Tekelec (TKLC) 8-K Tekelec Announces 2010 Operating Results

Exhibit 99.1

FOR IMMEDIATE RELEASE NEWS RELEASE

Tekelec Announces 2010 Operating Results

• 2010 Revenues of $424.0 million;

• 2010 Orders of $388.3 million;

• 2010 GAAP Gross Margin of 60%, and non-GAAP Gross Margin of 65% (as reconciled below);

• 2010 GAAP Operating Margin of 5%, and non-GAAP Operating Margin of 15% (as reconciled below);

• 2010 GAAP Diluted EPS of $0.22 per share, and non-GAAP Diluted EPS of $0.64 per share (as reconciled below);

MORRISVILLE, N.C. — February 10, 2011— Tekelec (NASDAQ: TKLC), the broadband data management company, today announced earnings for the fourth quarter and full year 2010.

2010 Fourth Quarter Results from Operations

Revenue for the fourth quarter of 2010 was $90.2 million, down 27% compared to $123.5 million for the fourth quarter of 2009. The Company’s orders were $178.4 million for the quarter, up 10% from the fourth quarter of 2009. Fourth quarter orders were the second highest in the Company’s history. Order input was up primarily due to a 16% year over year increase in SS7 and Sigtran orders for Eagle 5 with most of the growth occurring within North America. Included in the fourth quarter of 2010 is a $26 million dollar order from a North American customer for its 2011 Eagle 5 needs that we do not expect to repeat. As of December 31, 2010, backlog was $338.8 million compared to $253.6 million as of September 30, 2010 and $373.6 million as of December 31, 2009.

GAAP gross margins for the fourth quarter of 2010 were 54%, compared to 67% in the fourth quarter of 2009. Non-GAAP gross margins for the fourth quarter of 2010 were 61%, compared to 69% for the fourth quarter of 2009. Please refer to the attached reconciliations of the non-GAAP financial measures referred to in this release to the most directly comparable GAAP measures.

On a GAAP basis, the Company reported a net loss for the fourth quarter of 2010 of $8.0 million, or ($0.12) per share, compared to earnings in the fourth quarter of 2009 of $15.9 million, or $0.23 per diluted share. GAAP operating margins were a negative 15% for the fourth quarter of 2010 down from 18% for the fourth quarter of 2009.

On a non-GAAP basis, the Company reported a net loss for the fourth quarter of 2010 of $1.2 million, or ($0.02) per share, compared to net income of $19.4 million, or $0.28 per diluted share, for the fourth quarter of 2009. Non-GAAP operating margins for the fourth quarter of 2010 were a negative 2%, compared to 25% for the fourth quarter of 2009.

2010 Results

Revenue for 2010 was $424.0 million, down 10% compared to $469.3 million in 2009. The Company’s orders were $388.3 million, down 10% compared to $429.8 million in 2009. Growth in 2010 revenues and orders for next gen solutions were not able to offset the double digit declines in Eagle 5 revenues and orders.

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

On a GAAP basis, the Company reported 2010 net income of $15.0 million, or $0.22 per diluted share, compared to $47.4 million, or $0.70 per diluted share in 2009. GAAP operating margins were 5% and 17% for 2010 and 2009, respectively.

On a non-GAAP basis, net income for 2010 was $44.3 million, or $0.64 per diluted share, compared to $70.4 million, or $1.04 per diluted share, for 2009. Non-GAAP operating margins for 2010 were 15% compared to 23% in 2009.

2010 Business Highlights

• Orders for next gen solutions increased 20% from 2009 levels to $106 million for 2010 on the strength of orders for policy and subscriber data management solutions.

• Next gen solution revenues increased 28% for the year compared to 2009 on the strength of revenues from our policy and subscriber data management solutions, consistent with the orders increase.

• Continued to expand our customer base by adding 28 new customers in 2010, including 16 that purchased next gen solutions.

• Increased the number of policy customers to 44 customers in 27 countries; 32 of these customers are tier one.

• Added 7 new subscriber data management customers since the acquisition of Blueslice — including 3 tier one customers who serve 190 million subscribers.

• Orders for policy and subscriber data management solutions were approximately $40 million for 2010, doubling our initial expectations at the time of the acquisitions of Camiant and Blueslice.

• Ended the year with a strong balance sheet with over $220 million dollars in cash and no debt.

Balance Sheet and Liquidity

As of December 31, 2010, the Company’s consolidated cash and cash equivalents totaled $220.9 million compared to cash and cash equivalents of $222.7 million at September 30, 2010. Cash flows from operations in 2010 were $22.6 million, compared to $55.1 million in 2009. Working capital at December 31, 2010 decreased to $286.9 million from $297.1 million at September 30, 2010.

2011 Full Year Guidance

We believe that full year 2011 revenues will range between $360 million and $400 million and non-GAAP gross margins will be in the low sixty percent range. Finally, we believe that our non-GAAP EPS range will be between $0.20 and $0.30 per diluted share and we expect the range for GAAP EPS will be between a loss of $0.15 and a loss of $0.25 per diluted share.

	2011
	Guidance
Revenues	$	360M - $400M
Non-GAAP Gross Margin*	low 60’s
Non-GAAP Diluted EPS **		$0.20 - $0.30
GAAP Diluted EPS		($0.25) - ($0.15	)

*	Of the adjustments listed below, approximately $2M of stock-based compensation and $23M of amortization of intangibles will impact GAAP gross margins.
**	Non-GAAP guidance excludes an estimated $13M of stock-based compensation, $30M of amortization of intangible assets, and $3M of restructuring charges associated with the resignation of the former Chief Executive Officer. Each of these, net of the associated tax impact, are included in GAAP EPS. The estimated net tax impact of the GAAP adjustments is $14M.

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

“Live” Webcast and Replay

Tekelec will host a live webcast of its conference call on Thursday, February 10, 2011, at 8:00 a.m. EST to discuss 2010 results and certain forward-looking information concerning management’s outlook for the business. To access the webcast, visit Tekelec’s web site located at www.tekelec.com, enter the Investor Relations section and click on the webcast icon. A webcast replay will be available at approximately 11:00 a.m. EST on Thursday, February 10, 2011, and for 90 days thereafter. The Company also plans to provide on its web site immediately prior to the commencement of the call certain GAAP and non-GAAP information (including GAAP to non-GAAP reconciliations) and other financial information for the quarterly and full year periods.

Telephone Replay

A telephone replay of the call will also be available for one week after the live webcast by calling either (800) 642-1687 or (706) 645-9291, and entering the conference ID #39097158.

Non-GAAP Information

Certain non-GAAP financial measures are included in this press release. In the calculation of these measures, Tekelec generally excludes certain items such as amortization of acquired intangibles, restructuring and other charges, non-cash stock-based compensation charges, and unusual, non-recurring gains and charges. Tekelec believes that excluding such items provides investors and management with a representation of the Company’s core operating performance and with information useful in assessing its prospects for the future and underlying trends in Tekelec’s operating expenditures and continuing operations. Management uses such non-GAAP measures to (i) evaluate financial results, (ii) manage the Company’s operations, and (iii) establish operational goals. Further, non-GAAP measures are utilized by the Company’s management and board of directors to assist in determining incentive compensation and evaluating key trends within the business. In addition, since the Company has historically reported non-GAAP measures to the investment community, the Company believes the inclusion of this information provides consistency in our financial reporting. The release and the attachments to this release provide a reconciliation of each of the non-GAAP measures referred to in this release to the most directly comparable GAAP measure. The non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial measures.

Forward-Looking Statements

Certain statements made in this press release, including 2011 Guidance, are forward-looking, reflect the Company’s current intent, belief or expectations and involve certain risks and uncertainties. The Company’s actual future performance may differ materially from such expectations as a result of important risk factors, which include, in addition to those identified in the Company’s 2009 Form 10-K, 2010 First, Second, and Third Quarter Forms 10-Q and its other filings with the Securities and Exchange Commission, the effects on our revenue performance of our year-over-year decline in orders in 2010 and the increasing portion of our orders that are for newer products with longer order-to-revenue conversion cycles; our increasing dependence on selling next generation products with which we have less experience forecasting and for which the markets are less mature and more subject to demand and technology changes; the difficulty we may have in transitioning from a hardware-centric to a software-centric business; the uncertainty associated with the resignation of our former CEO and the interim status of our current CEO; any adverse outcome from or effects of the securities litigations we currently have filed against us; the current or further detrimental changes in general economic, social, or political conditions in the countries in which we operate including the impact of credit availability and other economic factors on overall capital spending by our customers and resulting pressure on us to lower our prices; the rate and size of decline in demand for our older SS7-based products from which we still derive a substantial portion of our revenues; our ability to compete with other manufacturers that have lower cost bases than ours, are partially supported by foreign governments, and/or employ unfair trade practices; risks related to our international sales, markets and operations, including among others, import regulations, limited intellectual property protection, including protection of our software source code, increased costs and potential liabilities related to compliance with current and future security provisions in customer contracts and regulations, and security, access, and other regulatory requirements imposed by governments, including in particular the government of India; exposure to increased bad debt expense and product and service disputes as a result of general economic conditions; the timeliness and functional competitiveness of our product releases, the timing and size of any increase in demand for our performance management, SIP, Diameter, policy and subscriber database products; the risk of infringing on, and litigating with others regarding their, intellectual property rights; the timing of our recognition of

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

revenues; the extent to which any customer outsourcing to our competitors or supplier consolidation increases the influence of competitors on our customers’ purchases; our ability to protect intellectual property rights; our ability to maintain OEM, partner, reseller, and vendor support and supply relationships; and changes in the market price of the Company’s common stock. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

About Tekelec

Tekelec enables billions of people and devices to talk, text, and access the Web. Our portfolio delivers a unique layer of intelligence allowing service providers to both manage and monetize the exponential growth in data traffic and applications. Tekelec has more than 25 offices around the world serving customers in more than 100 countries. For more information, please visit www.tekelec.com.

Contact:

Kyle Macemore | Vice President Finance and Investor Relations
(o) +1.919.380.6148 | kyle.macemore@tekelec.com

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended December 31,						Years Ended December 31,
	2010			2009			2010			2009
	(Thousands, except per share data)
Revenues	$	90,160		$	123,506		$	423,963		$	469,261
Cost of sales:
Cost of goods sold		35,609			38,640			151,572			152,417
Amortization of intangible assets		6,126			1,605			19,220			6,204
Total cost of sales		41,735			40,245			170,792			158,621
Gross profit		48,425			83,261			253,171			310,640
Operating expenses:
Research and development		23,681			24,734			92,347			100,337
Sales and marketing		22,588			17,070			78,446			68,644
General and administrative		13,486			15,718			52,662			56,006
Amortization of intangible assets		1,768			261			4,632			1,221
Acquisition-related expenses		103			—			2,994			—
Restructuring and other		—			2,984			—			2,984
Total operating expenses		61,626			60,767			231,081			229,192
Income (loss) from operations		(13,201	)		22,494			22,090			81,448
Other income (expense), net		(384	)		(1,468	)		(3,316	)		(14,755	)
Income (loss) from operations before provision for (benefit from) income taxes		(13,585	)		21,026			18,774			66,693
Provision for (benefit from) income taxes		(5,588	)		5,143			3,765			19,291
Net income (loss)	$	(7,997	)	$	15,883		$	15,009		$	47,402
Earnings (loss) per share:
Basic	$	(0.12	)	$	0.24		$	0.22		$	0.71
Diluted		(0.12	)		0.23			0.22			0.70
Weighted average number of shares outstanding:
Basic		68,599			67,355			68,284			66,900
Diluted		68,599			68,208			68,905			67,651

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,
	2010			2009
	(Thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	220,938		$	277,259
Trading securities, at fair value		—			81,788
Put right, at fair value		—			11,069
Accounts receivable, net		165,019			157,369
Inventories		28,221			23,353
Income taxes receivable		3,098			1,617
Deferred income taxes, current		19,906			66,758
Deferred costs and prepaid commissions		43,652			56,645
Prepaid expenses		8,527			7,007
Other current assets		3,687			1,943
Total current assets		493,048			684,808
Property and equipment, net		37,169			35,267
Deferred income taxes, net, noncurrent		72,854			39,153
Other assets		1,507			1,661
Goodwill		135,564			42,102
Intangible assets, net		92,245			31,017
Total assets	$	832,387		$	834,008
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,823		$	28,114
Accrued expenses		20,344			25,372
Accrued compensation and related expenses		22,680			40,980
Current portion of deferred revenues		145,291			149,065
Total current liabilities		206,138			243,531
Deferred income taxes, noncurrent		7,430			5,477
Long-term portion of deferred revenues		6,812			5,590
Other long-term liabilities		5,422			4,863
Total liabilities		225,802			259,461
Commitments and Contingencies
Shareholders’ equity:
Common stock, without par value, 200,000,000 shares authorized; 68,617,232 and 67,382,600 shares issued and outstanding, respectively		351,309			330,909
Retained earnings		256,829			241,820
Accumulated other comprehensive income		(1,553	)		1,818
Total shareholders’ equity		606,585			574,547
Total liabilities and shareholders’ equity	$	832,387		$	834,008

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2010			2009
	(Thousands)
Cash flows from operating activities:
Net income	$	15,009		$	47,402
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of investment in privately-held company		—			13,587
Gain (loss) on investments carried at fair value, net		(118	)		(1,846	)
Provision for doubtful accounts and returns		2,710			2,228
Provision for (reduction of) warranty		(1,639	)		3,875
Inventory write downs		4,528			6,165
Loss on disposals of fixed assets		121			147
Depreciation		16,453			18,105
Amortization of intangibles		23,852			7,425
Amortization of deferred financing costs and other		698			748
Deferred income taxes		1,252			8,035
Stock-based compensation		12,525			13,537
Excess tax benefits from stock-based compensation		(873	)		(840	)
Changes in operating assets and liabilities (net of acquisitions and dispositions):
Accounts receivable		(6,277	)		13,723
Inventories		(8,979	)		(5,752	)
Deferred costs		14,175			819
Prepaid expenses		(1,728	)		1,424
Other current assets		912			(246	)
Accounts payable		(16,486	)		2,545
Accrued expenses		(3,926	)		(9,498	)
Accrued compensation and related expenses		(19,291	)		(249	)
Deferred revenues		(8,801	)		(56,561	)
Income taxes receivable		(2,049	)		(1,796	)
Income taxes payable		541			(7,883	)
Total adjustments		7,600			7,692
Net cash provided by operating activities — continuing operations		22,609			55,094
Net cash used in operating activities — discontinued operations		—			(184	)
Net cash provided by operating activities		22,609			54,910
Cash flows from investing activities:
Proceeds from sales and maturities of investments		92,975			23,635
Purchase of acquired business, net of cash acquired		(161,953	)		—
Purchases of property and equipment		(17,659	)		(18,720	)
Net cash provided by (used in) investing activities		(86,637	)		4,915
Cash flows from financing activities:
Proceeds from issuance of common stock		10,950			9,886
Cash used to net share settle equity awards		(3,075	)		(2,289	)
Excess tax benefits from stock-based compensation		873			840
Net cash provided by financing activities		8,748			8,437
Effect of exchange rate changes on cash		(1,041	)		(444	)
Net increase (decrease) in cash and cash equivalents		(56,321	)		67,818
Cash and cash equivalents at beginning of the year		277,259			209,441
Cash and cash equivalents at end of the year	$	220,938		$	277,259

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

TEKELEC
RECONCILIATIONS OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
for the Three Months Ended December 31, 2010 and 2009

	2010					2009
	Amount		% of revenues			Amount		% of revenues
	(Thousands, except percentages)
Gross margins	$	48,425		54	%	$	83,261		67	%
Adjustments:
Amortization of intangible assets(1)		6,126		7	%		1,605		1	%
Stock-Based Compensation(2)		278		0	%		265		0	%
Acquisition related cash bonus(3)		53		0	%		—		0	%
Non-GAAP gross margins	$	54,882		61	%	$	85,131		69	%

	2010						2009
	Amount			% of revenues			Amount		% of revenues
	(Thousands, except percentages)
Operating margins	$	(13,201	)		-15	%	$	22,494		18	%
Adjustments:
Amortization of intangible assets(1)		7,894			9	%		1,866		2	%
Stock-Based Compensation(2)		2,611			3	%		3,262		3	%
Acquisition related cash bonus(3)		615			1	%		220		0	%
Acquisiton related expenses-other(4)		103			0	%		—		—
Restructuring and other(5)		—			—			2,984		2	%
Non-GAAP operating margin (loss)	$	(1,978	)		-2	%	$	30,826		25	%

	2010						2009
	Amount			per diluted share			Amount			per diluted share
	(Thousands, except per share data)
Net income (loss)	$	(7,997	)	$	(0.12	)	$	15,883		$	0.23
Adjustments:
Amortization of intangible assets(1)		7,894			0.12			1,866			0.03
Stock-Based Compensation(2)		2,611			0.04			3,262			0.05
Acquisition related cash bonus(3)		615			0.01			220			0.00
Acquisiton related expenses-other(4)		103			0.00			—			—
Restructuring and other(5)		—			—			2,984			0.04
Provision for (benefit from) income taxes(6)		(4,407	)		(0.06	)		(4,839	)		(0.07	)
Non-GAAP net income (loss)	$	(1,181	)	$	(0.02	)	$	19,376		$	0.28
Weighted average number of shares outstanding:
Basic					68,599						67,355
Diluted					68,599						68,208

(1)	The adjustments represent the amortization of purchased technology and other intangibles related to acquired companies.
(2)	The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units or stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.
(3)	The adjustment represents: (i) consideration payable to former Camiant employees for options not assumed in the merger; (ii) bonuses for certain Blueslice employees contingent upon their continued employment and the achievement of individual integration related milestones and (iii) consideration payable to Estacado that is contingent upon the continued employment of certain former Estacado employees by Tekelec.
(4)	The adjustment represents non-recurring employee related costs associated with our acquisitions of Camiant and Blueslice.
(5)	The adjustment represents the elimination of the costs associated with our restructuring activities.
(6)	The adjustment represents the income tax effect of footnotes (1), (2), (3), (4) and (5) in order to reflect our non-GAAP effective tax rate of 50% and 34% for 2010 and 2009, respectively.

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877

TEKELEC
RECONCILIATIONS OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
for the Years Ended December 31, 2010 and 2009

	2010					2009
			% of					% of
	Amount		revenues			Amount		revenues
	(Thousands, except percentages)
Gross margins	$	253,171		60	%	$	310,640		66	%
Adjustments:
Amortization of intangible assets(1)		19,220		5	%		6,204		1	%
Stock-Based Compensation(2)		1,326		0	%		1,050		0	%
Acquisition related cash bonus(3)		230		0	%		—		0	%
Non-GAAP gross margins	$	273,947		65	%	$	317,894		68	%

	2010					2009
			% of					% of
	Amount		revenues			Amount		revenues
	(Thousands, except percentages)
Operating margins	$	22,090		5	%	$	81,448		17	%
Adjustments:
Amortization of intangible assets(1)		23,852		6	%		7,425		2	%
Stock-Based Compensation(2)		12,525		3	%		13,537		3	%
Acquisition related cash bonus(3)		3,783		1	%		880		0	%
Acquisiton related expenses-other(4)		2,994		1	%		—		0	%
Restructuring and other(5)		—		0	%		2,984		1	%
Non-GAAP operating margins	$	65,244		15	%	$	106,274		23	%

	2010						2009
				Per						per
				diluted						diluted
	Amount			share			Amount			share
	(Thousands, except per share data)
Net income	$	15,009		$	0.22		$	47,402		$	0.70
Adjustments:
Amortization of intangible assets(1)		23,852			0.35			7,425			0.11
Stock-Based Compensation(2)		12,525			0.18			13,537			0.20
Acquisition related cash bonus(3)		3,783			0.05			880			0.01
Acquisiton related expenses-other(4)		2,994			0.04			—			—
Restructuring and other(5)		—			—			2,984			0.04
Impairment of investment in privately-held company(6)		—			—			12,917			0.19
Provision for (benefit from) income taxes(7)		(13,829	)		(0.20	)		(14,746	)		(0.22	)
Non-GAAP net income	$	44,334		$	0.64		$	70,399		$	1.04
Weighted average number of shares outstanding:
Basic					68,284						66,900
Diluted					68,905						67,651

(1)	The adjustments represent the amortization of purchased technology and other intangibles related to acquired companies.
(2)	The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units or stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.
(3)	The adjustment represents: (i) consideration payable to former Camiant employees for options not assumed in the merger; (ii) bonuses for certain Blueslice employees contingent upon their continued employment and the achievement of individual integration related milestones and (iii) consideration payable to Estacado that is contingent upon the continued employment of certain former Estacado employees by Tekelec.
(4)	The adjustment represents professional fees, travel and other costs associated with our acquisition of Camiant and Blueslice.
(5)	The adjustment represents the elimination of the costs associated with our restructuring activities.
(6)	The adjustment represents an impairment charge as a result of a decline in the estimated fair value as compared to historical cost for one of our investments in privately held companies. Partially offsetting this impairment is a one time property tax refund of $0.7 million associated with the former assets of a divested business unit.
(7)	The adjustment represents the income tax effect of footnotes (1), (2), (3), (4), (5) and (6) in order to reflect our Non-GAAP effective tax rate of 28.5% and 33% for 2010 and 2009, respectively.

5200 Paramount Parkway, Morrisville, N.C., USA 27560 TEL +1.919.460.5500 FAX +1.919.460.0877