Tekelec reorganization does not specify more cuts

Tekelec, a Morrisville company that makes telecommunications software, announced a new internal reorganization Friday to streamline operations and boost stock value.

The company, whose technology is used by the major wireless and telecommunications providers, said it will fuse two divisions into one unit. The company also said it will buy back $50 million of its stock.

Tekelec is coming off a year in which almost 600 workers were let go -- through a combination of staff reductions and the sell-off of a major division in Texas.

Company officials did not specify further cuts as Tekelec winds down the most recent staff reduction of 28 workers, about half of whom were based in Morrisville. The officials said the changes announced Friday are routine, noting that the company continually adjusts its size in response to volatile market conditions.

"When you build up the work force and the infrastructure based on growth expectations and you don't reach those expectations, you have to cut back," said Chief Financial Officer William Everett.

But Lawrence Harris, a research analyst in New York with Oppenheimer, said in a research report Friday that given the recent slowdown in Tekelec's business, "we would not be surprised if some cuts were made."

After strong growth last year, Tekelec's software orders have fallen below expectations during the first two quarters, forcing the company to lower sales projections by 10 percent for the year.

The company announced the stock buyback after the shares had been battered for three weeks, losing 20 percent of their value. The stock slipped again Friday, closing at $11.78 a share, down 21 cents.

Monday, Tekelec announced that Richard Mace, executive vice president of the company's Global Business Group Solutions unit in Morrisville, will leave Sept. 1 and his position will not be filled. Mace joined Tekelec in 2004 as part of an acquisition of Steleus, a Massachusetts communications software unit.

The consolidation will place two major units under the leadership of Ronald de Lange, who has for two years been heading one of the two divisions, the Network Signaling Group. Signaling, Tekelec's core business, is the technology that breaks down and sets up phone calls. Software solutions is a suite of applications to monitor data network traffic and gauge network performance.

Tekelec continues facing stiff competition from Chinese and Indian firms abroad, where Tekelec is fighting for market share. Meanwhile, the release of the latest version of Tekelec's telecom network traffic monitoring software has been delayed for several months as the product undergoes testing, which in turn has delayed key customer orders.

Tekelec's staff has remained steady in Morrisville at about 650. The company's total work force now fluctuates between 950 and 975 in 20 offices worldwide.

Many of the recent cuts have come in Texas, where Tekelec lost 490 employees when it sold a struggling division earlier this year.

Tekelec is in a strong position to buy its own stock; the company has a balance sheet with $465 million in cash and other liquid assets. The company also has $125 million in debt.

"We've got a big war chest, and we're spending $50 million of it to invest in ourselves," said investor relations director Jim Chiafery. "The stock buyback is a vote of confidence in the company's future."