Major layoffs expected at Tekelec

Rapidly changing telecommunications industry has onetime leader on defensive.

Staff WriterMay 5, 2011 

Tekelec is expected to announce major layoffs this morning as the Morrisville technology company deals with falling revenue and rising operating costs.

The telecommunications company is contending with slipping sales and declining confidence on Wall Street. Tekelec has been forced to cut its financial projections three times while the stock has lost more than half its value in the past year.

Tekelec will lay out its turnaround strategy and restructuring to Wall Street investors and analysts as it releases first-quarter results this morning. The company could shed dozens of local workers as it shifts emphasis from underperforming divisions.

As of Wednesday, the company's employee total was 675 in Morrisville and 1,250 worldwide. It's unclear how many positions Tekelec plans to eliminate, although company officials were notifying affected employees Wednesday.

Spokesman Adam Parken declined to comment.

One challenge for the company is that its legacy technology that transmits phone calls and text messages is losing ground to competitors' 4G networks that transmit data and video.

"They've got all sorts of people coming at them," said analyst Blair King at Avondale Partners in Nashville. "They're having to pioneer a whole new product line."

AT&T, Verizon Wireless and other Tekelec customers are scrambling to develop high-capacity networks to handle increasing demand from smartphones, tablets and other portable devices.

Tekelec could do no wrong even at the depths of the recession, but the company went into a tailspin as consumers snapped up iPhones and iPads, and wireless carriers aggressively embraced 4G network technologies to accommodate those devices.

In January, Tekelec CEO Frank Plastina abruptly resigned after five years with the company. The company is still searching for a full-time chief executive as it is being run by interim CEO Krish Prabhu, a Tekelec board member since 2008.

In February, Tekelec announced an aggressive cost-cutting strategy but said layoffs would be a last resort.

Investors have been applying increasing pressure for Tekelec to revamp its business strategy and become a growth stock. The stock could get a healthy boost when the company reduces expenses and refocuses operations.

"Most investors were hoping that would happen and the market will probably have a good reaction," King predicted.

Tekelec shares closed Wednesday at $8.15, up 13 cents. or 919-829-8932

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