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Optical/IP

Tellabs Names Prabhu as New CEO

Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) has appointed 49-year-old Krish Prabhu as its new CEO, taking over from Michael Birck, who remains as chairman (see Tellabs Appoints New CEO).

Prabhu, who joins from VC firm Morgenthaler Ventures (see Prabhu Joins Morgenthaler), was formerly COO of Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and CEO of Alcatel USA.

Birck, a founder of Tellabs, announced his intention to step down from the role last year (see Tellabs CEO to Retire... Again). He had taken over from Richard C. Notebaert, who vacated the CEO's chair after only 22 months to join Qwest Communications International Inc. (NYSE: Q) in June 2002.

Now Birck sees Prabhu as the man to take Tellabs to a new level. The industry is showing signs of recovery, Birck told a conference call, "and it's time for a transition at Tellabs. We need someone that can make that happen. Krish is that man."

While his appointment is expected to herald a greater shift towards data networking and a lesser focus on the company's traditional optical systems, Prabhu would not be drawn on any strategy details.

He did, however, note that while Tellabs has "a great product portfolio, it's been around a while," and that he saw certain trends in the telecom sector that needed to be addressed.

"Transport and access will blend, wireline and wireless will converge, and there is a transition from [traditional networks] to packets. The industry is undergoing a transition in front of our eyes, and we will need to change." That change will involve an evolution of the existing business, and could include acquisitions.

Prabhu would not elaborate on any M&A possibilities, saying only that if the company needs to "broaden its playground, we'll make the right move at the right time."

Tellabs has been linked with a number of potential targets recently that could take the company into the access space (see M&A's New Currency and Tellabs Angling for Access – and AFC).

As for ongoing growth of the existing business, Prabhu notes that the industry still has strong cashflows that provide significant opportunties to "grow and make lots of money."

And Tellabs is currently making some money from the noted transition towards packet networks. In its most recently reported quarter the company recorded a surge in demand for legacy products that support VOIP deployments, and this helped the vendor to post an increase in revenues (see Tellabs Has a VOIP Secret ).

Investors will be hoping for more of the same and a long-term strategy that will help Tellabs back to profitability. The company recorded a net loss of $242 million on revenues of $980 million in 2003 (see Tellabs Q4 Revenue Up 14%).

The key to success, believes Prabhu, is experience and timing. "Tellabs has a great brand, and understands the industry. It knows how to deliver to its customers." But it's vital to also have a vision, says Prabhu, and to have that vision early. It's important, he says, not just to have the right products but to be able to launch them into the market early.

The former Alcatel man has been busy gaining wide experience during his time at Morgenthaler, sitting on the board of a number of equipment vendors, including one of Tellabs' potential acquisition targets, Catena Networks Inc. (see Prabhu Joins Catena Board, Agere Adds to Board, Overture Raises $15M, ECI Puts Prabhu on Board, and Krish Prabhu Joins Westwave ).

The appointment is not the only senior management change at Tellabs in recent weeks (see Nulty Leaving Tellabs and Ed Kennedy Leaving Tellabs).

Having risen 26 cents yesterday to close the day at $10.20, Tellabs's share price is up another 9 cents in early morning trading at $2.29.

— Ray Le Maistre, International Editor, Boardwatch

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the_lord 12/5/2012 | 2:27:47 AM
re: Tellabs Names Prabhu as New CEO Krish should do well and fit in very well at Tellabs... He is a very knowledgable in the area in the telecom....

Also, they have donuts at Monday meetings!!! ;-)
sigint 12/5/2012 | 2:27:45 AM
re: Tellabs Names Prabhu as New CEO How would the industry, and his employees, rate his stint with Alcatel?

Sigint
coreghost 12/5/2012 | 2:27:44 AM
re: Tellabs Names Prabhu as New CEO How would the industry, and his employees, rate his stint with Alcatel?

Here is an overview from the outside based more
on observation than direct contact. They are
constructed as general observations of alcatel
USA rather than any single person.

0) Alcatel USA has in large measure collapsed.
Most of the acquisitions (DSC/Packet Engines
/Xlyan) have ended badly. Alcatel USA was
also involved in a very unusual number of
lawsuits.

1) There were problems in the leadership of
Alcatel USA. An unusual number of second-level
leaders ended up leaving the company in bitter
circumstances. And in some cases with lawsuits
involved. Anyone interested in more detail
should look at the public information associated
with the cisco/alcatel lawsuit. Or the public
comments of Bernard Danes after he left
packet engines.

2) There was a tendancy at the top to take
business very personally.

3) There was a tendancy to make what should
have been technology decisions based on
gut instinct which invariably led to bad
decisions being made. This was particularly
true of acqusitions.

4) Trust was placed in the wrong people and
often they got completely out of control
before it was noticed. Put another way, if
you were trusted, you could get away with
almost anything before there would be any
intervention.

5) Sometimes an impossible will be set
and given it to someone. That person has
a choice of either trying (and probably failing)
to do the impossible task or to tell the truth
and suffer the consequences. A hypothetical
example would be promoting someone to a very
senior job and then telling them that the
division has huge financial problems which
either require gutting the organization or
selling unrealistic amounts.

6) Tough and ruthless people were greatly
respected. Weakness (like caring about people
or moral questions about actions) didn't go
over very well to put it mildly.



How would an outsider rate alcatel USA?

- Nearly every acquisition made during the
period collapsed. Alcatel's attempts to get
a foothold in north america and a foothold
in internet technology both were massive failures.

- The core businesses of alcatel in telecom
(pre-acqusitions) also decayed. But how much
this was due to american leadership and how
much was due to pressure to shed americans
to protect european jobs is something only
the top person would have known.

- Along the same lines, its never easy to know
what a particular person was responsible for
vs. how much of it involved strings being pulled
in Paris.

dodo 12/5/2012 | 2:27:42 AM
re: Tellabs Names Prabhu as New CEO EOM
wilecoyote 12/5/2012 | 2:27:32 AM
re: Tellabs Names Prabhu as New CEO KP will crush Gary Smith and the rest of the Nortel alumni. Time to short ALA, CIEN, NT, LU.

Excellent choice for TLAB. This guy made ALA happen in the US and it's never been the same since he left. Yeah, he isn't perfect, who is, but given a US based, large company with lots of cash, this guy will wreak havoc.
OrderedSemaphore 12/5/2012 | 2:27:30 AM
re: Tellabs Names Prabhu as New CEO
"This guy made ALA happen in the US and it's never been the same since he left"

How about...

"This guy made ALA happen in the US and it's never been the same since"

ALA suck, they ruined N startups, they have no clue about IP, Xantium is a joke, whose sorry now, yadda yadda yadda.

Good DSL gear, though.

Ho ho ho.

Yours truly,
Disgruntled Ex-Startup Employee.
alcabash 12/5/2012 | 2:27:30 AM
re: Tellabs Names Prabhu as New CEO KP will fail at the day-to-day cost cutting required at Tellabs and McCarthy has already proven inept at that task, so KP will bring a hatchet man from Alcatel.

KP is not good at running a steady business, he failed at Alcatel on leveraging the Rockwell SONET success, he is really good at spinning new strategies and Wall Street likes him.

Brace for M&A, KP is too smart not to realize that Tellabs is on a slow death spiral... and SONET will not save them. Vivace came too late and is too small anyway.


coreghost 12/5/2012 | 2:27:28 AM
re: Tellabs Names Prabhu as New CEO I agree that he will create havok, but I dont
see havok as being in tellabs best interests.

And his judgement with acqusitions is really
bad. I can see him rushing out to buy Caspian
or riverstone without even looking at at what
he is getting. He would go for Caspian, if
for no other reason, than to prove to his
former VC partners what a great investment
it was.

He can crush the hangers-on at Tellabs, but
he has his own set of people who are as bad
or worse. The only experience those people
have is in EOL, cutting budgets and shutting
down an entire organization in an endless series
of layoffs.
Mezo 12/5/2012 | 2:27:27 AM
re: Tellabs Names Prabhu as New CEO I agree with you...ah...lord...ah...that makes me kinda uncomfortable...

Krish is excellent and has the best shot at turning Tellabs around.

He's a hell of a good guy...sorry lord...I mean an angel investor...ah...ok, he's a talented leader for Tellabs.

Amen
opticalweenie 12/5/2012 | 2:27:25 AM
re: Tellabs Names Prabhu as New CEO so what do the folks still left
at tlabs think about this?

weenie
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