Tellabs has agreed to be acquired for $891 million in cash by emerging optical networking powerhouse Marlin Equity Partners.
The deal may help extend the life of the ailing optical equipment vendor, which has been seeking a buyer for a while, but it doesn't provide much value for investors, as the agreed price of $2.45 per share is only 10 cents higher than Friday's closing price of $2.35. (See Tellabs CFO Roundabout Gets Another Spin and Tellabs Axes Product, Cuts Jobs.)
News of the deal sent Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA)'s share price up by 5 percent to $2.47 in early morning trading.
For Marlin Equity Partners , the move cements its position as a serious and committed player in the optical equipment market, as the company has already snapped up Nokia Solutions and Networks (NSN)'s transport division and part of Sycamore Networks to form Coriant . (See Coriant Counts on NSN's Optical Strengths, Coriant Soaks Up Sycamore, Coriant Boasts 'SDN-Plus' System, and Sycamore + NSN Optical = Coriant.)
Now it is adding a business with annual revenues of between $800 million and $900 million and a mature customer base, including Verizon Communications Inc. (NYSE: VZ), where Tellabs is one of the operator's two preferred metro transport equipment suppliers alongside Fujitsu Network Communications Inc. The move will also give Marlin an optical access product line, some routers, in the form of Tellabs's 8800 and 8600 platforms and an expanded software-defined networking (SDN) pitch. (See Tellabs Boasts SDN 'Engagements'.)
If successful, the deal may represent something of a bargain for Marlin, as Tellabs has a substantial chunk of cash in the bank (more than $540 million at the end of the second quarter) so the investment firm may only be shelling out about $350 million net to add Tellabs to its optical stable.
It also comes as the optical sector is experiencing something of a resurgence, a trend that was represented in Ciena's most recent financial report. (See Ciena's Smith: Next-Gen Spending Has Tipped and WDM Market Grows 10 Percent.)
— Ray Le Maistre, Editor-in-Chief, Light Reading
1. Target Market; the decision was made to bet everything on Telcos and abandon the private market. Everything was bet a few products with a very tiny number of possible customers.
2. The decision was made to flip the switch from being an entrepreneurial risk-taking results-oriented company to a rigid multiple-layer Senior Management driven company with VPs stacked like a 7 layer birthday cake. Brown-nosing replaced risk-taking as the way to move up.
3. Other than Martis, Billions of dollars and much of Management's attention wasted on fruitless acquisitions. The money would have been better spent as Dividends to the Stock Holders.
4. The decision to bring Senior Managers from companies that Tellabs was beating to run Tellabs like a "big company", that would be failed ATT after they lost their monopoly status & IBM while they were stumbling either just before or just after Gerstner cleared 20K+ employees out of the HQ that no one could say what they did for the company. The facts are my best recollection of IBMs record, if someone had a better set of fact feel free to chime in.
5. The decision to hire expensive employees who had never delivered anything, but did the planning and recommending on most key decisions, which others would have to implement.
This company's decline started several years before the revenues peaked and went into decline as the ideas and risk takers had either left the company or simply went silent and waited for their next multi-spectral, peer-level, 360, sensitivity, attention to brown nosing multi-week review process....while the entire bonus pool was allocated to just a few people at the top who had contributed nothing but arrived in time to make Tellabs just like AT&T and pre Gerstner IBM giant egos with no ideas or results but lots of posturing.