We have been reviewing technology and telecom equipment providers of late to see if the worst is truly behind or if more pain is yet to come.  After seeing the action in Tellabs Inc. (NASDAQ: TLAB) this week, we are being nice by only asking “What the hell?”

Tellabs ended last week strongly but we have to wonder if the slowing capital spending in telecom and communications providers is not adequately built into the share price.  The company did lose money at this week’s report, but less than expected. Revenues were down almost 30% from a year earlier and the range is flat to plus or minus a few percent for the coming quarter. 

We have conducted similar review for Alcatel-Lucent SA (NYSE: ALU) to see if it has found a plateau, as well as noting what looks to be a “back from the dead” attitude for Riverbed Technology, Inc. (NASDAQ: RVBD).

We have seen literally one analyst downgrade per day this week and these are all basically “sell” ratings:

• Wednesday: J.P. Morgan cut it to Underweight from an already cautious neutral;
• Tuesday: S&P Capital IQ cut the rating to “Sell” from Hold;
• Monday: Zacks cut the rating to Underperform.

Shares closed up on Monday at $4.69 before earnings, but now the stock is down to $4.20 after earnings and after the analysts have weighed on the stock.  Its 52-week trading range is $3.67 to $7.31.  No one wants it even though it is effectively now trading close to its tangible book value.  The only good news here is from Motley Fool saying “don’t get too worked up” on the earnings.

The issue is that the company is not sure if even the hurricane and the Verizon slow orders have signaled a bottom domestically and it has international risk now that more than half its sales come from outside of North America.  In a world of consolidating telecom and communications providers, the business climate often looks like a boom and a bust for companies of this size.

No love for Tellabs.  Apparently none tomorrow either, if the analysts are right.

JON C. OGG

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