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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Tellabs (Nasdaq: TLAB ) fell more than 20% after it reported disappointing fourth-quarter results and warned that first-quarter sales would fall below Street expectations.
So what: Tellabs, which competes with the likes of Alcatel-Lucent (NYSE: ALU ) and Cisco (Nasdaq: CSCO ) in the market for telecommunications equipment, turned last year's $0.16 profit into a $0.03 loss in Q4. Revenue also came in light at $410 million. Analysts were expecting $418.4 million, Reuters reports.
Now what: Rarely will you find me siding with the mouth foamers, but in the case of Tellabs I see good reasons for today's selling. Telecom equipment is a sensitive business that depends on the largesse of carriers fighting for a big bucket of low-margin profits. If Tellabs can't make good now -- in the golden age of smartphones, tablets, and IP telephony -- why should anyone believe it will make good when these high-growth markets mature?
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