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Tellabs (NASDAQ:TLAB)

Q1 2012 Earnings Call

April 26, 2012 8:30 am ET

Executives

Tom Scottino -

Robert W. Pullen - Chief Executive Officer, President and Director

Andrew B. Szafran - Chief Financial Officer and Executive Vice President

Thomas P. Minichiello - Former Acting Chief Financial Officer, Chief Accounting Officer and Vice President of Finance

Analysts

Rod B. Hall - JP Morgan Chase & Co, Research Division

Jess L. Lubert - Wells Fargo Securities, LLC, Research Division

Alex B. Henderson - Miller Tabak + Co., LLC, Research Division

Mark Sue - RBC Capital Markets, LLC, Research Division

Ehud Gelblum - Morgan Stanley, Research Division

Simona Jankowski - Goldman Sachs Group Inc., Research Division

George C. Notter - Jefferies & Company, Inc., Research Division

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Jeffrey T. Kvaal - Barclays Capital, Research Division

Simon M. Leopold - Raymond James & Associates, Inc., Research Division

Jim Suva - Citigroup Inc, Research Division

Eric A. Ghernati - BofA Merrill Lynch, Research Division

Operator

Good morning. My name is Brooke, and I'll be your conference operator today. At this time, I would like to welcome everyone to Tellabs First Quarter 2012 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Mr. Tom Scottino, Senior Investor Relations Manager. Thank you. Mr. Scottino, you may begin your conference.

Tom Scottino

Thank you, and good morning, everyone. With me today are: Tellabs' CEO and President Rob Pullen; our Executive Vice President and CFO Andrew Szafran; and our Vice President of Finance and Chief Accounting Officer, Tom Minichiello.

This morning, Rob will talk to our strategy, Andrew will make a few marks, and Tom will cover the first quarter results. After that, we'll open the call to your questions.

Before we do that, I want to say that if you have not seen the news release we issued this morning, you can access it at our tellabs.com website. I'd also like to remind you that this presentation contains forward-looking statements about future results, performance or achievements, financial and otherwise. These statements reflect management's current expectations, estimates and assumptions. These forward-looking statements are not guarantees of future performance, and involve risks, uncertainties and other factors that may cause Tellabs' actual results, performance or achievements to be materially different. A discussion of the factors that may affect Tellabs' future results are contained in Tellabs' most recent SEC filings.

The forward-looking statements made in this presentation are being made as of the time and date of its live presentation. If the presentation is reviewed after the time and date of its live presentation, it may not contain current or accurate information. Tellabs disclaims any obligation to update or revise any forward-looking statement based on new information, future events or otherwise.

This presentation may also include some non-GAAP financial measures. Reconciliation between non-GAAP financial measures and GAAP financial measures can be found at our tellabs.com website and in our SEC filings.

That said, I'll turn the call over to Rob.

Robert W. Pullen

Good morning, everyone.

Tellabs continues to focus on achieving profitable growth by helping our customers succeed. In January, we unveiled an updated strategy for Tellabs. We're focused on 3 market segments that are growing faster than customers' overall capital expenditures. Today, I want to update you on our progress in each one of those 3 markets.

First, we're focused on the Mobile Backhaul market, where we offer multi-service, ethernet and optical applications for mobile operators and for companies that provide backhaul networks to mobile operators. The mobile backhaul market is growing at a compound annual growth rate of around 9% per year, greater than the CapEx of the general market.

To sharpen our focus in the mobile market, we unified our mobile routing product development under Markku Ellilä, Markku is Tellabs Vice President and General Manager based in Finland. He oversees product development, planning and marketing.

To update our mobile backhaul solution, we're launching new enhancements to our aggregation and cell site nodes. Our enhanced aggregation nodes will be in controlled release in May.

Our new card and the software will provide 5x more capacity, so our existing customers can upgrade easily. In 3G and 4G mobile backhaul deployments, these nodes can lower capital expenditures in ethernet-based high-speed networks by up to 80%. We've also released these nodes to customers under controlled introduction and we expect to recognize revenue for them in the second quarter.

Our new cell site router, the Tellabs 8611, shipped as planned in the first quarter. It's now in trials with multiple customers and is deployed in several live networks. We released these nodes to customers under controlled introduction and we recognized revenue at our first customers during the first quarter.

In all, we serve about 160 mobile backhaul customers and we continue to add new customers during the first quarter.

Half of Tellabs' customers plan to migrate their networks to Long Term Evolution or LTE. We've already won several LTE backhaul contracts and have installed equipment in a number of LTE networks. During the first quarter, we also marked $1 billion in cumulative revenue from the Tellabs 8800 series, which is part of our mobile backhaul solution. The Tellabs 8800 series is part of the large install base of Tellabs' equipment, which is found in 40 of the world's top 50 telecom service providers.

Second, we're also focused on the packet optical market, where we offer applications for metro optical networks, mobile backhaul networks, as well as enterprise services. While most people are aware of our metro optical networks, including the largest one in the world, Tellabs also sells our optical solutions through service providers and systems integrators to enterprises, so it's a deliver of a business service from the service provider to the enterprise.

In fact, 11 of the Fortune 50 companies rely on services provided through Tellabs' equipment. For example, to address the needs of financial institutions, we've added new features such as low latency to our packet optical solution. Lower latency is crucial to help our financial customers speed their transactions, lowering their trading risk, and of course, making more money.

We recently made additional enhancements to our packet optical solution, including a new packet-switching card for carrier ethernet services. Compared with traditional dense wave division multiplexing networks and separate router architectures, this new card can reduce capital expense by up to 60%.

We also introduced a new OTN switching service card so customers can mix and match packet or sonet or synchronize digital hierarchy traffic on the same wavelength to light. Compared with traditional architecture of multiservice provisioning platforms or optical cross connects. With our new OTN card, customers can save up to 65% versus their present method of operation.

Our new release also includes control plain improvements that enable a network to survive many simultaneous network path failures. Customers need this kind of resiliency, especially in countries such as Chile, where there's earthquake risk, and in India, where there's many cable cuts that are caused by construction including people grabbing the fiber thinking it's copper.

Tellabs has hundreds of optical networks around the world. In the first quarter, we continued to add new packet optical customers including vitroconnect in Germany.

Third, we are focused on our professional services. We applied Tellabs' experience from hundreds of networks to help customers minimize risks and costs so they can maximize their performance and their competitiveness. We recently completed our first proof of concept for a new Tellabs Insight Analytics services with a Tier 1 customer in Europe. We expect to recognize our first revenue from Insight Analytics later this year. The new services enable customers to see the root causes of network problems and user problems far more quickly than ever before. Customers tell us it can take up to 2 days to determine the root cause of a network or a user problem. With Tellabs Insight Analytics, a root cause can be determined in just a couple of mouse clicks. As a result, customers are excited about this to be more responsive to their end-users.

As you know, much of Tellabs' differentiation and competitive advantage stems for our Tellabs 8000 Intelligent Network Manager, which customers use in hundreds of networks around the world. Tellabs offers a true single network management system across our packet optical, mobile backhaul and business ethernet platforms. Our network managers provide customers with a simple graphical interface that speeds service provisioning up to 5x faster than competitors.

In March, we released a new built-in functionality to the Tellabs 8000, for both troubleshooting and service provisioning, in both LTE and LTE advanced networks.

So far, I've discussed a number of improvements to our product portfolio. What's important is that Tellabs continues investing for the future as we get on a path to profitable growth and that's what we're committed to.

Now let me turn to our first quarter results. We're disappointed that revenue came in at the low end of our expectations at $258 million, and candidly, that's consistent with the industry. North America was slower than we expected but I am pleased that more than half of our revenue or 51% came from outside of North America for the third consecutive quarter.

Looking ahead to the second quarter, we have more positive news. Our expectations are that customers' capital expenditures will increase later in the year, and we're encouraged that our book-to-bill ratio is above 1. We expected our second quarter revenue should be up in the range of $280 million to $305 million. We expect second quarter non-GAAP gross margin to be 40% plus or minus 1 point or 2, depending on product and customer mix. Provided that we execute on our plan successfully during the second quarter, we expect Tellabs to return to profitability on a non-GAAP basis, which is consistent with the strategy we put in place in January.

Before I wrap up, I'd like to touch on a couple of recent news announcements. Earlier in April, we announced that 2 new directors will join Tellabs' Board of Directors on May 2, which is following our Annual Stockholders Meeting. Vincent D. Kelley, who is President, CEO and a Director of USA Mobility, brings more than 20 years of experience as a Communications Executive, as well as his expertise in business management, finance and accounting. Gregory J. Rossmann is a Senior Managing Director of GJR Capital Management. He's a Director of several private companies and a Director of Netgear Incorporated. He was a managing Director of the Carlisle Group and brings financial and technical expertise from a number of companies to Tellabs. We're really happy and glad to have their experience to Tellabs' Board.

As important, we appreciate the contributions and services of 2 directors who are retiring. Bill Souders and Linda Wells Kahangi. I want to extend my personal thanks to both Bill and Linda.

On April 16, we welcomed Tellabs' new Chief Financial Officer and Executive Vice President, Andrew Szafran. Andrew brings strong analytics, financial management and turnaround skills to Tellabs and we're glad he's aboard. His experience as a Chief Financial Officer from APAC Customer Services and from Communications Supply Corp. will help him guide Tellabs in our path to sustained growth and profitability. I'd be remiss, however, if I didn't recognize other folks in our organization. I want to thank our acting CFO, Tom Minichiello, and the entire finance department for their good work during this transition.

Now I've asked Andrew to share a few thoughts with you. And after that, Tom Minichiello will provide you a detailed results from the first quarter.

Andrew B. Szafran

Thanks, Rob, and good morning, everyone. I'm very excited to be part of the Tellabs team and let me tell you why I chose to join the organization.

Tellabs is known for helping carriers reduce their operating costs while developing new revenue-generating services. Over the years, Tellabs has developed key relationships with major service providers all around the world.

We've a heritage of innovative products and great customer support. Our product and services portfolio is pointed squarely at fast-growing opportunities like mobile backhaul, packet optical transport and professional services. I'll give you my initial observations as a person new to the organization.

Clearly, Tellabs is facing some challenges. I can tell you that this management team understands the challenges and is taking steps to address those issues. We're also positioning the company with a lower cost structure to drive operating leverage as we move forward.

A little bit about my philosophy. In my career, I've found that transparency is key to aligning the expectations of investors with those of management. So while we operate in a complicated business, rife with changing technology, jargon and acronyms, I'll strive for open, straightforward and transparent communication.

Before I finish up, I'd like to thank Tom Minichiello who has been a tremendous help to me in these first days. Tom and the entire finance team have worked very hard and done a great job maintaining continuity over the course of the last 4 months. So let me just say that I fully expect that our management team will overcome the challenges we face. I'm excited about our prospects for the future and I look forward to meeting many of you on today's call, in person in the near future.

At this time, I'll turn the call over to Tom for a review of the company's first quarter results.

Thomas P. Minichiello

Thanks, Andrew, and good morning, everyone.

Before we begin, I'd like to join Rob in welcoming Andrew to Tellabs. I'm looking forward to working with Andrew and I'm confident that together, we will partner with the rest of our leadership team and help drive improving results for our business.

Looking at the first quarter, I'd like to give you a little context before jumping into the results. Revenue largely reflected lower customer spending, particularly in North America early in the quarter. And while our revenue outside of North America was lower this quarter, it accounted for over half of total revenue for the third consecutive quarter. While we were disappointed in our top line performance, we saw bookings increase in March, driving our book to bill for the quarter to greater than 1.

We made good progress controlling expenses, having reduced non-GAAP operating expenses from $131 million in 4Q to $120 million in 1Q. As you recall, back in January, we set a goal to reduce non-GAAP quarterly OpEx to the $110 million range by the end of 2012, and we are headed in the right direction. If we execute our plan going forward, we should be profitable on a non-GAAP basis in the second quarter and generate positive cash from operations.

Okay, let's take a look at the first quarter numbers on a sequential basis. Revenue was $258 million in 1Q compared with $317 million in 4Q. On a GAAP basis, we reported a net loss of $140 million in 1Q compared with a net loss of $5 million in 4Q. The GAAP loss in 1Q included $106 million of restructuring charges, almost all of which was related to the actions we announced back in January to drive increased profitability and focus on our opportunities in mobile backhaul, packet optical and professional services.

On a non-GAAP basis, net loss was $15 million or $0.04 per share in 1Q, compared with net earnings of $4 million or $0.01 per share in 4Q. On a geographic basis, revenue from customers in North America was $127 million in 1Q compared with $146 million in 4Q. North American customers accounted for 49% of total revenue in the first quarter. Revenue from customers outside North America was $131 million in 1Q, compared with $171 million in 4Q. Revenue outside North America was 51% of total revenue in the quarter.

Now let's take a look at 1Q segment data on a sequential basis. Broadband, Transport and Services revenue declined sequentially. Broadband segment revenue was $130 million in 1Q, compared with $166 million in 4Q. Within broadband, data, managed access and access revenue declined sequentially. Broadband segment profit was $8 million in 1Q compared with $16 million in 4Q. This was driven primarily by the lower level of Broadband segment revenue, partly offset by lower costs and R&D expenses.

Transport segment revenue was $80 million in 1Q compared with $92 million in 4Q. Transport segment profit, driven primarily by reduced margins on Optical Transport Systems and a lower level of Digital Cross-Connect revenue was $8 million in 1Q, compared with $19 million in 4Q. Services segment revenue was $48 million in 1Q compared with $59 million in 4Q. Services segment profit, driven primarily by lower Services revenue, was $15 million in 1Q compared with $21 million in 4Q.

Turning now to the gross margin. Non-GAAP gross margin was 37.4% in 1Q compared with 42.7% in 4Q. Gross margin is highly dependent on product and customer mix. This quarter, we saw about 2 points of decline from reduced margins on Optical Transport Systems, about 2.5 points of decline related to the lower levels of revenue from data products, managed access systems and digital cross-connects and about 0.5 point of decline due to lower Services revenue. The balance was driven by other mixed shifts in the quarter.

Turning to operating expenses. Tight control of expenses enabled us to continue to reduce non-GAAP operating expenses on a sequential basis. Non-GAAP OpEx came in at $120 million in 1Q, better than 4Q and guidance. Non-GAAP R&D expenses were $65 million in 1Q, down from $79 million in 4Q. Non-GAAP SG&A expenses were $55 million in 1Q compared with $52 million in 4Q. Other income on a non-GAAP basis was $800,000 in 1Q compared with $2 million in 4Q. The non-GAAP tax rate of 32% resulted in a tax benefit of $7 million in 1Q.

Now turning to the balance sheet. Days sales outstanding based on a 12-month average was 81 in 1Q compared with 79 in 4Q. Our DSO this quarter reflects the continuing trend toward a higher percentage of revenue from customers outside North America. Inventory turns were 4.2 in 1Q compared with 4.7 in 4Q. At the end of the quarter, inventory was $133 million, an improvement from $144 million in 4Q. Capital expenditures were $5 million in 1Q. We returned about $7 million to shareholders via our cash dividend. We used $38 million in cash from operations in 1Q, of which, $14 million was related to cash payments for restructuring. Our overall cash and investments balance at the end of 1Q was $934 million. There were no open market stock buybacks during the quarter. The actual number of shares outstanding at the end of 1Q was about 366 million. Employment at the end of 1Q stood at approximately 2,650 compared with 3,250 people at the end of 2011. Book-to-bill was greater than 1 for the quarter.

Turning to our outlook for 2Q. Based on our bookings trend, backlog and market conditions, we expect 2Q revenue to be in the range between $280 million and $305 million. We expect non-GAAP gross margin to be about 40%, plus or minus 1 point or 2 depending on mix. We expect 2Q non-GAAP OpEx to improve again to around the $115 million range. In addition, we expect the 2Q non-GAAP tax rate to be 32%.

In conclusion, while we're disappointed about our performance in 1Q, we are encouraged by our increased bookings in March, which gave us a book-to-bill above 1. We're making good progress taking costs and expenses out of the business. We should have positive non-GAAP earnings in 2Q and generate positive cash from operations if we execute according to our plan.

Okay. Now we'll open the floor to your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Rod Hall with JPMorgan.

Rod B. Hall - JP Morgan Chase & Co, Research Division

I had a couple of questions, I guess. First one is on the bookings, you're talking about better bookings coming in. Can you give us any idea what products that's forming, is it broad-based or are there specific products that are seeing better booking activity through the quarter? That's the first question. And then also wanted to talk about the revenue weakness in Q1. Was that related to any pushouts or just general weakness, if you can just give any more color on what drove the weakness in the revenue in Q1, that would be helpful?

Robert W. Pullen

Sure, Rod. I'll take that question. First of all, bookings, on a positive note, were broad-based. Our -- we saw -- and this is our first improvement in over 1 bookings now in some time. And our revenue in the first quarter was terrible and that was broad-based as well, as Tom had given you the data unfortunately. And we view that it was down across the board, attributable to at least 2 things. The first one was it was down in North America and it wasn't just one customer. As we've talked about over the past year, it was several customers have slowed down because of the economy or at least fears and concerns about the economy. And then we started to see a little bit of slowdown in Eastern Europe in fourth and first quarter as well -- excuse me, on Western, I said Eastern Europe, I made a mistake, I meant Western Europe. Even though we saw -- we're looking -- and see some pick up here in Western Europe for the second quarter from a bookings perspective and from a demand perspective. But it was down both in North America and Western Europe, Rod.

Rod B. Hall - JP Morgan Chase & Co, Research Division

Rob, any more color on momentum on some of the new products. I know you talked about the announcements. What you're doing with trials and so on, but I mean, do you -- is there any one particular part of the lineup of products that's gaining momentum or is this just more related, things looking a little bit better in Q2 more related, do you think carrier spending picking up a little bit?

Robert W. Pullen

Well, I'd answer it this way, Rod, I mean, we do believe that carrier spending will pick up in the second half of the year, or that's what they're telling us. And -- so that's kind of my first point. Second point is that our growth products actually, while we're not highlighting that per se, our growth products were 57% of our revenue in the first quarter, which was up from 54% in 4Q of '11, from a sequential basis. And then lastly, we continue to see momentum in our now areas of focus, which is mobile backhaul and the packet optical. We both won new customers there. And I'm intrigued by the fact that we're introducing product, of course, we're doing it on time and meeting our quality criteria, and we're collecting revenue in the quarter that we either release the product or the subsequent quarter. That's all good news. Some of the stuff we told you about in the past, about the 8609 and 8611, and by the way, if you haven't noticed, we're trying to simplify our numbers to appear. But our new cell site aggregators and devices are showing promise as well.

Operator

Your next question comes from Jeff (sic) [Jess] Lubert with Wells Fargo Securities.

Jess L. Lubert - Wells Fargo Securities, LLC, Research Division

A couple of questions as well. First, can you comment if there are any 10% customers in the period? And then I was hoping if you could maybe talk about linearity in the quarter from a geographic perspective, how bookings activity compared in the U.S. versus Europe and some of the emerging markets? And maybe where you feel best about things going forward and where things may remain a little bit more challenging?

Thomas P. Minichiello

Jeff, this is tom, we had one 10% customer in the first quarter.

Robert W. Pullen

And then, Jeff, kind of a second part to that, maybe I'll add a little bit of color to Tom's statement. We almost had 2 10% customers by the time articulated, we truly only had one. Next, the linearity in the quarter to your question, it was back-end loaded, Jeff. It was -- we saw our bookings increase in March by comparison to the January and February timeframe. And it was consistent with my comments earlier, which is -- we saw a broader slowdown in North America, it wasn't just one customer. And we started to see some slowdown in Western Europe even though, as I mentioned earlier, our bookings are indicating that Western Europe and our EMEA regions should be up 1Q versus 2Q.

Jess L. Lubert - Wells Fargo Securities, LLC, Research Division

And were either of the 2 larger customers, international customers?

Thomas P. Minichiello

Yes. Jeff, the one-time customer was North America and the other large one that just basically barely missed was an international customer.

Jess L. Lubert - Wells Fargo Securities, LLC, Research Division

And then just final one, the data products business continues to decelerate, would you expect Q1 to represent a fundamental bottom off of where we start to see sequential growth? And if maybe you can discuss some of the activity you're seeing for the product category, North America, international markets, what's giving you confidence? I think that would be helpful.

Robert W. Pullen

Sure. First of all, yes, we expect the first quarter to be a bottom in the data products. Stated differently, we expect all of our data products to be up in 2Q versus 1Q. Next, we're -- I think the second part of your question, Jeff, is we've actually been seeing a broader base of customers now with some of our data products. A lot of our growth in Q4 has been outside of North America. But for our multiple new customers we had in the first quarter, one was a U.S. government, one was North American wireless and one was an international customer. So we're optimistic about it being broader than just one region.

Operator

Your next question comes from Alex Henderson with Miller Tabak.

Alex B. Henderson - Miller Tabak + Co., LLC, Research Division

Could you just talk a little bit about the second quarter guidance relative to whether you expect the rebound to be even between the U.S. and international or whether you expect the international to rebound more than domestic? And if you could just remind me, relative to that, whether there's a higher or lower margin to the international versus the domestic business these days?

Robert W. Pullen

I'll do the rebound. It's actually, Alex, we're seeing it broad-based including in international, when we looked at our funnel end and saw the opportunity for 2Q. We're seeing an uptick in each one of the regions. Asia Pac probably has the most suppression to it even though it's an uptick as well. But we're seeing that as a much broader basis.

Alex B. Henderson - Miller Tabak + Co., LLC, Research Division

So you're not seeing one growing faster than the other sequentially?

Robert W. Pullen

No, no, it's hard to tell at this point, Alex, in all candor. But I'm optimistic that North America will pick up because as we've talked about in previous calls, and I think some of the industry experts have talked about, North America has been slow both in 4Q and 1Q.

Alex B. Henderson - Miller Tabak + Co., LLC, Research Division

And the margin variance between international and domestic these days?

Thomas P. Minichiello

Alex, this is Tom. I'd be careful with drawing any conclusions as to one being different than the other and how that plays into the mix. It's really more a function of the products and the customers rather than making kind of a rule of thumb about international versus North America.

Robert W. Pullen

But Tom, your answer is correct. But to Alex's point, we're seeing slightly higher margins outside of North America based on the mix and our products and the cost reductions that we're pursuing.

Thomas P. Minichiello

Certainly, in the first quarter, that was the case.

Alex B. Henderson - Miller Tabak + Co., LLC, Research Division

I see. So going back to the commentary about improved conditions in the back half of the year, if you look at Verizon and AT&T spending, the forecast is flat for the full year, they spent 21%, 22% in the first quarter, which is actually above the normal seasonal pattern, which is normally 18% to 22% is the band. So are you suggesting that they're going to change the trajectory of their spending, i.e. increase the spending relative to the guidance that the companies have given, maybe not necessarily speaking to those 2, or are you just saying it's normal seasonal patterns that you expect to see going into the second quarter, second half? And then within that context, do think it's possible to get up revenue during the back half of the year on a year-over-year basis? Or do you think you still just got too much to offset to achieve that at this point?

Robert W. Pullen

Well, first of all, well, let me say that we are forecasting up revenue in the second quarter versus the first quarter. In the first quarter, obviously wasn't very good. And we do see some -- at least what customers are telling us now, Alex, is strength in the second half of the year by comparison to the first half of the year. Lastly, we don't comment on individual customers, you're going to have to go ask them. But my statements were more broader-based beyond just AT&T and Verizon, because we saw a slowdown in other customers as well. And they're telling us that they should pick up in the second half of the year. I'm not sure if I answered all your questions. Oh, you did ask about seasonality. The seasonality isn't as strong as we've had maybe a decade ago but we do see our fourth quarter having seasonally slightly higher than the previous quarters.

Alex B. Henderson - Miller Tabak + Co., LLC, Research Division

Do you think it's possible to have revenue growth this year or is that stretching it?

Robert W. Pullen

Versus last year, it's feasible but it's probably stretching it at this point.

Operator

Your next question comes from Mark Sue with RBC Capital Markets.

Mark Sue - RBC Capital Markets, LLC, Research Division

Carriers right around this time of the year, they're always, same to you, point to a stronger second half than the first half, that it seems one of those CapEx seems to be getting all the attention. What percent of your revenues of Tellabs is now skewed to wireless CapEx versus wireline CapEx? And how do you see that trend change by the time we exit the year?

Robert W. Pullen

Mark, it's a good question. I don't have the data off the top of my head as what is our wireless versus wireline. In fact, it's a little bit difficult to calculate because, as I said, in my comments, we're selling mobile backhaul whether it's optical or edge routing to wireless providers to go do backhaul and to wireline providers that are providing backhaul to the wireless carriers. If we can come up with a number, time and time, we'll certainly share that with you, Mark, but we don't have that off the top of our heads, that's maybe my first comment. The second comment is much more of our revenue, much, much more of our revenue is skewed toward wireless. And furthermore, you're right in your implication, customers are all telling -- well, most of them come, there are some total wireline customers, but most of them are telling us that they're going to spend more in the second half than the first. Next, we're caught up in the whole growth area of mobile data growth. And I don't view that as just a data growth, it's the video growth. And so in those 150 networks that we're in, which are dominantly wireless networks, it's all part of that wireless area and wireless data growth due to smartphones, tablets and so on, that all of you guys know. And so we're writing that curve right now, which is why we're seeing new customers and growth compensate from some of our legacy decline.

Mark Sue - RBC Capital Markets, LLC, Research Division

If we had to rank order, which products hold the most promise for you in 2012, any thoughts on how -- from a growth perspective how you see the products develop?

Robert W. Pullen

I'm sorry, Mark, can you reask that question, I was breaking up, I didn't hear you?

Mark Sue - RBC Capital Markets, LLC, Research Division

Sure. If you can rank order for our investors, how you see the growth of products this year in terms of their contribution to growth, what would it be, which products do you think held the most promise for growth this year?

Robert W. Pullen

Well, it'd be consistent with our previous forecast, which is the packet optical and edge routing and mobile backhaul. Those 2 areas, Mark, would continue to be our areas of growth and opportunity. We had -- from time to time, we had some opportunities on our core products and no doubt that will happen throughout the year. But it's really our investments and the growth areas in mobile backhaul, as well as packet optical.

Operator

Your next question comes from Ehud Gelblum with Morgan Stanley.

Ehud Gelblum - Morgan Stanley, Research Division

A couple of things, your Services revenue, all throughout last year, while your product revenue was dancing around with the CapEx spend, your Services revenue was actually quite strong and went up throughout most of the year. In this quarter, your services revenues sort of succumbed to gravity and came down. On a sequential basis, it was down pretty hard any from $59 million to $48 million. I saw the commentary in the press release about lower install revenue but wouldn't that have been true for several quarters last year and yet Services revenues seem to be stronger. Was there a component in Services revenue last year that suddenly kind of fell out? I've been thinking that last year's strength was due to a large part of maintenance being a part of Services and that's not necessarily going down?

Robert W. Pullen

First of all, Ehud, good question. You're right, we're down quarter-over-quarter from 4Q to 1Q in our Services. We expect our Services revenue to be up from 1Q to 2Q. And it was dominantly the installation service and it was dominantly one carrier in North America. We did see some uptick in pro services and we're hoping that, that's going to continue towards the second half of this year. I had mentioned, Insight Analytics where we're helping customers both optimize their networks and doing it faster than their present method of operation. Some of that should manifest itself by the second half of the year as well.

Ehud Gelblum - Morgan Stanley, Research Division

Okay. What I was saying, sort of going with, I was wondering, if you look at just the maintenance portion of the services contract -- the services revenue, which usually is flat to up every single quarter. Did that go down? Does that would maybe indicate that you lost actual footprint someplace at the services portion of the revenue?

Robert W. Pullen

No, Ehud, the maintenance agreements are going to be flat to up. And sometimes, they're not renewed precisely at the beginning of the year. And so you're seeing a little bit of downturn probably because of that. We give customers a little bit of leniency, I'm not sure that's the right policy but we do give customers a little bit of leniency. And as you -- I think you know we prorate that revenue on a quarterly basis throughout the year. So when they sign up for a yearly maintenance agreement, we only collect a quarter of the revenue divided by 4 quarters.

Thomas P. Minichiello

Ehud, just to further support what Rob is saying, if you look year-over-year, the Services revenue, I believe it was around $50 million in 1Q of last year compared -- when you do that comparison, it's a little more even. Next, the point that Rob made on the Services agreements when they renew.

Ehud Gelblum - Morgan Stanley, Research Division

Right. But I would think that's largely irrelevant. You should look at these things on a quarterly basis for that I think. The seasonality in services revenue other than renewals. So as long as we haven't lost footprint and haven't lost actual service contracts, then -- so is that true that we haven't really lost footprint?

Robert W. Pullen

We haven't lost footprint, we haven't lost service contracts period. Like I said though, we did lose some of the install from last year from one customer in North America.

Ehud Gelblum - Morgan Stanley, Research Division

Okay, sure. And that makes a lot of sense. U.S. was clearly down but one, it was around down around 13% or so I calculate. Which can be chalked up to certainly the seasonality. So you're Q1 U.S. in North America, within what most people would have thought generally happen, it was the international that seems to have been down a lot to somewhere around that 25%. What's going on internationally? I guess we're much more -- our antennas are wired to watch AT&T and Verizon and Qwest CenturyLink very close because they're nearby, but what is actually happening? Is it the macroenvironment that's cutting off European spending, is it that they're focusing more on wireless and less than wireline? And of them, is it mainly the Tier 1 carriers in Europe that you're exposed to, is it that they're Tier 2 and the competitors? What's the dynamic that's going on? Is it just Europe or are you seeing weakness in LatAm and Asia Pac too, and what gives you more confidence that those guys will actually all pick back up again?

Robert W. Pullen

Okay, Ehud, as usual, you asked a bunch of complex questions in one question. Let me see if I can answer them all. So first of all, you have to look at us more than just North America these days. As Tom and I mentioned, 51% of our revenue has come outside of North America, which is consistent with the strategy we put in place, we needed to become more global in nature. By the way, and not give up on our North American customers. The next point is I believe it's a trend around the world, Ehud, moving from wireline to wireless. People aren't abandoning wireline but most of their strategic investment has been wireless. Third, it's not just Tier 1s or Tier 2s, we're selling to both. And then as for kind of the root to your question, I believe, I believe it's macroeconomic. There is -- as you know, Western Europe is going through some traumatic turbulence, I'll call it, there's a few other words that I won't go into, but they're going through traumatic turbulence. And so we saw a softness both in 2 regions, both EMEA dominantly in Western Europe, Ehud. And we saw softness in Asia Pac as well. Asia Pac is tied to the global economy of course, and with the global economy slowing down, including shipments out of Brazil of simple things like iron ore to China, if their demand is down, we saw some Asia Pac down as well. So net-net, we do believe it's macro. It is probably Western Europe, a little bit of Asia Pac but we're tied to better trends. We're tied to the mobile data trends and the mobile video trends and that should help us with wireless on a global expansion. And as I said, our book-to-bill is higher than one. And we would expect each region to do better in the second quarter than the first quarter, notwithstanding my comments.

Ehud Gelblum - Morgan Stanley, Research Division

So macro notwithstanding, Europe is actually going to pick up? [indiscernible]

Robert W. Pullen

Yes. We think that, that's more of our product introductions, Ehud. We introduced some new products that customers want and need. And so I can't comment on what certainly others in our industry are going to see in Western Europe. I am concerned about Western Europe, I won't mislead any of you. But we're seeing that our Western Europe business could -- and Europe in general could increase from 1Q to 2Q.

Operator

Your next question comes from Simona Jankowski with Goldman Sachs.

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Just one thing, if I didn't catch it is that did you say how many new customers you added in the quarter, total?

Robert W. Pullen

We didn't. But I alluded to one comment, Simona, we added 6 new customers, 3 in the mobile backhaul space, and 3 in the packet optical space.

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Okay. And I think you alluded a couple of times to some of the weakness in margins in the Optical Transport System segment, can just expand on that a little bit, as far as what caused that and if that was a temporary effect or how you see that going forward?

Tom Scottino

Yes, Simona. It's a temporary effect in the first quarter, the trend line in our optical business has been quite good. It's been improving quarter-over-quarter. This quarter, the mix plays heavily even within the product group. And this quarter, we had more system components as a percentage of the mix than cards. That moves around in any given quarter. We expect that to move in a positive direction going forward and get our optical margins back on an improving track, which the trend line has been throughout last year and we see that picking back up and continuing going forward.

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Okay, great. And then just lastly, since you weren't using much as much kind of the nomenclature you've used in the past, with the 8609 and the 8611, it wasn't quite clear to me which one you were citing with some of the new trials and some of the new orders. And I do pick up that the 8611 shipped in the quarter as expected. But can you just, again, for each one of those, give us the update of the trials and any of the revenue recognition that you might have had in the quarter?

Robert W. Pullen

Simona, when we try and simplify things, people drag us back to the old way. I'd be happy to answer your question. First of all, the 8609, which is a cell site aggregator for our mobile backhaul business, that shipped in the third quarter of 2011, and we recognized revenue in both third quarter and subsequent quarters, which was good, and that was consistent with what we said we're going to do. The 8611, which is a higher density and redundant, more redundant system, I won't get into all the details, and a higher capacity system than the 8609, it's also a cell site aggregator. We shipped that as planned in the first quarter. We're in multiple trials right now. In fact, it's in live networks. And we expect to recognize revenue -- well, we recognized revenue in the first quarter already and we'll expect more of course, in the second quarter and beyond. The third area in the 8600 family is we just introduced a new expansion where we took our existing nodes in the field that are in 160 networks around the world, and we just multiplied their capacity by 5x, as well as introduced a new higher density ethernet card to lower the cost per circuit, do a cost reduction in other words. And that's in trials right now with customers as well. And we wouldn't expect revenue in that, at least until the second quarter. So that's kind of the summary of the numbers, Sue.

Simona Jankowski - Goldman Sachs Group Inc., Research Division

That was helpful. And then was that what you're referring to as far as being available in May, those enhanced aggregation nodes?

Robert W. Pullen

Yes. In fact, both the new -- the aggregation nodes are the 5x capacity with the new higher density ethernet, that our goal is to release that as a controlled introduction in May. And the same holds true with the 8611. Again, notwithstanding that we're in -- the fact that we're in trials today with these products and they're performing well.

Operator

Your next question comes from George Notter with Jefferies.

George C. Notter - Jefferies & Company, Inc., Research Division

I guess, kind of feeding into the picture here, I'm wondering if you could talk a little bit about the 9200 platform. I think you told us at one point that you'd expect it to start to generate more meaningful business towards the end of the year. Can you talk a little bit about how you're positioning that? I asked the question because obviously, there's a lot of EPC deals that have gone down. It seems like Ericsson and Alcatel lose and have won a large number of those deals in conjunction with LTE rollouts. You look at guys like Tellabs with MobileMax, they've really struggled in that area, they've come to market late. How do you see your niche with the 9200 going forward?

Robert W. Pullen

Sure. so George, first of all, again, you asked a few questions here. We are not pursuing an EPC enhancement on our 9200, let me just make that clear. On the other hand, what we do, what we have is an open ATI interface, let's call it an open software interface where others could develop on it if they so chose. Next, I think you referred to Tellabs MobileMax, that's actually Juniper. So I think you were eluding to probably Juniper not Tellabs. What we're positioning the 9200 at -- well, first of all, the 9200, it's actually we shifted to our initial target customer already, with preliminary software on it. And it's still in its development cycle. We do expect that to be available toward the end of this year or first quarter next year, so those data points have been consistent as we've told you in the past, and we're positioning it as a service aware aggregator for our mobile backhaul and an ongoing trend that we see in the world, which is for carriers who own both the wireless and a wireline network, they will likely converge those 2 networks over time. So all do it at different rates but you may have heard about fixed mobile convergence. This service aware device will help us not only in our mobile backhaul, it's an end to end solution but also as a fixed mobile convergence device as well. George, I tried to give you what we're not doing and what we are doing and the dates.

Operator

Your next question comes from Nikos Theodosopoulos with UBS.

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Just some quick questions. On the book-to-bill, can you give us a sense of whether that was slightly above one, materially above one, and has the order recovery in March continued into April?

Robert W. Pullen

It's slightly above one, Nikos. And the order recovery is continuing. We're seeing decent bookings right now going forward. So we're optimistic about that. And that's why we gave higher-level guidance of the 2.80% [ph] to 3.05% [ph] in the second quarter and hopefully while the margin is consistent with what we gave in the first quarter, we're hoping that based on mix, our margins should be higher than the first quarter as well.

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Okay, great. And you announced earlier this week or last week, a relationship with NEC for the packet optical products in Japan. Is that a market and a relationship you think that can be material for the company or is it kind of one-off with some niche potential deployments there?

Robert W. Pullen

I would describe it like this, Nikos. The announcement that we made is more of an opportunistic pursuit by both them and us, where the customer likes our technology and they're just going to be the systems integrator and so that's a symbiotic relationship there. I will share with you that it could grow into something more meaningful but it's not there yet.

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Okay. All right. Great. And can you give some color on obviously, either sequentially or year-over-year within transport, how cross connects versus packet optical, what the relative declines were, did they both decline about the same, or was there a bigger falloff in one versus the other?

Robert W. Pullen

Are you asking for the total year?

Nikos Theodosopoulos - UBS Investment Bank, Research Division

I mean, for the first quarter, if I look at your transport revenue and I look at the 2 major components, cross connects versus packet optical, did they both -- sequentially, did they both...

Robert W. Pullen

Oh okay, I understand your question. The 5500 fell off at a higher percentage than the 7100, Nikos.

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Sequentially?

Robert W. Pullen

Sequentially, from for 4Q to 1Q, if that was your question.

Nikos Theodosopoulos - UBS Investment Bank, Research Division

Okay, great. And just one last one. Rob, in the mobile backhaul market, and maybe this is an incorrect assessment so I want to get your view, when I look at results from Tellabs and peers, Cienna and microwave radio backhaul companies, the business seems to be very lumpy with -- regardless of which company you look at, big wins, revenue and then very little follow-on business, it almost seems like if I compare it to other products in the sector, the follow-on rate seems to be quite low so to keep the business going, it seems like you got to continue to win footprint. Do you see it that way or is there a lot of follow-on business and it's just not showing up in the numbers yet?

Robert W. Pullen

It's a good question, Nikos. It is lumpy in nature. It's -- we'll win a big -- we -- for example, we won a big customer in Russia, they had a mass deployment where they put in the nodes at the hubbing site, as well as the cell site. and they put in enough capacity for what they foresee and they're all slightly different, Nikos, by let's say about 9 months to a year. And then it's all based on demand after that, which is correlated to the follow-on growth. We actually have seen follow-on growth in many of our customers due to the data growth and the video growth. But it's more lumpy in nature than most product lines that I've been associated with in the past 26 years in this business. And by the way, that's why we continue to expand our footprint. We're expanding our footprint both in new customers. And for competitive reasons, I'm not going to go into other areas that we're investing in, but as a management team, we're investing in other regions now in the world to try and capture new business as well, to kind of get some of that upfront lumpy business and demand.

Operator

Your next question comes from Jeff Kvaal with Barclays.

Jeffrey T. Kvaal - Barclays Capital, Research Division

I was wondering, Rob, can we go into more detail, into the backhaul product. If I'm looking at it correctly, there was quite a material downtick in the -- sequentially, from the December quarter and then also year-over-year is quite meaningfully down. Given that this is an important leg of the stool for the recovery plan, can you give us a little flavor for what has happened over the course of the last few quarters there and why you're so optimistic about the outlook going from here?

Robert W. Pullen

Well, Jeff, as I've stated a couple of times, I think, the first quarter was just down altogether. We believe it was more macro. The fourth quarter was down sequentially in the 8600 from the third quarter and we thought that, that was macroeconomic as well. The reason we're optimistic about the 8600 improving in the second quarter by comparison to the first is our backlog and what customers are telling us for future demand, which means that we'll still book and ship in the same quarter. But we're optimists, the customers are telling us that they have ongoing demand, by comparison to the fourth quarter of last year and first quarter of this year. And so we're optimistic about that. And while we're not forecasting the second half of the year, they're giving us some optimism for the second half of the year as well. And it goes back to Nikos' point. On one hand, we've seen some lumpy new business, but on the other hand, we're now seeing some growth on the existing businesses we already have and that's kicking in.

Jeffrey T. Kvaal - Barclays Capital, Research Division

Okay. Should we think that there is, I mean, a chance for you to return to year-over-year revenue growth in that particular segment over the next 3 to 4 quarters or was it early in the trajectory there?

Robert W. Pullen

Jeff, there's reason to believe that we could see that growth year-over-year. And Jeff, remember, we can't simplify this. But the 7100 and other of our products are used for mobile backhaul as well. They're typically just used in wireline networks where the wireline carriers delivering a wholesale or a business service to the wireless carrier. We don't count that in our mobile backhaul, we count it as our packet optical transport. So we're trying to be as true and transparent to these numbers as possible.

Jeffrey T. Kvaal - Barclays Capital, Research Division

I think we understand that, it's just that you guys are a bit of a ways away from getting back to year-over-year revenue growth so it's good to hear your commentary on that, Rob.

Robert W. Pullen

Yes, that's fine, Jeff. Look, you guys know that we had a really rough year in 2011, mainly from one customer. I don't know if I've said this in public to all of you but if you take away that one customer in 2011, the overall company grew 9% from 2010 to 2011. That's one way to cut it. Next, as I answered the question earlier, while it's feasible we could outdo last year, we don't expect that from a top line perspective, but we're certainly stabilizing the business. And as you know, we've recently cut out over $100 million of expenses to both pursue this growth that we're going to see here in the second quarter, as well as improve our profitability. And by the way, we're not sacrificing what's going on with our research and development. We still are investing a large percent of our revenue back into R&D, our current estimates is around 21%. So we continued to invest for the future while keeping an eye on profitability.

Operator

Your next question comes from Simon Leopold with Raymond James.

Simon M. Leopold - Raymond James & Associates, Inc., Research Division

I wanted to ask about 2 things. One is concerning the mix in the second quarter guidance. I think given what you're suggesting on gross margin, it implies to me, a very strong sequential move in the data networking products, and I want to try to see if we can get a little bit more granularity around what's driving that and if we can think about it, at least getting pretty close to the level you had in the December 2011 quarter? That's my question on the mix. If you could give us a little more color there. The second thing I was hoping you could talk about is what's going on in the pricing environment, particularly in your optical products around maybe 10G, 40G pricing trends? It sounds like that's getting a little bit tougher than maybe it has been?

Thomas P. Minichiello

Simon, let me take your first question about the mix and the gross margin for second quarter. We have, as we talked about earlier, the optical product group, we expect that to improve and get back up to the improving trend we had seen last year and towards the end of last year. So that will be a good chunk of how you get back up to the area that we've give you for guidance here, it's just 40% plus or minus. The other one that you mentioned that was discussed earlier is certainly the backhaul business and the data products in particular, and the 8600 in particular, we see a very strong rebound there. So that will be another big component to how the margin will be moving up higher than what we've reported for the first quarter. And then broadly, the rest of the business will be up and services we expect also to improve and that'll play a -- those 3 are really the -- the 8600, the optical group and the services business are really the drivers for 2Q margin.

Robert W. Pullen

And we should also see an uptick in 8800 from 1Q to 2Q as well, right Tom?

Robert W. Pullen

Yes, 8800, as well as 8600, yes.

Robert W. Pullen

So Simon, the second part of your question is, so what's driving all this? Well, we believe the first area is some of our new systems. These new enhancements, both the new enhancements to the aggregation nodes and the new cell site aggregators. In fact, it may have caused some pause in the 4Q and 1Q. It's hard to correlate that but it may have caused some of that. But what's driving our optimism and our growth is some of the new products. The second one is customers are telling us that -- I just took a trip to India and Spain and met with a lot of our customers, and they're telling us that the data growth and video growth is killing them and so growth in that embedded basis is showing some continued signs. Notwithstanding the fact I told Nikos that it's lumpy because when you win a new customer, you deploy big and then slow down for a while. And the last area is we're continuing to go after new customers. We don't have the market saturated yet and there's new regions in the world that the management team is already invested in and we're hoping it will pay off. Okay, that's kind of the second part to your question on what's driving the data increase. The other part of your question is 10G and 40G pricing. We don't see as much pricing -- we -- it's a competitive market as all of you know. We don't see as much pricing pressure on the transponders of 10G and 40G per se. What we continue to see, however, is a fight for new market share which implies that we may be lowering the entry price on our new systems when we're winning new share. And so the bigger issue is more margin pressure on the entry price of new systems going in as you go to win new share and that's really on a global basis.

Operator

Your next question comes from Jim Suva with Citi.

Jim Suva - Citigroup Inc, Research Division

It's Jim Suva. Quick question, I know your CFO is really new there, but I have to ask the question about the CFO's strategy. Did you kind of stay on plan with what's the kind of laid out earlier this year or is there a need for some major restructuring, selling divisions, some shakeup in the company? What to do with your cash and how to look at things because with Q1 being down 20% year-over-year, and Q2 down 7% year-over-year that it looks like that there's some big drops here. I just have to ask the question about what the CFO's strategy plan is at this point but still recognizing he's relatively new?

Robert W. Pullen

Sure, Jim. Well, first of all, we've been shaking this company up period. And we just shook up the company again in January. And so again, we're focused in these areas that we just mentioned, trying to get back to growth and profitable growth. Andrew, we hire him because he had a lot of experience in this space, he had good business management, finance experience and turnaround experience. And we're hopeful that he can augment Tom and his team to help us execute this strategy and do it in a more meaningful way. Did we -- are we talking about selling divisions, was one of your questions. We don't talk about that for strategic reasons but we're not, we're staying the course at this stage. But we would always evaluate what we can do to maximize shareholder value and/or customer value while looking out for employees. And so we evaluate all of these options on a going forward basis and we are going to give Andrew every shot to come shake us up, as he's smiling here to my left, and challenge any of our thinking and that's one of the reasons we went and hired Andrew as well.

Tom Scottino

Brooke, this is Tom, I think we've gone over the time limit that we had set but I think we'll take one more question and then we'll wrap this up.

Operator

Your final question comes from Tal Liani with Bank of America.

Eric A. Ghernati - BofA Merrill Lynch, Research Division

This is Eric Ghernati for Tal. If I recall correctly, you had expected $20 million annualized COGS savings and looking at your guidance for Q2, all else considered, it would imply that you left out like 170 bps of margin improvements from the guidance or the upper end of your guidance and compensates for those, can you just walk us through why 40% and not 42% gross margin that you're targeting?

Robert W. Pullen

Okay. So just to give a little context and recall around the savings. We had a total of $115 million that we were taking out of the business between our last July plan and the plan we announced back in January of this year. The first plan from last year is essentially done, that's 50 -- the typical split is the way our spending works is about 80% of it in the upper end of the expenses and about 20% of it above the gross margin line. So that piece is done and a lot of those costs are already out from the $50 million. In fact, a substantial amount from the January plan, which was $100 million, and again, that's around $80 million in the OpEx and $20 million in the other costs of goods sold. A lot of that was completed in the first quarter. There's still more to go that you'll see in the results moving forward, but substantially, most of it was done. So the amounts that we took out in the cost to goods sold is pretty much -- is what you see. There'll be a little bit more and that will show in the second and third quarter. By the fourth quarter, this second plan, the January plan is expected to be completed and you'll see our goal there is to have our OpEx running at about $110 million per quarter, on a $440 million annual run rate.

Eric A. Ghernati - BofA Merrill Lynch, Research Division

What do you think your normalized gross margins should be by the end of Q4?

Thomas P. Minichiello

Well, as we always say, the growth -- there's a lot of factors and variables that play into the gross margin rate, particularly quarter-to-quarter. It's highly dependent on our product mix, and to some degree, our customer and regional mix. So this is why we give you the guidance with a bit of a range. It's highly dependent on the revenue mix in any given quarter. The other cost to goods sold, we've taken cost out of the business in that area and to keep it consistent with our current business volumes, and that for the most part is in, there's a little more to go there. But again, we like 40% or better. We are focused on profitability and that's where we need to be if we're to achieve that so that's what we're focused on and while it can move around given the mix in any given period, we want to be at or above that range.

Robert W. Pullen

Thank you. Let me summarize then for all of you. First of all, thanks for spending the time with us again this morning. Next, on a personal note, I want to thank many of you for all your nice thoughts and warm wishes toward me personally. As I said in some external documents and announcements, my energy is great. I'm already seeing some improvements and I'm continuing to work and we have a strong management team here to help us out. More importantly, going back to the business, when we execute against this plan that we pursued since earlier this year, we should see -- expect to see growth in 2Q from 1Q, and we should see improved profitability. That's what we're focused on while we're investing for the future to keep up-to-date and our cost down and our opportunities up in this highly competitive market. So thanks again, for all your nice thoughts, your participation this morning and we'll talk to you soon. Thanks, everyone.

Operator

Thank you. This concludes Tellabs First Quarter 2012 Earnings Conference Call. You may now disconnect.

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