Tellabs Could Seek Optical Redemption
Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) missed one big optical transition 10 years ago, and it looks like the company doesn't want to botch its second chance.
Tellabs plans to release an OTN switch this year, CEO Rob Pullen mentioned on Wednesday's earnings call. It would be the company's chance to catch the wave of optical-network refreshes based on packet-optical transport systems (P-OTS).
Years ago, Tellabs underestimated demand for optical cross-connects, figuring carriers would stick with digital cross-connects for quite a while. That opened the door for others -- mainly Ciena -- to enjoy the optical boom and eat up the cross-connect market.
"They just let that entire thing go," says Sterling Perrin, an analyst with Heavy Reading. "For them, this is probably the only opportunity to get back into that switching market."
Tellabs wouldn't comment much on the OTN switch; a spokeswoman said via e-mail that the company plans to add "enhanced Ethernet, OTN, and multi-layer control plane" to the Tellabs 7100 OTS.
Other companies that have announced P-OTS plans include -- well, pretty much everybody in optical. (See Cisco (Finally) Adds P-OTS, NSN Adds Packet-Optical Punch, Ericsson Retraces Packet-Optical Steps, Hitachi Preps P-OTS Box, Ciena Catches Packet/Optical Convergence Bug, AlcaLu Makes Its Packet-Optical Move , Cyan Plays God With Optical and ZTE Fills Out Its 100G.)
That shouldn't deter Tellabs. "Depending on when this Tellabs product ships, it may not be behind, really. I guess the key to that is that they've been designing it for some time," Perrin says.
Tellabs's primary P-OTS target is probably Verizon. The carrier uses the Tellabs 7100 but has been looking to other vendors; in 2008, it picked the Flashwave 9500 from Fujitsu as a second option. Verizon is looking to upgrade its optical core, too, and as of a couple of months ago, Tellabs didn't seem to have the product to fit the bill. (See Fujitsu Confirms Verizon Packet Optical Win and AlcaLu, Ciena Look Good for Verizon RFP.)
Tellabs's stakes here go beyond Verizon, though. "If Verizon likes a certain feature, it's likely other operators will be interested as well," Perrin says.
All told, depending on what's in the new P-OTS product and when it starts shipping, Perrin thinks Tellabs could have a shot at gaining the optical glory it missed.
"The best scenario for Tellabs would have been to participate in the optical cross-connect market the first time around," Perrin says -- and Tellabs would have to recruit some special new talent to make that happen.
— Craig Matsumoto, West Coast Editor, Light Reading