Kennedy Takes Charge at Tellabs

Ocular seems to be fitting in well at Tellabs, and its former CEO is now a Tellabs bigshot. Will the blissful marriage last?

March 22, 2002

4 Min Read
Kennedy Takes Charge at Tellabs

Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) seems to be expecting big things from its acquisition of Ocular Networks (see Tellabs Cops Ocular).

Ocular's products fill an important gap in Tellabs' next-generation product line. As one indication of Ocular's value, Tellabs has made former Ocular CEO Ed Kennedy the senior vice president of its metro networking group. Since metro is the hottest space in networking, this is one of the most important roles in the company.

This move signals an interesting shift for the company. Historically speaking, Tellabs hasn’t had a great record of integrating new startups into the company or introducing cutting-edge technology quickly. The fear among industry observers has been that it would stifle the startup mentality that had driven Ocular until the acquisition in November of last year. Now Tellabs seems to be giving its somewhat staid corporate culture an infusion of entrepreneurial spirit.

Kennedy says Ocular’s OSX 6000, now called the Tellabs 6400, is integrating nicely into the Tellabs product line. And he believes attempts to inject the company with a new culture will flourish.

"We’ve pretty much been left alone to continue doing what we do well," said Kennedy during an interview at the Optical Fiber Conference in Anaheim this week. "Everyone might be wearing Tellabs shirts now instead of Ocular shirts, but that’s about the only thing that has changed in our culture."

While the rest of the Tellabs development and corporate teams are based outside Chicago or in Canada, the 6400 group has remained in its Reston, Va., facility. Kennedy is now heading up the metro networking group, which includes the Tellabs 6400 along with the newly named Tellabs 7100, its metro transport product.

Kennedy reports that almost 100 percent of Ocular's engineers have decided to stay with Tellabs since the merger (see Tellabs Nabs Ocular). This may not be too surprising, given the current job market, and given the fact that employee options vesting was not accelerated as part of the deal.

Another major reason that Kennedy and others from Ocular seem to be happy with the merger is the strong support the group has received from Tellabs president and CEO, Dick Notebaert.

"Dick is a startup guy who happens to be running a Fortune 500 company," said Kennedy. "I've really enjoyed working with him. Tellabs is viewed as a conservative company, and that’s true from a financial perspective. But that’s why they have over a billion in cash and virtually no debt."

The Ocular product has already begun to see some success. Even without much technical re-jiggering, Tellabs' sales team has been able to place the Tellabs 6400 into at least two incumbent carrier labs for trials.

"We’re expanding into accounts we’d never seen before," Kennedy said. "As a startup, I don’t think we would have had the infrastructure to support an RBOC account. We would've had to partner with a larger, more stable company just to get in the door."

So where exactly does the Ocular product fit into the Tellabs portfolio? Before it was acquired, Ocular marketed itself as a Tellabs crossconnect killer, billing its product as a replacement for the Tellabs 5500 (see Ocular Takes On Tellabs). Now that the two companies are part of one big, happy family, Kennedy has changed his tune. Now he says the two products are complementary, rather than competitive.

"Part of the positioning had to do with marketing," said Kennedy. "But we also didn’t realize that there were certain applications where they would really complement each other until we were able to come in and lift up the curtain a little. They're definitely more complementary than I would have thought six to eight months ago."

Kennedy said the two boxes will be deployed with the Tellabs 5500 in larger points of presence or central offices, while the Tellabs 6400, which has a lower capacity, lower cost, and smaller footprint, can be deployed in smaller POPs closer to the edge and access portions of the network.

Kennedy admits the 6400 doesn’t have the capacity to handle the same amount of traffic as the 5500 right now. But while the two are complementary in their current forms, the 6400 was originally designed to scale. So what will Tellabs do in the future? Will it phase out its existing crossconnect technology and scale the Ocular technology? Will it develop a next-generation, higher-scale box using the Ocular technology?

Some analysts have given good reviews to the merger so far, but cautioned that success is far from assured. "On paper it sounds like a formidable product line," said Simon Leopold, an analyst with Merrill Lynch & Co. Inc.. "The risk is in the execution. For a long time the multiservice provisioning platform vendors have been saying that they will eat away at Tellabs market. Now, through Ocular, Tellabs has a product that sits in those same sort of applications."

— Marguerite Reardon, Senior Editor, Light Reading

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