Light Reading

Tellabs: To Be Continued

Dan O'Shea
12/6/2013
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Is the telecom industry done with Tellabs just yet? Though the company's sale to Marlin Equity Partners will be seen as the end of an era and the final breath of one of the longest-surviving independent midsized vendors, it could be just the next chapter in the Tellabs story.

Marlin Equity Partners announced this week that it had completed its acquisition of Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). Though the Marlin offer in October looked like the last glimmer of hope for Tellabs (which had failed to strike a deal with other suitors) to survive in some capacity, it's surprising that the somewhat modest offer of $2.45 per share didn't draw other bidders into the fray. (See: Marlin Closes Tellabs Acquisition, Tellabs' Last Hope: Marlin's Optical Ambition, and Tellabs to Be Sold to Marlin for $891M.)

Now that the deal is done, Marlin said it intends to invest in Tellabs and enable the struggling vendor's products to be cross-marketed as part of the Marlin telecom portfolio. Also, Tellabs CEO Dan Kelly told the Chicago Tribune that there are no immediate plans for more job cuts at a company that has suffered through several rounds already. That plan, of course, could change. Private equity firms are not exactly known for preserving their acquisitions in the condition in which they found them. As it leverages Tellabs' best products through partnerships with the other vendors it owns, Marlin would be remiss not to attempt to sell or shut down other product lines.

Also, Marlin already has a collection of distinct telecom properties: Coriant, Coriant America (formerly Sycamore Networks Solutions), and Openwave. If it pursues more telecom acquisitions -- and even if it doesn't -- it might makes sense to integrate these properties eventually into a more cohesive whole. That could lead to organization restructuring, job cuts, and office relocations.

For now, industry observers seem content to view Tellabs as a closed book. Many are reviewing its story as that of a poor performer that could not adapt quickly enough to change. They see a company that failed to pursue the IP migration, took wrong turns with product development, made bad decision about acquisitions it pursued (or didn't pursue), and made worse decisions about managing acquired assets. The role those issues played in the company's struggles can't be overstated, but the fact remains that Tellabs lives on for now. Its story is not over yet.

— Dan O'Shea, Managing Editor, Light Reading

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DOShea
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DOShea,
User Rank: Blogger
12/8/2013 | 3:33:42 PM
Re: My view...
Yeah, I agree with you--there may be stuff happening already that no one at Tellabs has control over.
brookseven
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brookseven,
User Rank: Light Sabre
12/6/2013 | 5:33:36 PM
Re: My view...
Dan,

 

I have known Dan Kelly personally for over 10 years and I know he would not knowingly lead you astray.

My question would be:  Why would anybody think they would tell Dan anything?

The decisions are made in Marlin and not inside Tellabs.  I expect Dan (who is an extraordinarily nice man) to be gone within 90 days.  But maybe I am just colored by past experiences with Platinum Equity.

seven

 
DOShea
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DOShea,
User Rank: Blogger
12/6/2013 | 3:42:51 PM
Re: My view...
Kelly mentioned no "immediate plans" job cuts and no HQ move, but apparently didn't say anything about what could be sold or shuttered. If the latter process is underway, the "immediate" quiet period may not last long.
brookseven
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brookseven,
User Rank: Light Sabre
12/6/2013 | 2:17:53 PM
My view...
 

They will sell off the non-Optical businesses and then combine the optical businesses into a single entity.  Okay, everybody raise their hands who has seen a PE firm add opex in a unprofitable firm.  Okay that's nobody.

seven
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