Bloomberg News

Tekelec Surges After Preliminary Earnings Exceed Estimates

October 19, 2011

(Updates with analyst comment in fourth paragraph.)

Oct. 19 (Bloomberg) -- Tekelec surged the most since 2002 after the maker of telecommunications-signaling systems reported preliminary third-quarter profit that was better than analysts estimated and said it won a new $20 million contract.

The shares surged 23 percent to close at $9.21 in New York, the biggest advance since August 2002. The stock has dropped 23 percent this year.

Profit excluding certain costs was 16 cents to 20 cents a share in the third quarter, the Morrisville, North Carolina- based company said in a statement. Analysts had projected 6 cents on average, according to data compiled by Bloomberg. The company said it will report final third-quarter results on Nov. 9 before U.S. markets open.

“The stronger result is a big surprise,” said Greg Mesniaeff, an analyst at Kaufman Bros. LP, in an interview. He rates Tekelec “hold” with a target price of $9. “As the telecom equipment sector has been sluggish, the expectations for most companies are not to deliver solid results for the second half,” he said.

The company also said its diameter signaling router, which controls the flow of traffic for so-called voice over Internet protocol, or phone calls transmitted over the Internet, won a $20 million contract in early October, making Tekelec optimistic about the product’s prospects for future sales.

“Next year, there is going to be a big upgrade to 4G and LTE,” Mesniaeff said, referring to new wireless technologies being rolled out by carriers. “As that happens there will be big demand for DSR.”

Revenue was $103 million to $106 million in the third quarter, the company said. The average estimate of analysts was for sales of $93.3 million. Tekelec projected orders of $66 million to $68 million.

--Editors: Jillian Ward, Marcus Chan

To contact the reporter on this story: Xu Wang in New York at lrapaport1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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