Part 2 of Street.com article.
Judging by the prices that Lucent (LU:NYSE - news) paid for similar technology when it acquired Ascend this year,
Silverstein speculates that Tellabs could pay between $7 billion and $8 billion, or 38 to 44 a share, for Newbridge. Tuesday,
Newbridge finished at 22 7/8. Tellabs declined to comment on merger possibilities. Newbridge did not return a call seeking
comment.
But Tellabs, a proven performer, might be unable to convince investors that Newbridge is the right partner. "Given how
badly the Street would massacre [Newbridge's] stock, I don't think [Newbridge] would have the gumption to try," says
equity analyst Chandan Sarkar with Soundview Technology Group. His firm has no banking ties to the companies discussed.
Tellabs might consider acquiring private companies, says Christin Flynn, an analyst with the Yankee Group. Her
Boston-based firm consults for Tellabs. She and other analysts interviewed see the value of three potential targets: Corvis,
the high-profile start-up created by Ciena founder David Huber, Quantum Bridge Communications and Tellium. None would
comment on the possibility of a purchase by Tellabs.
Part of the impatience with Tellabs stems from its reluctance to promote half-cooked plans to the analyst community.
"We're not the kind of company that goes out and hypes up new technology before we have it," says Robert Pullen, Tellabs
vice president of marketing and engineering. Meantime, Tellabs can count on the durable performance of its existing
offerings. The company is expected to keep increasing revenue more than 30% annually by furnishing local phone companies
with reliable network "cross-connects." It reached $594.5 million in the September quarter.
Tellabs has bulked up some already. Its NetCore unit, acquired in August, expects to ship high-capacity network routers in
early 2000. Tellabs' Pullen says the new Focus optical systems have stolen some business from Lucent and Nortel. Tellabs is
revamping its cross-connect products to compete with popular new offerings from Ciena.
Even with those moves, an acquisition remains the quickest way for Tellabs to keep pace with its peers. Tellabs "definitely
needs to start buying," says Nicholas DeVito, Tellium's marketing director. So far, "what they're trying to do is bolt on some
capabilities to old products and convince their customers to wait." |
