Stock Boost: Layoff, Restructuring News Helps Tekelec Stock On Street
Posted June 23, 2006 1:38 a.m. EDT
MORRISVILLE, N.C. — Shares in telecom gear manufacturer
rose 31 cents, or more than 3 percent a share, on Thursday after its announcement of a restructuring. The climb continued Friday with shares selling at $12.23, up 17 cents, in afternoon trading.
The Morrisville-based company said after the markets closed Wednesday that it was cutting 60 jobs and moving to cut costs by up to $8.5 million a year.
Wall Street analyst firm Jeffries & Company raised its rating of Tekelec (Nasdaq: TKLC) to "buy" from "hold" on the restructuring news.
"While yesterday's restructuring alone will not stem the hemorrhaging, Tekelec management is now taking action toward reaching breakeven profitability in the business," analyst George Notter said in a report from Jeffries & Company, according to The Associated Press.
Jeffries set a stock target price of $17.50.
Analyst firm Brean Murray initiated coverage of Tekelec earlier in the day Wednesday with a "strong buy" rating.
The majority of the jobs being lost are at Tekelec's Switching Solutions Group based in Plano, TX, Tekelec said in a brief statement on Wednesday.
Tekelec described the moves as "part of its ongoing efforts to align its cost structure with the business opportunities in certain business units and operating groups."
Tekelec shares closed at $11.70 Wednesday, up 47 cents.
The cost cutting is the latest move by new Chief Executive Officer Frank Plastina to put his imprint on Tekelec, which recently moved its headquarters from California to Morrisville. Plastina, a former Nortel executive, joined Tekelec in January.
Tekelec recently restated earnings from 2003-2005. The company also took a $51 million charge against earnings in February related to the acquisition of switching firm Taqua in 2004.
In April, the company also sold off its IEX Corp. subsidiary for $200 million.
Earlier this week, Tekelec named Dave Rice, a former Nortel executive, as its new senior vice president of operations.