Light Reading
Tellabs acquires a major position in the access gear market with acquisition UPDATED 11AM

Tellabs Buys AFC for $1.9 Billion

Light Reading
News Analysis
Light Reading
5/20/2004
50%
50%

Billion-dollar buyouts are back on the telecom agenda. Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) announced this morning it is buying access equipment vendor Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) in a stock and cash deal worth $1.9 billion (see Tellabs to Acquire AFC).

The move comes only three months after Juniper Networks Inc. (Nasdaq: JNPR) announced a $4 billion takeover (see Juniper Buys NetScreen).

Today's announcement shouldn't come as a shock, as Light Reading has been writing about a potential deal for months (see Tellabs Angling for Access – and AFC, Talk of AFC Deal Is Back , and AFC Chief Says Sale Makes Sense). Analysts say a major factor in the agreement may have been AFC's need for a larger partner to go after FTTP deals at large RBOCs, such as those developing at Verizon Communications Inc. (NYSE: VZ) (see Verizon's FTTP Demo Helps AFC and Verizon Flaunts Fiber Plan).

AFC's stock was trading up $2.01 (12%) to $18.84 in morning trading, reflecting a premium in the price offered over yesterday's stock price.

The news was not well received by all investors. Tellabs' share price fell $1.22 (13%) to $7.97 in morning trading.

Tellabs and AFC executives say the motivation for the deal is to tap into the booming broadband market.

"Marrying the leader in access with the leader in transport positions us to grow with our customers in the industry's sweet spot of broadband services," said Tellabs CEO and president Krish Prabhu in a prepared statement. "Together, Tellabs and AFC create a strategic global telecom equipment supplier that will lead the industry's shift to broadband data with end-to-end access and transport solutions."

Under the terms of the transaction, AFC stockholders will receive 1.55 shares of Tellabs common stock and $7.00 in cash for each AFC share. Based on Tellabs' closing price yesterday, the deal is valued at $1.9 billion.

Once the acquisition is completed, Tellabs stockholders will own approximately 75 percent of the company and AFC stockholders the remaining 25 percent. The acquisition is set to close in the second half of 2004.

AFC's CEO John Schofield will become chief operating officer and a director of Tellabs once the deal is completed. The combined company will employ about 4,100 staff around the world.

Rumors of the Tellabs/AFC combination first surfaced in January 2004, when the access gear vendor was valued at more than $2 billion. Since then AFC's stock price tumbled from a high of $27.50 to around $15.50, giving it a market capitalization of $1.4 billion and making an acquisition more attractive. Tellabs' stock had held steady, helped by the fact that the company posted its first profit in two years last quarter (see Tellabs Returns to Profit).

Light Reading will update this story as more information becomes available.

— Pauline Rigby, Senior Editor, Light Reading

(17)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
palaeozoic
50%
50%
palaeozoic,
User Rank: Light Beer
12/5/2012 | 1:45:37 AM
re: Tellabs Buys AFC for $1.9 Billion
Let's see if I've been keeping accurate notes: Marconi barely skirts bankruptcy, strips down its aging North American Access business and peddles it to AFC. AFC, with an imploding core business, just announced its worst quarterly results in 5 years and peddles itself to Tellabs. What's next?Tellabs, master of digital cross connects in an IP world, peddles itself to...Nortel. Nortel, still noodling over the meaning of accounting, peddles itself to...oops, I guess this strategy only works as long as there are bigger suckers left to play the game.
USA
50%
50%
USA,
User Rank: Light Beer
12/5/2012 | 1:45:36 AM
re: Tellabs Buys AFC for $1.9 Billion
Tellabs has made some dumb acquisitions over the past few years, but I will go in the record as saying that this is the dumbest move they have ever made. This may take both companies down.

We'll how long Schofield lasts before he heads back to Oz.
Truelight1
50%
50%
Truelight1,
User Rank: Light Beer
12/5/2012 | 1:45:35 AM
re: Tellabs Buys AFC for $1.9 Billion
Okay LR does some of your sniffing and get the scoop on this deal.
BlueWater66
50%
50%
BlueWater66,
User Rank: Light Beer
12/5/2012 | 1:45:35 AM
re: Tellabs Buys AFC for $1.9 Billion
WHAT? I could believe the "Leader in Cross Connects" or even call them the "Leader in Switching".... but what the $#$#$#@ does he mean by TRANSPORT. They aren't the leader in DWDM transport systems.

Maybe the new CEO should sit back and learn more about the company before he starts talking. Or maybe I need to be re-educated on my definitions (feel free to respond).

Otherwise, I like Tellabs and think the 5500 is a solid, alas mature, product. Also like the Ocular and Vivace boxes. The 5500-NGX is a neat box. The AFC deals seems reasonable to me (but expensive), because Tellabs has such a strong position selling DCC with a huge number of ports pointing out towards the edge. Linking an AFC machine to each of those outward facing ports is interesting.

But- Tellabs has a terrible track record integrating acquisitions. Good luck!
rbkoontz
50%
50%
rbkoontz,
User Rank: Light Beer
12/5/2012 | 1:45:33 AM
re: Tellabs Buys AFC for $1.9 Billion
Siemens, among others, did diligence on AFCI earlier this year. They were rumored to want to make a better offer. Wonder what happened. Is this AFC calling Siemens bluff? Siemens can still make a bigger offer with a 3% breakup fee. Let the bidding war begin.
whyiswhy
50%
50%
whyiswhy,
User Rank: Light Beer
12/5/2012 | 1:45:33 AM
re: Tellabs Buys AFC for $1.9 Billion
"Tellabs and AFC executives say the motivation for the deal is to tap into the booming broadband market."

ROTFLMAO!

Look guys, we all know the days of fiducial duty to the shareholders, debt holders, the customers and especially to the employees are over.

This is a grab for the cash. Fire hose it. Both companies in trouble, a completely over-valued deal, what else?

-Why
echo2
50%
50%
echo2,
User Rank: Light Beer
12/5/2012 | 1:45:31 AM
re: Tellabs Buys AFC for $1.9 Billion
The bubble is back!!

My options are going to make me rich!

echo2
technonerd
50%
50%
technonerd,
User Rank: Light Beer
12/5/2012 | 1:45:27 AM
re: Tellabs Buys AFC for $1.9 Billion
... of a brontosaurus and a stegosaurus. Oops, what's that flaming boulder in the sky?
Big Red
50%
50%
Big Red,
User Rank: Light Beer
12/5/2012 | 1:45:22 AM
re: Tellabs Buys AFC for $1.9 Billion
Interesting timing. A day before this announcement Jo Scho mentions that everything is OK with FTTP. FTTP is THE deal to bail out AFC. Now the project is off his clock, COO or not. Based on the continued skepticism everywhere outside of AFC, I would bet some sort of leak or announcement within the next month or so that AFC still has not delivered a deployable product.

Takers ?

Big Red
tekbabe
50%
50%
tekbabe,
User Rank: Light Beer
12/5/2012 | 1:45:20 AM
re: Tellabs Buys AFC for $1.9 Billion
Hello boys... what do they say??? Timing is EVERYTHING! Take the money and run before you're held accountable for the sinking ship.
Page 1 / 2   >   >>
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Custom TV
Advantech Accelerates 100G Traffic Handling

10|17|14   |   7:56   |   (0) comments


Paul Stevens from Advantech explains why handling 100GbE needs a whole new platform design approach and how Advantech is addressing the needs of equipment providers and carriers to give them the flexibility and performance they will need for SDN and NFV deployment.
LRTV Huawei Video Resource Center
Holland's Imtech Traffic & Infra Discusses Huawei's ICT Solution and Services

10|16|14   |   4:49   |   (0) comments


Dimitry Theebe is from the business unit at Imtech Traffic & Infra which delivers communications solutions for transportations. His partnershp with Huawei began about a years ago. In this video, Theebe speaks more about this partnership and what he hopes to accomplish with Huawei.
LRTV Huawei Video Resource Center
Huawei's Comprehensive Storage Solutions Vital for SVR

10|16|14   |   6:16   |   (0) comments


SVR Information Technology provides cloud services for academic and special sectors. With Huawei's support, SVR and Yildiz Technical University has established Turkey's largest and most advanced High Performance Computing system. CSO Ismail Cem Aslan talks about what he hopes Huawei's OceanStor storage system will bring for him.
LRTV Huawei Video Resource Center
Mexico's Servitron's Impression of Huawei at CCW 2014

10|16|14   |   6:35   |   (0) comments


Servitron is a network operator in Mexico that has been in the trunking industry for the past 20 years. Its COO, Ing. Ragnar Trillo O., explains at Critical Communications World 2014 that his company has been interested in the long-term evolution of LTE technology and its adoption for TETRA.
LRTV Huawei Video Resource Center
Building a Better Dubai

10|16|14   |   2:06   |   (0) comments


Abdulla Ahmed Al Falasi is the director of commercial affairs, a telecommunications coordinator for the government of Dubai. Their areas of service span across multiple industries, including police, safety, shopping malls and more. In this video, Abdulla talks about his department's work with Huawei.
LRTV Huawei Video Resource Center
Huawei Lights Up Malaysia Partner Maju Nusa

10|16|14   |   1:59   |   (0) comments


Malaysia's Maju Nusa is an enterprise partner to Huawei in networking, route switches and telco equipment. At this year's Critical Communications World in Singapore, CTO Pushpender Singh talks about what Huawei's eLTE solutions mean to his company and for Malaysia.
LRTV Custom TV
Evolving From HFC to FTTH Networks

10|15|14   |   2:19   |   (0) comments


Cisco's Todd McCrum delves into the future of cable's HFC plant, examining how DOCSIS 3.1 and advanced video compression will extend its life and how the IP video transition will usher in GPON and EPON over FTTH.
LRTV Custom TV
Exploring the Future of Cable Access

10|15|14   |   6:23   |   (0) comments


Cisco's Brett Wingo looks at where cable access architectures are heading, discussing the impact of DOCSIS 3.1, CCAP, Remote PHY, SDN, virtualization of cable networks and related technologies.
LRTV Custom TV
Optimizing & Monetizing WiFi

10|15|14   |   5:53   |   (0) comments


Cisco's Vince Pandolfi outlines the reasons for cable WiFi's rapid growth, lays out the issues with the technology and explains the new Cisco tools that can help operators monitor and improve their WiFi delivery.
LRTV Huawei Video Resource Center
Emulex & Huawei Collaboration Mutually Beneficial

10|14|14   |   4:17   |   (0) comments


US company Emulex collaborates with Huawei in areas such as blade servers and workload documentation. Mike Heumann of Emulex believes that Huawei has done incredibly well moving from a telecom company into servers and networks, working closely with customers to realize their needs.
LRTV Huawei Video Resource Center
Chile's VZION Looks Forward to Seeing More of Huawei

10|14|14   |   4:43   |   (0) comments


VZION is a systems integrator company in Chile with a focus on virtulization technology. In this video, Cesar Alcacibar talks about the challenges in virtualization and how Huawei helps his company to achieve the best results possible. Alcacibar is expecting more adoption and integration of Huawei technologies in Chile.
LRTV Huawei Video Resource Center
Pro-Datech & Huawei for a High-Tech Singapore

10|14|14   |   2:59   |   (0) comments


Pro-Datech Systems is a specialty IT solution provider based in Singapore. For an added value to its customers, the company uses Huawei's hardware and trusted performance and features for a total solution. It's looking forward to the creation of a lab, to be based in Singapore, for the two companies' coorporation on total storage solution.
Upcoming Live Events
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Forget the Internet, Brace for Skynet
Stephen Saunders, 10/15/2014
HBO Will Go OTT in 2015
Mari Silbey, Independent Technology Editor, 10/15/2014
Google: Carriers & Cloud Providers Need to Cooperate
Mitch Wagner, West Coast Bureau Chief, Light Reading, 10/16/2014
CBS Takes OTT Plunge
Mari Silbey, Independent Technology Editor, 10/16/2014
Could Data Be the New 'Currency'?
Ray Le Maistre, Editor-in-chief, 10/16/2014
Like Us on Facebook
Twitter Feed