To the chagrin of telecom equipment firms, Verizon (VZ +0.9%) is staying frugal with its capex: after spending $16.2B in 2012 (down slightly Y/Y in spite of a 4.5% revenue gain), the carrier forecasts 2013 capex will be flat Y/Y. Big Red also says it wants to lower wireless expenses by $2B, and forecasts a 2013 wireless EBITDA margin of 49%-50% (up from 2012's 46.6%). Lower smartphone subsidies are a goal (possibly bad news for Apple and Samsung), and stock buybacks aren't ruled out - a heavy debt load and cash distributions to Vodafone limit Verizon's flexibility here. (more)
Light Reading sees higher carrier capex among the optical networking trends to look out for in 2013: the site points to comments from Finisar's (FNSR) CEO about European networks running at 65% of capacity (up from a prior 40%), as well as remarks from MKM noting "positive spending announcements" from AT&T, Sprint, Deutsche Telekom, and others. It also sees demand for 100G optical transmission systems taking off. Yesterday, Piper predicted component vendors would get a 2H13 lift from capex increases.
Though FQ4 results missed estimates and guidance for FQ1 revenue of $435M-$460M isn't favorable with a $458.6M consensus, Ciena (CIEN +1.8%) is trading higher. Few expected a great report in light of soft wireline capex, and a record backlog is going over well. Also, gross margin rose 290 bps Q/Q to 42.7%, and is expected to stay in the low-40s in FQ1. Optical transport sales (62% of total) saw a 2% Y/Y decline and optical switching fell 50%. But carrier Ethernet sales rose 66% and software/services 21%. TLAB +1.5%. FNSR +5.3%. OCLR +2%.
Tellabs (TLAB) +15.3% after declaring a $1/share special dividend and naming interim chief Dan Kelly its permanent CEO. The telecom equipment vendor, which has long been bleeding share due to its exposure to legacy technologies such as SONET/SDH, closed yesterday not too far away from 16-year lows. Some may be hoping Kelly's R&D background will help Tellabs improve its competitive footing.
In addition to declaring a $1/share special dividend, Tellabs (TLAB) announces it has named Dan Kelly its permanent CEO. Kelly became interim CEO in June, stepping in for Rob Pullen, who died of cancer in July. Prior to June, Kelly was Tellabs' R&D chief. Shares are halted.
Tellabs (TLAB +4.8%) is rallying after announcing it will start buying back shares again, leveraging $224.6M left in a program authorized back in Nov. '07. The optical networking vendor, which has been hit hard by poor industry capex and a dropoff in legacy hardware sales, will finance the purchases with its $942M cash/investment balance. (PR)
Juniper (JNPR) +2.5% AH and F5 (FFIV) +1.4% after Cisco beats FQ4 estimates, provides decent FQ1 guidance, and delivers relatively upbeat earnings call commentary about U.S. and Asia-Pac demand (though not Europe), particularly regarding service provider activity. Some other names to keep an eye on tomorrow: RVBD, CIEN, JDSU, FNSR, TLAB, ALU, AMCC, ADTN.
Ahead of its investor day, Ericsson (ERIC -1.2%) forecast the telecom equipment market will show a CAGR of just 3%-5% from 2012-2015. In light of all the bad earnings news and capex forecasts to hit the telecom equipment space lately, not too many will argue with Ericsson's assessment. The company does, however, think the telecom services, support solutions, and OSS software markets, where it has been trying to grow its positions, will post healthier (though not spectacular) CAGRs.