TEKELEC TRIUMPHS TELECOMMUNICATIONS COMPANY COMES ON STRONG IN 4TH QUARTER.

Byline: Evan Pondel Staff Writer

CALABASAS - The fourth quarter showed little promise as Wall Street's nerves were still frayed from the terrorist attacks, but Tekelec garnered investors' confidence, extinguishing financial woes with its ability to perform.

The Calabasas-based company entered the quarter wooing investors with better-than-expected earnings, resulting in a 50 percent gain for the stock over the period ended Dec. 31.

``Their stock was initially on the undervalued side. Of course, that was before they announced their third-quarter results, though,'' said Stephen Levenson, analyst with Gerard Klauer Mattison & Co. in New York. Tekelec shimmied past analysts' expectations, with pro forma net income, excluding acquisition-related charges, at $4.1 million, or 7 cents per diluted share. The same period's results were higher a year ago, with pro forma net income of $12.8 million, or 20 cents a diluted share, although analysts were pleased with Tekelec's ability to prevail.

``Tekelec had come up short the period before the third quarter, but they were able to snap right back into gear,`` said Edward Jackson, analyst with U.S. Bancorp Piper Jaffray in Minneapolis, Minn.

For a telecommunications company to stay afloat when the rest of the economy is sinking isn't only an indication of a favorable impression on Wall Street, it's proof that Tekelec's products are valued by customers.

Since Tekelec's inception in 1979, the company has been involved in developing telecommunications signaling infrastructures, essentially enabling wireless phones to communicate with one another today.

``As people use more and more wireless minutes up, our company should continue to grow,'` said Paul Pucino, the 41-year-old chief financial officer of Tekelec.

With cell phones the preferred method of communication for many, Tekelec's future will most likely benefit. Wireless calls will make up 40 percent of all phone conversation minutes by 2005, according to The Yankee Group, a research company in Boston.

Still, Tekelec doesn't stand alone in its quest to facilitate communication. Alcatel and Nortel are two competitors vying for the No. 1 slot in wireless technology.

``Stiff competition for a much smaller company,'' Jackson said.

Even so, Alcatel and Nortel are tying up their lines by focusing too much on other facets of the telecom world. Jackson said the competition will invariably propel Tekelec because of the company's expertise. Currently, Tekelec controls around 70 percent of the domestic market share.

``The competition is a positive because Alcatel and Nortel are distracted,'' Jackson said. ``Tekelec is more of a pure play.''

As the company moves ahead, it's looking overseas for expansion. Last week, mobile operator, Orange UK, a United Kingdom-based company that expanded after teaming up with France Telecom, completed the transition for its mobile communications network via technology provided by Tekelec.

``We're putting people on the ground in Europe, developing relationships and partnering,'' Pucino said.

The company also has a toehold on wireless technologies that are just starting to crop up on the street. Known as ``3G'' or third generation, the sophistication involved in routing mobile phones will soon exceed the capabilities of many networks.

However, Tekelec is confident it's ``agnostic to change,'' able to evolve without flinching at technological advances, Pucino said.

As the company already proved its ability to live up to analysts' expectations, in Tekelec's fourth quarter, due out Jan. 29, the company expects to see revenues around $78 million to $80 million, with earnings per share on a pro forma basis between 7 cents and 8 cents.

``I think the shares will do well and outperform the market. Hopefully, we'll see the same increase we saw in the latest quarter,'' said Lawrence Harris, analyst with H.C. Wainwright & Co., Inc. in New York.

Tekelec shares rose 25 cents Friday, or 1.25 percent, to close at $20.25 on the Nasdaq.

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2 photos, box

Photo:

(1 -- color) Tekelec CFO Paul Pucino, left, and CEO Fred Lax show off some of the line card components that are assembled at the company's facility in Calabasas.

(2 -- color) Tekelec technician Gia Tich tests line cards for a key company product, the Eagle STP. Stock values jumped dramatically in the fourth quarter for the Calabasas-based company.

Evan Yee/Staff Photographer

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