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Tellabs` (NasdaqGS: TLAB) Q1 2010 better-than-expected results reflect the wireless operators` need to up their backhaul capacity.

With AT&T, Sprint and Verizon on its customer roster, Tellabs reported that revenue increased 5 percent to $380 million in Q1. Not only did these results beat out Tellabs` own forecast of about $370 million, but also a Thomson Reuters I/B/E/S analyst poll of about $371 million. Company Q1 2010 profit was $45.9 million, or 12 cents a share, up from $6.5 million or 2 cents a share in 2009.

Clearly, the stars in Tellabs` Q1 earnings report were broadband data and professional services.

Buoyed by strong data sales, Tellabs` broadband segment revenues, while offset by declines in its broadband access segment, increased 7.3 from $178.3 million in Q1 09 to $191.3 million in Q1 2010. Tellabs` data product revenue jumped 107.8 percent from $63.0 million in Q1 09 to $130.9 million in Q1 2010. Sales of its 8600 managed edge system and the 8800 multiservice router series to a major unnamed operator upgrading its wireless backhaul network drove Tellabs` data product revenues up 107.8 percent from $63.0 million in Q1 09 to $130.9 million in Q1 2010.       

But for all the gains Tellabs made with data services, Q1 2010 last mile access revenue was down from $64.1 million in Q1 09 to $30.1 million. A major contributor to the access revenue decline was slowing sales of its 1600 Optical Networking Terminal (ONT) products. Tellabs said it expects that overall last mile "access revenue will likely continue to decline."

On the services side, revenue increased 13 percent to $60.7 million, a factor it attributes to the growth of deployment and professional services.  

Rob Pullen, Tellabs president and chief executive officer said that an uptick in product purchases and cost cutting is helping the company right the ship out of the challenging economic storm that hit many equipment vendors in the last year. "By focusing on growth products, and innovating in growth markets such as mobile Internet, Tellabs is helping customers succeed and is achieving profitable revenue growth," he said.