SSB's take on TLAB's acquisition:
Salomon Smith Barney
May 26, 1999
--SUMMARY:--
* Today TLAB announced it would buy Alcatel's European DSC Comms.
businesses for $110 million in cash. The acquired business 1999 revenues are estimated at $112 million implying a good buy for TLAB at 1X revenues.
* The European business provides SDH, managed, high-speed transport
solutions, and DWDM technology and provides TLAB with enabling technologies in SDH, SONET and optical networking.
* We believe this is a positive acquisition for Tellabs as it compelements & strengthens its already successful European Martis SDH business. The new products will allow Martis to break further into the core of the network.
* Since the acquisition is only a penny dilutive in 1999 and accretive in 2000, we are not revising our estimates since we assume TLAB will beat estimates in the current quarter.
--OPINION---
ACQUISITION DETAILS.
Tellabs and Alcatel today announced an agreement for Tellabs to buy Alcatel's European DSC Communications business, which provides SDH, a managed, high speed transport solution and DWDM technology. The acquisition also includes the unit's research, development and manufacturing resources. The agreement covers the businesses' operations in Copenhagen, Denmark and Drogheda, Ireland, sales & support offices in London, India and Poland, and an interest in FIBCOM India Ltd, a joint venture in India. As part of the agreement, Tellabs and Alcatel will enter into a technology cross-licensing arrangement.
Tellabs will pay $110 million in cash. The 1999 revenues for the
acquired business are estimated at $112 million, implying a good buy for TLAB at only 1X revenues.
POSITIVE ACQUISITION FOR TELLABS.
We believe this is a positive acquisition for Tellabs as it complements and strengthens its already successful SDH Martis business in Europe. The new products will allow Martis to break further into the core of the network. (Current Martis products are in the access segment of the network.) Additionally, the acquired business provides Tellabs with enabling technologies in SDH, SONET and optical networking.
NO CHANGE TO ESTIMATES.
Since the acquisition is only a penny dilutive in 1999 and accretive in 2000, we are not revising our estimates since we assume Tellabs will beat estimates in the current quarter.
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