Talk of AFC Deal Is Back
Several sources say Wall Street circles are once again whispering about AFC as the target of an acquisition. The leading candidate is supposed to be Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). But other larger players, such as Nortel Networks Corp. (NYSE/Toronto: NT), have also been known to be looking for the type of access product portfolio that AFC has to offer.
In January, Light Reading reported that Tellabs, which was an early AFC investor, was talking to the company (see Tellabs Angling for Access – and AFC). The two sides walked away amicably, but others may be lurking, according to some sources.
Tellabs CEO Michael Birck is on the record as saying that his company is interested in expanding its product portfolio. Access products, especially with the potential for FTTP (fiber to the premises) business, would be a natural way to do that.
AFC has been making deals at well. In January it closed a deal to buy Marconi Corp. plc's (Nasdaq: MRCIY; London: MONI) access division (see Access Acquisition Boosts AFC). So why would a deal suddenly be on the table again? Well, the stock market has backed off since January, and AFC is trading off its highs. If price was the initial stumbling block to the deal, as was cited in several places, it may now be easier to get the deal done.
Tellabs is looking to expand beyond its core business, which includes mostly Sonet/SDH gear and some newer packet-switching products that it is developing via its aquisition of Vivace Networks (see Tellabs Unveils Vivace Sibling and Tellabs Snags Vivace for $135M). AFC is one of the leading access players, along with Alcatel SA (NYSE: ALA; Paris: CGEP:PA), so it fits the bill.
AFC has drawn a lot of attention lately for its FTTP contract with Verizon Communications Inc. (NYSE: VZ).
In an SEC filing a few weeks ago, AFC said it missed a February 23 product delivery, costing it a PCP (performance compensation payment) of $2 million (see AFC Fesses Up, Defenders Pipe Up). “We subsequently provided the required product release on March 8, 2004,” the filing states.
Wall Street analysts seem split as to whether the Verizon’s deployment will live up to the expectations of some, who think it will develop into a big growth area for AFC.
AFC did not respond to a request for comment, and Tellabs declined to comment.
— R. Scott Raynovich, US Editor, Light Reading