DOW JONES NEWSWIRES 
 

Tellabs Inc.'s (TLAB) first-quarter net income tumbled 61% amid lower demand as customers remain cautious about spending for telecommunications equipment.

The supplier of voice, data and video systems reported net income of $6.5 million, or 2 cents a share, down from $16.6 million, or 4 cents, a year earlier. Excluding restructuring and other charges, earnings fell to 6 cents from 8 cents. Analysts polled by Thomson Reuters most recently were looking for earnings of 3 cents a share on average.

Revenue decreased 22% to $361.7 million, in line with the company's January projection of $345 million to $375 million.

Gross margin rose to 44.2% from 38.3% amid higher data revenue and improved margins for its access and optical networking products.

For the second quarter, the company expects revenue will be flat to up by as much as the high-single digits on a percentage basis from the first quarter, and margin will be flat to up or down as much as two percentage points. Analysts expected revenue of $377 million.

President and Chief Executive Rob Pullen said data products continued to be the fastest growing category in the latest quarter, with revenue up 45%. However, it was not enough to offset declines in the rest of its broadband business, which makes up more than half of Tellabs sales and where revenue fell 12%. Its transport business saw revenue tumble 37%.

The company's phone and Internet clients include giants such as AT&T Inc. (T) and Verizon Communications Inc. (VZ), which are being cautious on capital spending. The global recession is just the latest challenge for the telecom networking industry, on top of increased competition from low-cost Asian rivals and weakening leverage amid consolidation in the telecommunications sector.

Shares closed at $4.99 on Monday and didn't trade premarket. The stock is up 21% this year.

-By Tess Stynes, Dow Jones Newswires; 201-938-2473; tess.stynes@dowjones.com