Tellabs CEO to Retire... Again

Michael Birck says he's going for good next April. The search for a successor has begun

November 5, 2003

3 Min Read
Tellabs CEO to Retire... Again

At 65, Michael Birck is the Michael Jordan of Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). He keeps coming back.

43080.jpgBirck, who co-founded Tellabs in 1975 and nurtured it from six employees to over 4,000 today, this morning announced plans to step down from his post as CEO... again.

Birck retired once before in August 2000. Richard C. Notebaert took over the top spot. But after only 22 months on the job, Notebaert left in June 2002 to become CEO of Qwest Communications International Inc. (NYSE: Q) (see Notebaert Takes Out Nacchio). As a result, Birck came out of retirement and returned as CEO.

Birck, who still owns a large stake in the company, plans to stick around until April 2004. He will continue his role as chairman of the board, a position he has held continuously since the company was founded.

Birck’s retirement has been anticipated on Wall Street since he came back to Tellabs last year. The departure should have little impact on the company’s share price, says Steve Levy, an analyst with Lehman Brothers.

“Our coverage of Tellabs has been continuous for more than 16 years, and in that time we have always viewed Mike as one of the critical factors that defined Tellabs,” he writes in a research note today. “But a new day has dawned for the industry and for Tellabs, and the time has come for Mike to finally turn the reigns [sic] over to a new CEO.”

The big question left unanswered by today’s announcement is who will replace Birck. The Tellabs board of directors is already looking for a replacement. The company, which has hired recruiting firm Spencer Stuart to spearhead the search, says it will consider both internal and external candidates.

Analysts view three executives as likely internal candidates: Anders Gustafsson, president of Tellabs International, Stephen M. McCarthy, senior vice president of operations, and Edward H. Kennedy, president of North American operations.

Kennedy has had a quick ascent within Tellabs, since joining the company in 2001 after the acquisition of Ocular Networks (see Tellabs Nabs Ocular). Months after the acquisition, he was appointed senior vice president of metro networking (see Kennedy Takes Charge at Tellabs). His responsibilities grew in this role (see Tellabs Regroups, Promotes Kennedy). And then in March of this year, he was promoted once again to president for North America (see Tellabs Names Kennedy President). While Kennedy is a strong candidate, analysts say it's still too early to tell who will be chosen.

“I think the position is still up for grabs,” says Levy.He says the company has more pressing issues to deal with in the interim. “They need to get back to sustainable profitablility. I don’t think a change in the CEO will change that in the next few months.”

For the third quarter of 2003, Tellabs’ revenues were $245 million, up 5 percent sequentially from the previous quarter (see Tellabs: More Work to Do ). But the company still had a net loss of $64.8 million ($0.16 per share). This was an improvement over the previous quarter, which showed a net loss of $111 million ($0.27 per share).

— Marguerite Reardon, Senior Editor, Light Reading

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