Morgan Stanley Lowers Tellabs Outlook

Analyst Alkesh Shah sees further fundamental weakening, bankruptcies, and ongoing spending cuts weakening the company

Morgan Stanley cut estimates on Tellabs (TLAB ).

On Monday President and CEO Richard C. Notebaert resigned. Analyst Alkesh Shah says Tellabs chairman and founder Michael Birck will fill the CEO role. Shah thinks the company is in good hands, and says his investment thesis stays unchanged.

However, Shah says further fundamental weakening, as demonstrated by early pre-announcements, additional bankruptcies, and ongoing, expected cuts in capital expenditures makes him more cautious on top-line results through 2002. Shah cut his $0.10 2002 earnings per share estimate to $0.03, and trimmed the $0.12 2003 estimate to $0.07. He says his analysis indicates fair value for the company around $6, with a downside risk to $3-$5. Shah has an equal-weight rating.

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