Companies In The News Tellabs Raising Global Sales, Broadening Its Product Lines
Investors Business Daily, Tuesday, April 14, 1998 at 12:29
Phone equipment maker Tellabs Inc. has been making smooth
connections nationwide for quite some time. But the sound of growing
opportunities abroad for the company is coming through louder and
clearer than ever.
As a result, Tellabs wants foreign sales to make up half of its
business by 2000. Today, they account for about one-third of total
sales and originate mainly in Europe.
Tellabs took a big step in this direction in February by
announcing plans to merge with Ashburn, Va.-based Coherent
Communications Systems Corp. through a stock swap valued at $670
million. The deal should be approved by early June, analysts say.
Tellabs makes a variety of telecommunications equipment for
transmitting voice, data and video. The company's main customers are
long-distance and public phone carriers, cellular and wireless
providers and large corporations.
What's boosting Tellabs' business? Deregulation in Europe, Latin
America and Asia. Cellular operators are growing fast outside the
U.S. and the emergence of a new sector - cable telephony - could turn
into a multibilliondollar industry, analysts say.
Expanding Information Networks
In addition, the global telecom market is being fueled by a
growing number of phone companies and the expanding need for access
to the information superhighway.
"There are a number of things driving the business today," said
President and CEO Michael J. Birck. "Internet traffic,
videoconferencing, the growth of cellular and wireless (devices) and
demand for more bandwidth in general - all add to the amount of
traffic handled in the communications network."
Though new growth areas have emerged, Tellabs' bread and butter
still comes from its core products, Titan 5500 and Martis DXX.
Titan, sold only in the U.S., is a digital cross-connect system
that costs about $3.5 million. It sorts and directs the flow of
wideband voice, video and data traffic. If a line is down, it
switches traffic to another circuit.
An upgraded version of Titan, which will double its capacity, is
due out around midyear. Each new unit will be able to carry up to
1.4 million phone calls at the same time, the company says.
Titan made up half of Tellabs' sales in '97. It gives the company
a leading 30% share of the estimated $2 billion crossconnect market,
a field that's growing 25% a year, Birck says.
Last month, the company won a deal to sell Titan to Bell Atlantic
Corp. over the next five years. That means Tellabs is now working
with all five Baby Bells - including Nynex Corp., which Bell Atlantic
acquired in August. The deal is estimated to be worth $450 million
in total, analysts say.
Michael Birck
The company's second key product, Martis, is a managed digital
network system that combines cross-connect capabilities with
traditional multiplexing (transmitting two or more signals
simultaneously on the same channel) and digital circuit features that
meet certain global standards.
Martis is not sold in the U.S. The product can, however, be bought
in 56 other countries. It brought nearly 25% of the company's
revenue last year, analysts say.
Coherent Communications' main products cancel echoes and improve
phone conversations by removing feedback that occurs in almost all
long-distance and wireless connections.
Tellabs sells some similar products, but they account for only 10%
of its business today. Besides, most of the company's echo-
cancellation sales are in the U.S., while about 80% of Coherent's
business is abroad, mainly in Europe. "We needed more of a presence
in that market," Birck said.
The company also expects growth from its cable TV telephony
products, specifically its Cablespan 2300 line, which is gaining
acceptance in the U.S. and abroad.
"The (U.S.) cable telephony market has taken longer to develop
than expected," Tim Savageaux, an analyst at BancAmerica Robertson
Stephens, wrote in a recent report. "It appears that the nearterm
market opportunity is developing overseas," especially in developing
countries, he wrote.
Still, the company recently won two important contracts in the
developed world. MediaOne Group, the nation's third-largest cable TV
operator, signed on as a client in December. And A2000, a venture
that MediaOne Group's parent firm, US West Inc., has a 50% stake in,
selected Cablespan in November. The deals are valued at $100 million
each, analysts say.
Companies or Securities discussed in this article:
Symbol
Name
NASDAQ:TLAB
Tellabs Inc
BB:CCSC
Coherent Communic Sys
NYSE:BEL
Bell Atlantic Corp
Symbols: |
