Heres and interesting article from the street.com. It gets into some of the questions that I have for the board on TLAB. This market TLAB competes in is changing at light speed. TLAB needs to define how all this fits together. The article is in two parts.
If anyone does have insight as to how this whole thing fits together please post it. I am not a short on TLAB just looking for direction.
Mike
Expectations Build for Tellabs Acquisition
By Kevin Petrie
Staff Reporter
12/21/99 10:32 PM ET
SAN FRANCISCO -- Expectations of an acquisition by Tellabs (TLAB:Nasdaq - news) have reached a high pitch in the
merger-manic business of telecommunications equipment.
Tellabs' rivals are broadening their arsenals by buying other companies. To keep pace, Tellabs must move fast. Cisco
(CSCO:Nasdaq - news) is snapping up Milan-based Pirelli's optical division for $2.2 billion in stock. Last week, Nortel
(NT:NYSE - news) said it will acquire Qtera for $3.3 billion. Ciena (CIEN:Nasdaq - news) has zoomed from 30 to 62 in
two months as it prepares new optical products for release.
"The battleships are turning into fleets of battleships," says analyst Joe Savage, research vice president with RHK, which
counts Tellabs as a client. Tellabs "either needs to acquire or be acquired." Tellabs CEO Mike Birck, while characteristically
tight-lipped, let slip at an investor meeting last month that he might announce an acquisition by year-end.
Birck, who has run the Lisle, Ill.-based telecom supplier for 25 years, has been selective about acquisitions. He snapped up
NetCore in July for about $540 million after months of consideration.
Tellabs still needs to show how it will upgrade its telephone network systems with fiber-optic and Internet technology,
according to five industry and stock analysts. Worries increased last month when long-distance giant Sprint (FON:NYSE -
news) halted development of an Internet telephone system that was to use Tellabs' bridging equipment -- it was not Tellabs'
fault, but it did create another question mark.
For these reasons, Tellabs has lagged the giant Nasdaq rally this fall. The stock has slipped and now trades just 3% higher
than its Oct. 29 level. Cisco and Nortel have jumped 41% and 60% in the same period, respectively.
"We've always thought that Tellabs was very well positioned technologically," says analyst Steve Byars with Current
Analysis, which consults Tellabs, Cisco and Nortel. "But what we don't see from them is any kind of singular, unified story
for how all these things fit together." Equity analyst Patrick Houghton, with the investment bank Sutro & Co., adds, "There's
still a perception out there that they have yesterday's product."
Should Tellabs make a purchase this year, a likely target is Newbridge Networks (NN:NYSE - news). Kanata,
Ontario-based Newbridge is a telecom supplier with $1.3 billion in annual sales that has consistently failed to meet Wall
Street's expectations. Tellabs might benefit from Newbridge's large network switches, says equity analyst Paul Silverstein
with Robertson Stephens, which has no underwriting relationship with Tellabs. |
