Segment Information

9 Months Ended

Sep. 28, 2012

Segment Information

11. Segment Information

Prior to the second quarter of 2012, we reported results of operations for three reporting segments: Broadband, Transport, and Services. As a result of strategy changes and internal reorganizations at the beginning of the second quarter of 2012, we are focusing on the growth markets of Packet Optical (primarily our optical portfolio) and Mobile Backhaul (primarily our data portfolio) in addition to the on-going Access and Services businesses. With these strategic adjustments, we changed our reporting segments accordingly. Therefore, beginning with the second quarter of 2012, we have reported in the following four segments: Optical, Data, Access and Services (the Services segment is unchanged).

Optical segment products are primarily used to manage large volumes of telecommunication traffic in metro areas. The Optical segment includes the Tellabs^® 7000 series of optical transport systems, as well as the Tellabs^® 5000 and 6300 series of transport systems equipped with optical interfaces.

Data segment products are primarily used in mobile backhaul applications, and for business services and various edge routing applications. The Data segment includes the packet-switched Tellabs^® 8600 Managed Edge System, the Tellabs^® 8800 Multiservice Router Series, and Tellabs^® 9200 Content-Aware Router Series, as well as the Tellabs^®8100 Managed Access System.

Access segment products are primarily used to enable service providers to bundle Internet, video, and voice over high-speed fiber-based networks and in Optical LAN applications. The Access segment includes the Tellabs^® 1000 and 1100 Multi-service Access systems, and the Tellabs^® 1600 Optical Network Terminals.

The Services segment includes services that support all phases of the network: planning, building and operating. The Services segment includes deployment, support, training and professional services for customers of the Optical, Data and Access segments.

We define segment profit (loss) as gross profit less research and development expenses. Segment profit (loss) excludes sales and marketing expenses, general and administrative expenses, the amortization of intangibles, restructuring and other charges, the intangible asset impairment charge and the impact of equity-based compensation.

Consolidated revenue by segment follows:

	Third Quarter				Nine Months
	9/28/12		9/30/11		9/28/12		9/30/11
Optical	$	108.0	$	120.4	$	334.8	$	368.8
Data		66.2		109.1		213.3		312.7
Access		42.3		43.2		115.5		123.1
Services		47.9		57.1		146.8		164.3
Total revenue	$	264.4	$	329.8	$	810.4	$	968.9

Segment profit (loss) and reconciliation to operating loss by segment follows:

	Third Quarter						Nine Months
	9/28/12			9/30/11			9/28/12			9/30/11
Optical	$	23.5		$	20.6		$	67.3		$	67.1
Data		1.4			8.0			1.8			(7.8	)
Access		11.1			7.2			23.5			26.6
Services		15.6			22.8			48.0			54.4
Total segment profit	$	51.6		$	58.6		$	140.6		$	140.3
Sales and marketing expenses		(29.7	)		(41.4	)		(98.3	)		(126.9	)
General and administrative expenses		(17.9	)		(18.6	)		(58.7	)		(63.3	)
Equity-based compensation		(1.7	)		(3.1	)		(6.5	)		(11.1	)
Intangible asset amortization		(1.1	)		(5.0	)		(4.3	)		(15.3	)
Restructuring and other charges		(3.3	)		(19.5	)		(110.2	)		(20.5	)
Goodwill and IPR&D impairment		—			(102.7	)		—			(102.7	)
Operating loss	$	(2.1	)	$	(131.7	)	$	(137.4	)	$	(199.5	)

The segments use many of the same assets. For internal reporting purposes, we do not allocate assets by segment and therefore asset, depreciation and amortization, or capital expenditure by segment information is not provided to our chief operating decision maker.