We reiterate our long-term Neutral recommendation on
). The company reported disappointing financial results for the
third quarter of 2013. Both the top and the bottom lines were
significantly lower than the respective Zacks Consensus
Why Kept at Neutral?
Tellabs is targeting the growing mobile Internet market since
the company's legacy switching products are gradually losing
relevance. Management is currently emphasizing on mobile backhaul
solution, IP-packet optical solution and Insight Analytics
Services. However, we remain concerned that the global
macroeconomic fluctuations may hinder its pace of
In the reported quarter, Tellabs suffered severe top-line
setback, which declined 24.9% year over year. All the four
reporting segments of the company witnessed sales decline.
Moreover, revenue fluctuation indicates tougher times for the
company. Apart from a steady decline in North American revenues,
the international revenues also declined significantly.
Meanwhile, Tellabs has decided to become a private entity. On
Oct 21, 2013, Tellabs declared that the company has entered into
a definitive merger agreement with private equity firm, Marlin
Equity Partners, which will acquire all outstanding shares of
Tellabs for $2.45 per share in cash. The total deal size will be
approximately $891 million. This deal is expected to close by the
fourth quarter of 2013 and is not subject to a financing
Other Stocks to Consider
Tellabs currently carries a Zacks Rank #4 (Sell).
Nevertheless, there are other stocks in the same industry which
are performing well. These include
Ubiquiti Networks Inc.
Mitel Networks Corp.
). While both ShoreTel and Ubiquiti have a Zacks Rank #1 (Strong
Buy), Mitel has a Zacks Rank #2 (Buy).
MITEL NETWORKS (MITL): Free Stock Analysis
SHORETEL INC (SHOR): Free Stock Analysis
TELLABS INC (TLAB): Free Stock Analysis
UBIQUITI NETWRK (UBNT): Free Stock Analysis
To read this article on Zacks.com click here.