Tekelec reports strong first quarter

MORRISVILLE -- Tekelec, whose technology is used by major telecommunications companies worldwide, this morning reported a strong first quarter in the wake of a major corporate restructuring.

The company reported first-quarter revenue of $118.2 million, up 9 percent from the same three-month period last year.

First quarter income was $18.3 million, or 25 cents per diluted share. First-quarter earnings shot up 67 percent, beating analysts' expectations of 16 cents a diluted share for the period ending March 31.

Tekelec is reaping a windfall generated by a price war between telecommunications carriers like AT&T and Verizon Wireless and others that are competing for customers with flat-rate calling plans and other discounts. Cheaper calling plans are driving increased telephone and text messaging traffic over Tekelec-designed networks. The carriers are forced to place orders to expand their networks in order to carry the increased voice and data traffic.

Tekelec's chief financial officer, Bill Everett, said the company in the first quarter saw the benefits of record product orders last year that are now being shipped to the telecom carriers and recorded as sales revenue on Tekelec's books.

Tekelec dominates the North American market for a network technology that initiates and terminates phone calls, a technology required to handle the surge of text messages increasingly being sent over phone networks. Tekelec has 80 percent of the North American market share of this network technology and is now vying to increase its 40 percent worldwide market share in the field.

Additionally, the company's gross profit margins jumped from 57 percent to 67 percent. The upshot: nearly $12 million in profit for the quarter. The margins are improving as Tekelec shifts its business model from selling hardware and equipment, which are costly to manufacture, to selling software, which is comparatively easy to modify, test and copy.

"The plans we put in place 12 to 18 months ago are taking hold," Tekelec CEO Frank Plastina told Wall Street analysts during a morning conference call.

The company released first-quarter financials this morning before market trading. Tekelec stock jumped 8 percent in mid-morning trading.

Tekelec's stock closed at $14.60 a share Monday, up 12 cents. In the past year, the stock has dropped as low as $10.12 a share and peaked at $15.31 a share.

The company also said it has repurchased $33.7 million of its own stock as part of a corporate plan to buy back up to $50 million in stock. By buying back its own stock, Tekelec reduces the number of shares outstanding, which has the effect of boosting the value of the remaining shares.

Tekelec reports financial data from its "continuing operations" to give investors and analysts a consistent picture of the company's financial performance.

Tekelec had 931 full-time employees worldwide as of December 31, including about 650 in Morrisville.