NEW YORK (AP) - Shares of Tekelec Corp. jumped more than 9 percent Monday
after a Morgan Stanley analyst upgraded the networking gear maker amid growing
spending by key customers -- such as AT&T Inc. -- and improving gross margins.
Scott Coleman upgraded Tekelec to "Overweight" from "Equal-weight" and said
the company's business fundamentals are improving, likely driving 2008 results
above Wall Street's expectations. Coleman expects adjusted first-quarter
earnings of 17 cents per share from Tekelec, above average analyst expectations
of 13 cents per share as polled by Thomson Financial.
Coleman said in a client note Tekelec's key U.S. customers, such as AT&T and
T-Mobile, are returning to spending on signaling technology, which should bode
well for Tekelec. Signaling systems, Coleman explained, are the "brains of the
telecom network." For a wireless service, for example, the signaling network
finds the phone and instructs the network to route the calls to the appropriate
cell phone.
"We believe improving order trends should drive shares higher," Coleman
wrote. "Longer term, the European market could accelerate on potential
regulatory shifts ... and changes in carrier business models ... both of which
should drive increased usage and demand for TKLC's equipment."
Tekelec's margins are also improving, helped in part by the company's
restructuring efforts that started in 2008 and should have an effect this year,
the analyst said.
Shares Morrisville, N.C.-based Tekelec rose $1.01, or 9.3 percent, to $11.85
Monday. The stock has traded between $10.12 and $16.29 in the past 52 weeks.
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