Light Reading

Tellabs vs. Sycamore

Craig Matsumoto
Valley Wonk
Craig Matsumoto
2/1/2013
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Here's a sobering outlook for Tellabs Inc.: "The mostly likely scenario appears to be a slow wind-down during which most of the cash is returned to shareholders," writes analyst Mike Genovese of MKM Partners, in a report issued Friday. In other words, he thinks Tellabs could go "gently into that good night." That's what he titled his report, anyway. Coincidentally, that's what Sycamore Networks Inc. did on Friday. Completing a plan laid out in October, Sycamore's shareholders voted to liquidate the company, minus the Intelligent Bandwidth Management business, which got sold to Marlin Equity Partners. (See Sycamore Prepares to Shut Down.) Both companies were optical high-fliers around the turn of the century that found themselves with lots of cash after the bubble peaked. What they've got in common is that neither managed to build a fully revived business from that bankroll. But Tellabs tried. Sycamore, by contrast, seemed to shore up for the long winter. Even in early 2005 -- eight years ago! -- we were talking about Sycamore possibly closing up shop. (See Will Sycamore Call It a Day? and Sycamore Being Sycamore.) Tellabs, meanwhile, acquired Advanced Fibre Communications (AFC) in 2004 for $1.5 billion to move into the access business, only to find out how unkind a business it is. By 2008, it was clear Tellabs needed another new direction. (See Tellabs Kills Its Verizon GPON Efforts and TLAB Shakeup Coming.) More recently, Tellabs had a couple of flops -- the SmartCore 9100 for mobile-network cores and the 9200 edge router, which the company discontinued on Thursday. (See Tellabs Axes Product, Cuts Jobs.) It's not the greatest highlight reel, but what does Sycamore have to show for the past several years? A story in The Wall Street Journal Friday notes Sycamore "distributed more than $750 million in special dividends over the past three years." Maybe that's nice math for shorter-term shareholders, but I think most of us would prefer to see a company identify and invest in evolutionary market strategies, much like Tellabs continues to do. — Craig Matsumoto, Managing Editor, Light Reading

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hoytaxtontrio
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hoytaxtontrio,
User Rank: Light Beer
2/4/2013 | 9:48:41 PM
re: Tellabs vs. Sycamore
-Brook,
Yes.- As soon as I hit the send button, I thought of them.- And I'm old enough to know better..- :-)

I guess I should've clarified that and said within the last 50 years.- The companies on your list (and you can include Alcatel, Siemens, etc.) are/were all big enough to sustain true in house R&D that includes basic research (PARC, Thomas Watson Research, Bell labs).- Intel is the best example in that they made their initial fame in memory and then morphed to processors when memory was commodotized by the Japanese.

Hoyt
brookseven
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brookseven,
User Rank: Light Sabre
2/4/2013 | 5:32:30 PM
re: Tellabs vs. Sycamore
hoy,

How about....Xerox, IBM, AT&T, HP, Intel as examples off the top of my head.

seven
hoytaxtontrio
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hoytaxtontrio,
User Rank: Light Beer
2/4/2013 | 4:38:43 PM
re: Tellabs vs. Sycamore
-I'm hard pressed to think of a company founded on innovation that went beyond it's first trick by truly innovating again organically.- Apple is about the only one I can think of and now with Jobs gone, will they be able to do it again?
Vishnu Goel
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Vishnu Goel,
User Rank: Light Sabre
2/4/2013 | 3:04:28 PM
re: Tellabs vs. Sycamore
It is really surprising that Sycamore,knowing its promoters background and roots in innovation should just get into sunset with dividends payout.The hey days of Optical boom and later developments in Optical market made this good company exiting the scene! Lets see if Tellabs reinvents itself and create new Network niche to stay in the reckoning? Vishnu Goel T&M +919810101238
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