Mark Donahue Mark Donahue is an associate editor for Telephony magazine. Previously, he worked in The Associated Press’ Chicago bureau, as well as two trade publications. He graduated from...more

Archive for April 28th, 2009




For Immediate Release: Contacts: Bryan Black

4/28/09 Veronica Obregon

(512) 463-7664



Agency releases Request For Information to enhance broadband services

AUSTIN — The Texas Department of Agriculture is partnering with the Public Utility Commission and other agencies to gather information from broadband providers in an effort to extend broadband connectivity to all areas of Texas.

“New communication technologies are shrinking our world, and it is essential we make sure Texans don’t miss out on these new tech tools,” Commissioner Todd Staples said. “Expanding broadband service is key to creating opportunities and efficiencies for all Texans, from private citizens and businesses to healthcare and education.”

“We are happy to be working with the Agriculture Department on this broadband project,” Barry Smitherman, chairman of the Public Utility Commission, said. “It is an important opportunity to bring broadband service to areas that do not have this valuable service today.”

TDA is seeking information from qualified contractors in preparation for the release of federal funding to enhance access to broadband. The department will take input on strategies to identify and extend service to areas of the state that are underserved or unserved by broadband providers. Interested parties may access the Request For Information (RFI) by going to this Web site. The deadline for submitting responses to the RFI is May 15.

The mapping initiative, and related deployment projects, may be implemented through the Broadband Data Improvement Act of 2008, or the Reinvestment Act: Broadband Technology Opportunities Program.

For more information on the Request For Information, please contact Rick Rhodes at (512) 463-7577 or by e-mail at


All TDA press releases are also available via the Internet at

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Edgeware Partners with Avtrex to Bring Ad-Insertion and Trick Play Capabilities to Web TV

Edgeware, the provider of revolutionary server systems for network deployed on-demand TV, and Avtrex, a leading supplier of client software for set top boxes and connected TVs, today announced their partnership to provide full interoperability for video services delivered over the Internet including, ad-insertion and trick play capabilities.

The combined Edgeware-Avtrex offering enables operators and content rights owners to quickly build a solution to deliver premium, on-demand video and TV over the open Internet where the highest Quality of Service (QoS) is necessary.

Edgeware and Avtrex’s combined solution provides a true DVD-like experience with support for full interactivity including multi-speed fast-forward and rewind. Edgeware servers store only the file encoded at the normal speed to deliver trick play video ‘on-the-fly’ when requested by each Avtrex client. The partnership also enables advertising-funded business models via support for dynamic playlists. Adverts personalized to individual consumers’ interests and needs can be inserted at appropriate places in the featured content. Pre-roll, post-roll and interstitial insertions are all supported with full trick-play functionality.

“For Internet TV and video services to move from the PC to the TV, they need to meet the expectations of a premium content service,” said Joachim Roos, founder and CEO of Edgeware. “Working with Avtrex, we can deliver a cost efficient and scalable end–to-end solution including targeted advertizing and full interactivity, based on standard protocols”.

Through the partnership, broadcast content is recorded in the network by Edgeware servers and delivered using open Internet protocols to set top boxes and connected televisions running Avtrex client software. Even in congested networks where TCP re-transmission is required, each Edgeware server can deliver unique streams to over 32,000 Avtrex clients at the same time. The servers consume just 85W of power, 1U rack space and require virtually no maintenance. Operational costs are dramatically reduced enabling caching of premium content at the edge and avoiding expensive core network and backhaul upgrades for Web TV deployment.

The Avtrex client software, whether in a set top box or installed directly in a network-connected television, provides sophisticated buffer management which ensures smooth operation over the Web despite varying network conditions. A development platform enables simple porting of services to new client devices and all major encryption systems for content rights protection are supported. Depending on the video rights available, delivery of content to multiple devices in a home network is also supported through the Avtrex Home Server functionality.

”Edgeware’s servers, which already provided a revolutionary solution to operational cost of IPTV and video-on-demand implementations, have allowed Avtrex to create a superior user experience, while satisfying the demanding requirements of system operators and content owners with regard to content security and monetization,” said Steve Francis, CEO of Avtrex.

The two companies will be showing a full demonstration of the solution at the Edgeware’s NAB booth C1657.

About Edgeware

Edgeware is the supplier of revolutionary server systems for on-demand TV, setting new industry standards for video streaming over IP. Edgeware enables Video On-Demand (VoD), Time Shifted TV, Web TV and Ad-insertion services, with unmatched scalability and at the lowest investment and operational cost on the market.

In 2006 Edgeware pioneered using flash memory by launching a fully solid state flash memory based network appliance, for truly distributed deployment. By combining solid-state flash memory and hardware accelerated streaming, Edgeware offers the most integrated, reliable and power efficient appliances in the industry. The systems solution includes dynamic asset propagation and management to enable highly scalable and resilient architectures with central clusters in combination with caches distributed deep into the network. Caching popular content close to the viewers means substantial savings on network infrastructure and shortened time to market. Edgeware´s server systems have been deployed around the globe by leading Telcos and cable MSOs, and more recently by over the top service providers.

The company is headquartered in Stockholm, Sweden, with a U.S.-based office in San Jose, California.

About Avtrex

Avtrex, Inc, is a Silicon Valley-based start-up focused on advanced technologies for digital video recording, digital television, and home media distribution. Avtrex is a provider of embedded software whose customers are leading innovators in consumer electronics and digital entertainment. Avtrex is privately held, founded in 2001 by a team that has been working together for more than a decade. More information about Avtrex is available at


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Altitude Telecom Chooses Ekinops for its Converged Ethernet and TDM Optical Transport Network

Ekinops 360 platform delivers on the “pay-as-you-grow” promise

PARIS, April 28, 2009 – Ekinops, a leading provider of next generation multi-protocol, multi-reach optical transport, and aggregation solutions, for metro, regional, and long haul networks, contributed to the deployment of the Altitude Telecom high-capacity, regional optical network between Paris and northwestern France.

The phased project involved construction of a converged TDM and Ethernet 10G DWDM optical backbone using the Ekinops 360 platform.

Altitude Telecom is a full-service operator offering voice, data, and Internet services. Thanks to the success of the new Altitude Telecom Data Center, the carrier was looking to increase the capacity of its network. The Ekinops 360 platform offered Altitude Telecom a cost-effective means to extend its network.

“We needed a robust and flexible technology for our core network and for interconnecting with other service providers,” noted Bertrand Lebarbier, Executive Director of Altitude Telecom. “The Ekinops solution was selected for its flexibility, reliability and its upgradability. We also liked the small footprint and low power consumption. It will significantly reduce our OPEX.”

“The Ekinops platform provides the ideal ‘pay as you grow’ architecture, allowing Altitude Telecom to invest in its network incrementally when the services growth justifies it,” explains Didier Brédy, Ekinops CEO.

The new infrastructure was deployed in several phases. In 2007, Ekinops was able to implement the first phase in less than a month, compared with the industry typical two-to-four-month implementation timeline.

“We are proud to work with a service provider as renowned as Altitude Telecom and to have won in 2008 the extension to this new converged network,” adds Brédy. “Our optical transport solutions enable telecommunications carriers to seamlessly migrate their legacy networks toward a new generation of converged, flexible, multi-protocol and ‘green’ DWDM networks.”

Among the deployment challenges was Altitude Telecom’s need for high bandwidth in a number of point-to-point links, most of which exceeded 150 kilometers (about 95 miles). The Ekinops 360, which enables optical links of several hundred kilometers without in-line amplification, was an ideal solution for this architecture. It allowed for minimal upfront cost and lower ongoing cost due to the elimination of the inline amplification sites.

Ekinops’ advanced DynaFEC (Dynamic Forward Error Correction) and DynaMux (Dynamic Multiplexing) technologies also allow for reduced initial cost. DynaFEC, a leading FEC technology, uses software techniques to eliminate errors and push longer distances rather than using more expensive optics to achieve the required distances. DynaMux allows for the multiplexing of any mix of service types over a single wavelength, reducing the required number of wavelengths in converged networks.

In addition, Altitude Telecom was looking for equipment that took up minimal space and utilized minimal power in each of its network sites. The Ekinops 360 platform is amongst the lowest power consuming systems in the industry.

About Ekinops

Ekinops is a leading designer and supplier of next generation optical transport equipment for service providers and enterprise customers. The Ekinops 360 Dynamic, Multi-Reach Transport System provides DWDM and CWDM on a single platform that addresses Metro, Regional, and Long Haul applications. The Ekinops 360 system relies on the innovative, programmable Ekinops T-Chip® (TRANSPORT ON-A-CHIP TECHNOLOGY) that enables Fast, Flexible, and Cost-effective service delivery for building high speed optical networks. Using the Ekinops 360 carrier-grade system, operators can increase transport capacity of their networks – CWDM, DWDM, Ethernet, ESCON, Fiber Channel, SONET/SDH, and uncompressed video (HD-SDI, SD-SDI, ASI) – through the industry’s most efficient aggregation of services. The company is headquartered in Lannion, France, with offices in Europe, the USA and Asia. For more information, visit Ekinops at

About Altitude Telecom

Altitude Telecom is a full telecommunications operator experts in IP. Altitude Telecom provides companies with voice, data and Internet solutions, anywhere in France. Altitude Telecom relies on strong technology knowledge in the telecommunication industry and offers services to several large enterprises and administration: VPN IP MPLS, VoIP, Internet access, hosting and fixed/mobile convergence. For more information, please visit

Press contacts:


Dominique Arestan

Tel. direct : +33 (0)1 49 97 04 03

Mobile : +33 (0)6 42 10 95 05

Altitude Télécom

Maïté Sommervogel

Tel. direct : +33 (0)2 76 51 12 10

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Business Transformation Takes Forumville Center Stage at Management World 2009

Forumville Highlights Business Transformation at TM Forum’s Management World 2009

Innovative Business Solutions Drive Communications Service Provider Success

MORRISTOWN, NJ, April 28, 2009 –TM Forum, the world’s premier industry group focused on business effectiveness for the communications and media sectors, revealed today the ground-breaking business transformation solutions that will be demonstrated in the exclusive Forumville innovation zone at the Forum’s flagship Management World conference (4-8 May 2009, Nice, France).

Business Transformation is one of six key strategies to combat the economic downturn and prepare the industry for the future. In a world where communications service providers face the continual challenge of maintaining profitability for increasingly competitive and diverse services, TM Forum is leading the way in improving business effectiveness. Through leadership and collaboration, the Forum is delivering the standards and best practices that underpin automation, reduce OpEx and customer churn, and allow service providers to adapt to new business models.

According to Martin Creaner, President and COO, TM Forum, “Forumville brings together leading industry experts in a series of live Technology Catalyst and Content Encounter demos, providing examples of the innovation and rapid solution development only possible through collaboration. Together with business and technical presentations focused on implementation of TM Forum standards, Forumville will offer conference delegates a one-stop-shop for essential transformation tools.”

Business Transformation — Tuning Business for the Road Ahead

The Business Transformation innovation area looks at the big picture of how the TM Forum best practices, business programs, and executive communities can help businesses become more efficient, automated, agile, and customer-centric. Visitors will see how TM Forum Solution Frameworks have already helped hundreds of companies around the world save millions of dollars by shortening return on development investment, getting new services to market faster and driving down operational costs through a multitude of business process and IT transformation projects.

One of the highlights of the Business Transformation zone is TM Forum’s Business Benchmarking Program, which boasts more than 100 service provider participants. The program allows service providers to assess metrics, ranging from operations to finance, and to see how they compare to best in class providers around the world. The data support business decision-making — a crucial need as companies undergo massive operational transformations to support new converged, media-rich services, reduce costs, and provide outstanding customer experience with low levels of customer churn.

The Business Transformation zone will also feature a defense industry Technology Catalyst demonstration on Managing Future Satellite Communications. The Catalyst focuses on operational agility and the real-time management of complex space networks. The defense industry is transforming its management strategies using TM Forum-based standards to create a solution framework that manages across operator boundaries.

As Service Providers implement business transformation projects, one of the complex issues they face is how to migrate key customer data and other records into their new systems. The data must be verified, rationalized, cleansed, formatted and then moved. The Application Data Migration Technology Catalyst addresses the industry challenges resulting from current migration practices and strategies to overcome those challenges. It demonstrates the principles and recommendations using a real-world case study.

Forumville will include two theaters, offering in-depth technology demonstrations, case studies of real-world implementations, and educational presentations. Attendees will also receive free registration to the Forum’s new online community, where members can connect to their peers and gain access to the latest industry topics and thought leadership.

The strategies and tactics unveiled in Forumville will be mirrored throughout the Management World 2009 conference, which opens with an impressive keynote lineup on Wednesday, May 6. “Forumville, along with the entire Management World conference this year, focuses on the strategies and tactics service providers need to embrace to survive. The current economic situation presents an opportunity for service providers to transform themselves to support the new business models that will prove to be essential to future growth and profitability for service providers,” added Creaner.

The full conference agenda, keynote and speaker details, as well as information surrounding certified training courses available in Nice are available now at

Press and analysts are invited to contact Geoff Devlin,, to apply for press access to the conference.

To learn more please visit

About TM Forum

With more than 700 member companies in 75 countries, TM Forum is the world’s leading industry association focused on improving business effectiveness for service providers and their suppliers. Serving the information, communications and entertainment industries, the Forum provides practical solutions, guidance and leadership to transform the way that digital services are created, delivered and charged. Members include the world’s largest service providers, cable and network operators, software suppliers, equipment suppliers and systems integrators.

TM Forum provides a wide range of information and support to help its members reduce the costs and risks associated with creating and delivering profitable services. These include industry research and benchmarks, technology roadmaps, best practice guidebooks, software standards and interfaces, as well as certified training, conferences and publications. The Forum also provides its member community with extensive marketing and networking opportunities, enabling business with new customers and partners.

Subscribe to TM Forum

TM Forum Newsletters

TM Forum Press Releases

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Related Topics: IMS, Access, FTTX, Independent, Global, Software, IPTV, VOIP, Broadband, Wireless, Other |

Tellabs Reports First-Quarter 2009 Revenue of $362 Million

Tellabs Reports First-Quarter 2009 Revenue of $362 Million

Company improving gross profit margins, generating cash and investing in the future

NAPERVILLE, Ill., April 28 /PRNewswire-FirstCall/ — Tellabs’ first-quarter 2009 revenue totaled $362 million, compared with $464 million in the first quarter of 2008.

Tellabs earned $7 million or 2 cents per share on a GAAP (U.S. generally accepted accounting principles) basis, compared with $17 million or 4 cents per share in the year-ago quarter.

On a non-GAAP basis, Tellabs earned $22 million or 6 cents per share, compared with $32 million or 8 cents per share in the year-ago quarter. Non-GAAP results exclude pretax charges of $18 million, which includes $5 million or 0.9 cents per share in equity-based compensation expense.

GAAP gross profit margins were 44.2% in the first quarter of 2009, higher than in any quarter since the third quarter of 2006. The company generated $44 million in cash from operations and increased its cash and cash equivalents to $1.18 billion. Tellabs continues to invest in the future: research and development spending amounted to 19% of revenue in the quarter.

“Tellabs continues to focus on improving profitability - both our customers’ and our own - by helping customers generate new revenues, reduce capital expenses and cut operating expenses,” said Rob Pullen, Tellabs president and chief executive officer. “During the first quarter, we gained new customers for our innovative growth products, including our dynamic optical networking and data products. Data products continue to be our fastest-growing product category: first-quarter data revenue grew 45% compared with the year-ago quarter. We are successfully transitioning to growth products while improving gross profit margins, generating cash and investing in the future.”

For the first quarter of 2009, broadband segment revenue was $178 million, transport segment revenue was $130 million and services segment revenue was $54 million. More detailed information, including year-over-year segment comparisons, can be found in the Results of Operations section of this news release.

Second-Quarter 2009 Guidance - The following statements are based on current expectations and involve risks and uncertainties, some of which are set forth below. Compared with the first quarter of 2009, Tellabs expects second-quarter revenue to be flat to up by a high-single-digit percentage. Non-GAAP gross margin is expected to be flat, plus or minus a point or two, as a result of product mix. Non-GAAP operating expense is expected to continue on a downward trajectory in the second quarter. Non-GAAP gross margin excludes about $1 million, and non-GAAP operating expense excludes about $5 million, in equity-based compensation expense.

Simultaneous Webcast and Teleconference Replay - Tellabs will host an investor teleconference at 7:30 a.m. Central Daylight Time today to discuss its first-quarter 2009 results and provide its outlook for the second quarter of 2009. Internet users can hear a simultaneous webcast of the teleconference at; click on the webcast icon. A taped replay of the call will be available beginning at approximately 10:30 a.m. Central Daylight Time today, until midnight Central Daylight Time on Thursday, April 30, at 800-642-1687. (Outside the United States, call 706-645-9291.) When prompted, enter the Tellabs conference ID number: 94429696. A podcast of the call will be available at later today.

About Tellabs - Tellabs helps customers succeed through innovation. That’s why 41 of the top 50 global telecom service providers choose our mobile backhaul, optical networking and business services solutions. We help telecom service providers, independent operating companies, MSO/cable TV companies, enterprises and government agencies get ahead by adding revenue, reducing expenses and optimizing networks. With wireless and wireline networks in more than 90 countries, we enrich people’s lives by innovating the way the world connectsâ„¢. Tellabs (Nasdaq: TLAB) is part of the NASDAQ Global Select Market, Ocean Tomo 300â„¢ Patent Index, the S&P 500 and several corporate responsibility indexes including FTSE4Good and eight KLD indexes.

Forward-Looking Statements - This news release, which includes the Results of Operations discussion that follows, contains forward-looking statements, including but not limited to the second-quarter 2009 guidance and cost savings information contained in this release, that involve risks and uncertainties. Actual results may differ from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks associated with: the competitive landscape, including pricing and margin pressures, the response of customers and competitors, industry consolidation, the introduction of new products, the entrance into new markets, the ability to secure necessary resources, the ability to realize anticipated savings under our cost-reduction initiatives, and overall negative economic conditions generally and disruptions in credit and capital markets, including specific impacts of these conditions on the telecommunications industry. In light of these factors investors are advised not to rely on forward-looking statements in deciding whether to buy, sell or hold the company’s securities. The company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after today or to reflect the occurrence of

unanticipated events.

Tellabs® and the Tellabs logo are trademarks of Tellabs or its affiliates in the United States and/or other countries. Any other company or product names mentioned herein may be trademarks of their respective companies.




First Quarter


4/3/09 3/28/08

—— ——-

In millions, except per-share data


Products $308.0 $408.0

Services 53.7 56.1

—- —-

Total revenue 361.7 464.1

—– —–

Cost of Revenue

Products 166.5 242.8

Services 35.4 43.4

—- —-

Total cost of revenue 201.9 286.2

—– —–

Gross Profit 159.8 177.9

Gross profit as a percentage of revenue 44.2% 38.3%

Gross profit as a percentage of revenue -

products 45.9% 40.5%

Gross profit as a percentage of revenue -

services 34.1% 22.6%

Operating Expenses

Research and development 69.5 80.7

Sales and marketing 42.4 43.4

General and administrative 26.4 26.1

Intangible asset amortization 6.0 5.6

Restructuring and other charges 6.7 8.7

— —

Total operating expenses 151.0 164.5

—– —–

Operating Earnings 8.8 13.4

Other Income

Interest income, net 5.2 9.9

Other (expense) income, net (0.5) 0.6

—- —

Total other income 4.7 10.5

— —-

Earnings Before Income Tax 13.5 23.9

Income tax expense (7.0) (7.3)

—- —-

Net Earnings $6.5 $16.6

==== =====

Net Earnings Per Share

Basic $0.02 $0.04

===== =====

Diluted $0.02 $0.04

===== =====

Weighted Average Shares Outstanding

Basic 395.8 407.9

===== =====

Diluted 396.6 408.9

===== =====



4/3/09 1/2/09

—— ——

In millions, except share data Unaudited



Current Assets

Cash and cash equivalents $226.2 $376.1

Investments in marketable securities 958.1 776.0

—– —–

Total cash, cash equivalents and marketable

securities 1,184.3 1,152.1

Other marketable securities 191.8 179.1

Accounts receivable, net of allowances of $1.5 and

$1.4 320.1 332.7


Raw materials 37.4 34.2

Work in process 9.0 13.9

Finished goods 124.4 128.8

—– —–

Total inventories 170.8 176.9

Income taxes 38.7 38.7

Miscellaneous receivables and other current

assets 53.4 56.3

—- —-

Total Current Assets 1,959.1 1,935.8

Property, Plant and Equipment

Land 20.8 21.1

Buildings and improvements 197.9 201.6

Equipment 405.5 420.0

—– —–

Total property, plant and equipment 624.2 642.7

Accumulated depreciation (358.3) (364.4)

—— ——

Property, plant and equipment, net 265.9 278.3

Goodwill 122.2 122.4

Intangible Assets, Net of Amortization 38.2 44.2

Other Assets 122.1 127.5

—– —–

Total Assets $2,507.5 $2,508.2

======== ========

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts payable $72.9 $84.1

Accrued compensation 50.0 60.7

Restructuring and other charges 15.3 17.7

Income taxes 71.2 73.0

Stock loan 191.8 179.1

Deferred revenue 43.7 34.6

Other accrued liabilities 96.4 91.4

—- —-

Total Current Liabilities 541.3 540.6

Long-Term Restructuring Liabilities 10.7 13.3

Income Taxes 59.8 59.7

Other Long-Term Liabilities 47.8 48.1

Stockholders’ Equity

Preferred stock: authorized 5,000,000 shares of

$0.01 par value; no shares issued and

outstanding - -

Common stock: authorized 1,000,000,000 shares of

$0.01 par value; 495,851,232 and 495,757,314

shares issued 5.0 5.0

Additional paid-in capital 1,491.4 1,485.9

Treasury stock, at cost: 100,123,599 and

100,088,341 shares (952.6) (952.4)

Retained earnings 1,189.7 1,183.2

Accumulated other comprehensive income 114.4 124.8

—– —–

Total Stockholders’ Equity 1,847.9 1,846.5

——- ——-

Total Liabilities and Stockholders’ Equity $2,507.5 $2,508.2

======== ========




First Quarter


4/3/09 3/28/08

—— ——-

In millions

Operating Activities

Net earnings $6.5 $16.6

Adjustments to reconcile net earnings to net cash

provided by operating activities:

Depreciation and amortization 18.8 21.8

Loss on disposal of property, plant and

equipment 0.2 0.2

Equity-based compensation 5.5 8.0

Deferred income taxes 4.0 (4.0)

Restructuring and other charges 6.7 8.7

Other-than-temporary impairment charges on

investments - 1.4

Net changes in assets and liabilities:

Accounts receivable 6.6 24.2

Inventories 5.2 9.7

Miscellaneous receivables and other current

assets 2.3 2.8

Other assets 1.1 18.9

Accounts payable (8.8) (16.4)

Restructuring and other charges (6.8) (4.9)

Deferred revenue 9.1 5.8

Other accrued liabilities (4.4) (8.0)

Income taxes (3.3) 0.7

Other long-term liabilities 1.4 (2.6)

— —-

Net Cash Provided by Operating Activities 44.1 82.9

—- —-

Investing Activities

Capital expenditures (7.6) (7.1)

Proceeds on disposals of property, plant and

equipment 0.2 0.1

Payments for purchases of investments (416.5) (482.3)

Proceeds from sales and maturities of investments 233.7 506.3

—– —–

Net Cash (Used for) Provided by Investing Activities (190.2) 17.0

—— —-

Financing Activities

Proceeds from issuance of common stock under stock

plans - 0.4

Repurchase of common stock (0.2) (142.1)

—- ——

Net Cash Used for Financing Activities (0.2) (141.7)

—- ——

Effect of Exchange Rate Changes on Cash (3.6) 0.9

—- —

Net Decrease in Cash and Cash Equivalents (149.9) (40.9)

Cash and Cash Equivalents - Beginning of Year 376.1 213.0

—– —–

Cash and Cash Equivalents - End of Period $226.2 $172.1

====== ======


For the first quarter of 2009, revenue was $361.7 million, compared with $464.1 million in the first quarter of 2008, as we saw revenue declines in all three segments.

Consolidated gross margin in the first quarter was 44.2%, up 5.9 percentage points from 38.3% in the first quarter of 2008. The increase in consolidated gross product margin was driven by the higher level of data revenue, which grew 45.2% year-over-year, margin improvements associated with our access and optical networking products, and improved services gross margin.

Operating expenses in the first quarter of 2009, including $6.0 million in intangible amortization and $6.7 million in restructuring and other charges, were $151.0 million, down $13.5 million from $164.5 million in the first quarter of 2008.

Net earnings for the first quarter of 2009, driven by the lower level of revenue, were $6.5 million or $0.02 per share (basic and diluted), compared with $16.6 million or $0.04 per share (basic and diluted) for the same period of 2008.

Revenue (in millions)

First Quarter

2009 2008 Change

Products $308.0 $408.0 (24.5%)

Services 53.7 56.1 (4.3%)

Total revenue $361.7 $464.1 (22.1%)

Revenue declined in the Products and Services segments. In the Broadband product segment, increased revenue from data products was offset by lower access and managed access revenue. In the Transport product segment, the revenue decline was driven primarily by lower revenue from digital cross-connect and optical networking systems. In the Services segment, the revenue decline was primarily driven by a lower level of deployment revenue.

On a geographic basis, revenue in North America (United States and Canada) was $247.0 million in the first quarter of 2009, down 29.3% from the year-ago quarter. Revenue outside North America was $114.7 million in the first quarter of 2009, compared with $114.6 million in the year-ago quarter.

Gross Margin

First Quarter

2009 2008 % Point


Products 45.9% 40.5% 5.4

Services 34.1% 22.6% 11.5

Consolidated 44.2% 38.3% 5.9

The increase in product gross margin between the first quarter of 2008 and the first quarter of 2009 was driven primarily by the higher level of data revenue and improved margins on access and optical networking products. The increase in services gross margin during the same period reflects improved gross margins for deployment services.

Operating Expenses (in millions)

First Quarter Percent of


2009 2008 Change 2009 2008

Research and development $69.5 $80.7 ($11.2) 19.2% 17.4%

Sales and marketing 42.4 43.4 (1.0) 11.7% 9.4%

General and administrative 26.4 26.1 0.3 7.3% 5.6%

Subtotal 138.3 150.2 (11.9) 38.2% 32.4%

Intangible asset

amortization 6.0 5.6 0.4

Restructuring and other

charges 6.7 8.7 (2.0)

Total operating expenses $151.0 $164.5 ($13.5)

The decline in operating expenses was driven primarily by lower research and development expenses. Restructuring and other charges of $6.7 million in the first quarter 2009 primarily reflect severance, facility- and asset-related charges.

Other Income (in millions)

First Quarter

2009 2008 Change

Interest income, net $5.2 $9.9 ($4.7)

Other (expense)

income, net (0.5) 0.6 (1.1)

Total other income $4.7 $10.5 ($5.8)

Interest income, net, was lower in the first quarter of 2009 versus the comparable period in 2008. Market interest rates declined during 2008 and remained low in the first quarter of 2009. In the first quarter of 2009, 90% of our portfolio was allocated to governments and government agencies, as compared with 68% in the first quarter of 2008.

Income Taxes

For the first quarter of 2009, we recorded tax expense of $7.0 million at an effective tax rate of 51.9%, compared with a tax expense of $7.3 million at an effective tax rate of 30.5% for the first quarter of 2008. The increase in our rate reflects the absence of a tax benefit on domestic losses (due to the valuation allowance established against our domestic deferred tax assets) and normal tax rates on our international earnings.


Segment Revenue (in millions)

First Quarter

2009 2008 Change

Broadband $178.3 $202.1 (11.8%)

Transport 129.7 205.9 (37.0%)

Services 53.7 56.1 (4.3%)

Total revenue $361.7 $464.1 (22.1%)

Segment Profit* (in millions)

First Quarter

2009 2008 Change

Broadband $34.3 $8.7 294.3%

Transport 39.8 79.2 (49.7%)

Services 19.0 13.7 38.7%

Total segment profit $93.1 $101.6 (8.4%)

*We define segment profit as gross profit less research and development expenses. Segment profit excludes sales and marketing expenses, general and administrative expenses, the amortization of intangibles, restructuring and other charges, and the impact of equity-based compensation (which contains restricted stock and performance stock units granted after June 30, 2006, and stock options).


Revenue: Broadband revenue between the first quarter of 2008 and the first quarter of 2009 was driven by increased data revenue that was offset by lower access and managed access revenue. Data product revenue grew 45.2% between the first quarter of 2008 and the first quarter of 2009. Revenue benefited primarily from the continuing rollout of our next-generation wireless backhaul solution in multiple geographic regions. Access revenue will likely continue to decline as several key customers are transitioning to alternative network architectures. The decline in managed access revenue was driven by lower revenue from the Tellabs® 6300 SDH transport revenue, as we completed the initial stages of a large build-out in the EMEA region, and lower overall revenue from the Tellabs® 8100 managed access system.

Segment Profit: Broadband segment profit grew $25.6 million, driven by higher revenue from data products, margin improvements associated with access products, and reduced research and development expenses.


Revenue: The decline in Transport revenue between the first quarter of 2008 and the first quarter of 2009 was driven primarily by lower revenue from digital cross-connect and optical networking systems. The decline in digital cross-connect system revenue reflects lower spending from North American customers; the decline in optical networking revenue reflects the completion of the initial stages of a large build-out in North America during 2008.

During the first quarter of 2009, Tellabs 5500 digital cross-connect product revenue from new systems, system expansions and system upgrades were approximately 19% of the total, compared with 44% in the first quarter of 2008. The remaining balances consisted of port-card growth on the installed base.

Segment Profit: The decline in Transport segment profit was driven by the lower level of digital cross-connect system revenue.


Revenue: The decline in Services segment revenue from the first quarter of 2008 to the first quarter of 2009 was driven by lower revenue from deployment services, which was associated with the lower level of product revenue.

Segment Profit: The increase in Services segment profit reflects improved gross margins for deployment services.

Financial Condition, Liquidity and Capital Resources

Our principal source of liquidity remained our cash, cash equivalents and marketable securities of $1,184.3 million as of April 3, 2009, which increased by $32.2 million since year-end 2008. The increase in cash, cash equivalents and marketable securities for the quarter reflects $44.1 million in cash generated from operating activities, partially offset by cash used for capital expenditures.

Substantially all of our investments are backed by governments or government agencies and are highly liquid instruments. We may rebalance our portfolio from time to time, which may affect the duration, credit structure and future income of our investments.

During the first quarter of 2009, we repurchased approximately 4,000 shares of our common stock at a cost of $17,000 under previously announced share repurchase programs. We provide no assurance that we will continue our repurchase activity and we may change our repurchase activity in the future. We cannot estimate the timing of any such change or the impact on our cash, cash equivalents and marketable securities.

Based on historical performance and current forecasts, we believe the company’s cash, cash equivalents and marketable securities will satisfy working capital needs, capital expenditures and other liquidity requirements related to existing operations for the next 12 months. Future available sources of working capital, including cash, cash equivalents, and marketable securities, cash generated from future operations, short-term or long-term financing, equity offerings or any combination of these sources, should allow us to meet our long-term liquidity needs. Our current policy is to use our liquidity, financial strength and stability to fund business operations, to expand business, potentially through acquisitions, or to repurchase our common stock.




First Quarter 2009 First Quarter 2008

—————— ——————-

In millions, except As Adjust- Non- As Adjust- Non-

per-share data Reported ments GAAP Reported ments GAAP

——– ——- —- ——– ——- —-


Products $308.0 $- $308.0 $408.0 $- $408.0

Services 53.7 - 53.7 56.1 - 56.1

—- — —- —- — —-


revenue 361.7 - 361.7 464.1 - 464.1

—– — —– —– — —–

Cost of Revenue

Products (a) 166.5 (0.4) 166.1 242.8 (0.7) 242.1

Services (a) 35.4 (0.7) 34.7 43.4 (1.0) 42.4

—- —- —- —- —- —-

Total cost

of revenue 201.9 (1.1) 200.8 286.2 (1.7) 284.5

—– —- —– —– —- —–

Gross Profit 159.8 1.1 160.9 177.9 1.7 179.6

Gross profit as a

percentage of

revenue 44.2% 0.3% 44.5% 38.3% 0.4% 38.7%

Gross profit as a

percentage of

revenue -products 45.9% 0.2% 46.1% 40.5% 0.2% 40.7%

Gross profit as a

percentage of

revenue -services 34.1% 1.3% 35.4% 22.6% 1.8% 24.4%

Operating Expenses

Research and

development (a) 69.5 (1.7) 67.8 80.7 (2.7) 78.0

Sales and

marketing (a) 42.4 (1.1) 41.3 43.4 (1.6) 41.8

General and

administrative (a) 26.4 (1.5) 24.9 26.1 (2.0) 24.1



amortization (b) 6.0 (6.0) - 5.6 (5.6) -


and other

charges (c) 6.7 (6.7) - 8.7 (8.7) -

— —- — — —- —



expenses 151.0 (17.0) 134.0 164.5 (20.6) 143.9

—– —– —– —– —– —–


Earnings 8.8 18.1 26.9 13.4 22.3 35.7

Other Income

Interest income,

net 5.2 - 5.2 9.9 - 9.9

Other (expense)

income, net (d) (0.5) - (0.5) 0.6 0.3 0.9

—- — —- — — —

Total other

income 4.7 - 4.7 10.5 0.3 10.8

— — — —- — —-

Earnings Before

Income Tax 13.5 18.1 31.6 23.9 22.6 46.5

Income tax expense (e) (7.0) (2.3) (9.3) (7.3) (7.6) (14.9)

—- —- —- —- —- —–

Net Earnings $6.5 $15.8 $22.3 $16.6 $15.0 $31.6

==== ===== ===== ===== ===== =====

Net Earnings Per


Basic $0.02 $0.04 $0.06 $0.04 $0.04 $0.08

===== ===== ===== ===== ===== =====

Diluted $0.02 $0.04 $0.06 $0.04 $0.04 $0.08

===== ===== ===== ===== ===== =====

Weighted Average

Shares Outstanding

Basic 395.8 395.8 395.8 407.9 407.9 407.9

===== ===== ===== ===== ===== =====

Diluted 396.6 396.6 396.6 408.9 408.9 408.9

===== ===== ===== ===== ===== =====

(1) Reconciliation of non-GAAP Adjustments

In addition to reporting financial results in accordance with U.S.

generally accepted accounting principles (GAAP), Tellabs, Inc. has

provided non-GAAP financial measures as additional information for

its operating results. These measures have not been prepared in

accordance with GAAP and may be different from measures used by other

companies. Whenever we use non-GAAP financial measures, we designate

these measures, which exclude the effect of certain charges, as

“adjusted” and provide a reconciliation of non-GAAP financial measures

to the most closely applicable GAAP financial measure. The non-GAAP

financial measures eliminate certain items of expenses and losses

from cost of revenue, operating expenses, other income and expenses,

and income taxes. Management believes that this presentation allows

investors to better evaluate the current operational and financial

performance of our business and facilitate comparisons to historical

results of operations. Management uses these measures for reviewing

our financial results and for business planning and performance.

Management discloses this information publicly along with a

reconciliation of the comparable GAAP amounts, to provide access

to the detail and general nature of adjustments made to GAAP financial

results. While some of these excluded items have been periodically

reported in our statements of operations, including significant

restructuring and other charges, their occurrence in future periods

depends on future business and economic factors, among other evaluation

criteria, and the occurrence of such events and factors may frequently

be beyond the control of management.

(a) The adjustments to cost of revenue, research and development,

sales and marketing, and general and administrative expenses for

the first quarter of 2009 and the first quarter of 2008 reflect

equity-based compensation expense. We began to include equity-based

compensation expense in our GAAP operating results in accordance

with Statement of Financial Accounting Standards (SFAS) 123( R ),

Share-Based Payment in January 2006. Because of varying available

valuation methodologies, subjective assumptions, and the variety of

award types, which affect the calculations of equity-based compensation,

we believe that the exclusion of equity-based compensation expense allows

for more accurate comparisons of our operating results to our peer

companies. In addition, we believe this non-cash GAAP measure is not

indicative of our core operating performance.

(b) We exclude amortization of intangible assets resulting from

acquisitions to evaluate our continuing operational performance.

The amortization of purchased intangible assets associated with

acquisitions results in our recording expense in our GAAP financial

statements that were already expensed by the acquired company before

the acquisition and for which we have not expended cash. We believe

this GAAP measure is not indicative of our core operating performance.

Accordingly, we analyze the performance of our operations without

regard to such expenses.

(c) We exclude restructuring and other charges because we believe that

they are not related directly to the underlying performance of our

core business operations. Restructuring and other charges result from

events which arise from unforeseen circumstances that often occur

outside of the ordinary course of continuing operations. Although

these events are reflected in our GAAP financials, these unique

transactions may limit the comparability of our on-going operations

with prior and future periods.

(d) The $0.3 million adjustment to Other (expense) income, net in

the first quarter of 2008 reflects a $0.6 million write-down of a

long-term equity investment in a start-up technology company offset

by a $0.3 million gain on a sale of a long-term equity investment

in a start-up technology company. We exclude write-downs and gains

on sales of long-term equity investments in partnerships and

start-up technology companies because we believe that they are not

related directly to the underlying performance of our working capital


(e) We calculate a separate tax expense and effective tax rate for

GAAP and for non-GAAP purposes. The tax adjustment reflects the

difference between these computations, and takes into account the

impact of (i) the effect on our global effective tax rate of adjusting

pretax earnings in multiple jurisdictions at differing tax rates; and

(ii) the valuation allowance maintained against our domestic deferred

tax assets, which is included in our GAAP expense but excluded

from our non-GAAP expense.

NOTE TO EDITORS: The complete text of this release is available at

CONTACT: Media, George Stenitzer, +1-630-798-3800,, or Investors, Tom Scottino, +1-630-798-3602,, both of Tellabs

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