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
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Light Reedy
Numbers Are In: LR's 2014 Salary Survey

7|24|14   |   1:25   |   (7) comments


Our fourth annual Salary Survey paints a picture of who's hiring, firing, earning, and yearning for a change in the telecom industry.
LRTV Custom TV
Driving the Network Transformation

7|23|14   |   4:29   |   (0) comments


Intel's Sandra Rivera discusses network transformation and how Intel technologies, programs, and standards body efforts have helped the industry migration to SDN and NFV.
LRTV Custom TV
Distributed NFV-Based Business Services by RAD

7|18|14   |   5:38   |   (0) comments


With the ETSI-approved Distributed NFV PoC running in the background, RAD's CEO, Dror Bin, talks about why D-NFV makes compelling sense for service providers, and about the dollars and cents RAD is putting behind D-NFV.
LRTV Custom TV
MRV Accelerating Packet Optical Convergence

7|15|14   |   6:06   |   (0) comments


Giving you network insight to make your network smarter.
LRTV Custom TV
NFV-Enabled Ethernet for Generating New Revenues

7|15|14   |   5:49   |   (0) comments


Cyan's Planet Orchestrate allows service providers and their end-customers to activate software-based capabilities such as firewalls and encryption on top of existing Ethernet services in just minutes.
LRTV Custom TV
Symkloud NVF-Ready Video Transcoding, Big Data

7|9|14   |   3:41   |   (0) comments


Kontron and ISV partner Vantrix demonstrate high-performance video transcoding and data analytic solutions on same 2U standard platform that is ready for SDN and NFV deployments made by mobile, cable and cloud operators.
LRTV Huawei Video Resource Center
The Evolving Role of Hybrid Video for Competitive Success

7|4|14   |   4:09   |   (0) comments


At Huawei's Global Analysts Summit in Shenzhen, China, Steven C. Hawley from TV Strategies speaks to us about the evolving role of hybrid video for competitive success.
LRTV Huawei Video Resource Center
How CSPs Leverage Big Data in the Digital Economy

7|4|14   |   4:48   |   (2) comments


Justin van der Lande from Analysys Mason shares with us his views on how telecom operators can leverage customer asset monetization with big data. His discusses the current status of big data applications and the challenges and opportunities for telecom operators in the digital economy era.
LRTV Huawei Video Resource Center
Accelerator for Digital Business Future Oriented BSS

7|4|14   |   3:08   |   (0) comments


Mobile and internet are becoming intertwined; IT and CT are integrating; and leading CSPs have begun to transform to information service and entertainment providers. How should the BSS system evolve to enable this transformation? Karl Whitelock, an analyst at Frost & Sullivan, shares his views.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
Packet Design asks network professionals how they handle the cloud, SDN, and network management.
Today's Cartoon
Vacation Special Caption Competition Click Here
Latest Comment
Hot Topics
The Municipal Menace?
Jason Meyers, Senior Editor, Utility Communications/IoT, 7/22/2014
Cisco Puts a Fog Over IoT
Sarah Reedy, Senior Editor, 7/23/2014
Apple Earnings: Strong iPhone Sales, iPad Sales Slump, $7.8B Profit
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/22/2014
Salary Survey Report 2014
Sarah Reedy, Senior Editor, 7/23/2014
Like Us on Facebook
Twitter Feed