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Tellabs to Restructure, Cut 530 Jobs

Ray Le Maistre
1/31/2012

Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) has succumbed to increasing market pressure and initiated a restructuring process that will see the company focus on its packet optical products, mobile backhaul systems and Service Provider Information Technology (SPIT) capabilities.

As a result of the downsizing, about 530 staff (around 16 percent of its total headcount) will be laid off and the company will take a restructuring charge of about US$107 million. The company previously announced job cuts in July 2011. (See Tellabs Cutting 10% of Staff.)

Tellabs currently has 3,250 staff. It still has 125 jobs to cut from its previously announced reduction and will now axe a further 530. The company tells Light Reading, though, that it also plans to hire 105 new staff, which will bring its post-restructuring headcount to around 2,700.

The restructuring decision comes amid what Tellabs CEO Rob Pullen describes in the company's official announcement as "a climate of economic uncertainty." (See Maybe AT&T Won't Accelerate Capex and Tellabs Slowdown Surprises Street.)

That climate hammered the company's revenues and profits in 2011. For the full year Tellabs reported revenues of nearly $1.29 billion, down 21.7 percent compared with 2010, and a net loss of $188.4 million compared with a profit of $155.6 million the previous year.

In the fourth quarter, Tellabs generated revenues of $316.8 million, down 22.9 percent from a year earlier, and posted a net loss of $4.9 million, better than the $10.9 million the vendor lost a year earlier. Some other vendors, but not all, also found the final quarter of 2011 tough going. (See Juniper's Q4 Got Even Worse, Acme Packet Revises Forecast and Adtran Shows Its Mettle.)

For the first quarter of 2012, Tellabs expects revenues of between $260 million and $290 million, lower than the $297.7 million that financial analysts, on average, had been expecting.

Portfolio restructuring
As part of its refocus, Tellabs says it will "stop new development work on the Tellabs SmartCore 9100 LTE product, while continuing to support Tellabs SmartCore 9100 WiMax customers." That wireless core platform was acquired by Tellabs in October 2009 for $165 million. (See Tellabs Tees Up LTE EPC and Core Blimey! Tellabs Buys WiChorus.)

The portfolio focus will now be on the company's mobile backhaul and packet optical "solutions" and its Insight Analytics network performance management tool plus associated professional services. (See Orange Moldova Backhauls With Tellabs, Tellabs Smartens Up Its Routers, Tellabs Scoops Two Russian Backhaul Deals , Tellabs Could Seek Optical Redemption and Packet Optical Dips in Q3.)

Tellabs, of course, is not the only vendor to slim down and focus on areas of core competency in an effort to survive. (See NSN to Cut 17,000 Staff and NSN Unveils Its Kill List .)

— Ray Le Maistre, International Managing Editor, Light Reading

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digits
digits
12/5/2012 | 5:43:57 PM
re: Tellabs to Restructure, Cut 530 Jobs


After a few hours of trading, Tellabs' share price is down 5.6% to $3.96.

paolo.franzoi
paolo.franzoi
12/5/2012 | 5:43:52 PM
re: Tellabs to Restructure, Cut 530 Jobs


 


I would think so.  It was not that long ago (earlier in 2011) where Tellabs was pointing to this platform as the growth engine for the future.  I know they have morphed it into a next gen 8800 (Vivace) but this does not bode well for them from a strategy level.


seven

DCITDave
DCITDave
12/5/2012 | 5:43:48 PM
re: Tellabs to Restructure, Cut 530 Jobs


Is Tellabs just not the right company for EPC, which may require more than a few point solutions? Or was the projected growth of EPC overstated from the beginning?

paolo.franzoi
paolo.franzoi
12/5/2012 | 5:43:47 PM
re: Tellabs to Restructure, Cut 530 Jobs


 


I would say none of those.  Tellabs thought it had a spot in the EPC because of the 8800 (Vivace) deployment in the AT&T network.  This was one of the largest 8800 customers and one of the reasons that Tellabs not being a Domain Supplier was a big deal (the 8600 being the other piece of that).


When Tellabs bough WiChorus, it was for the plan to be a next gen EPC player.  The problem was the WiChorus product had done WiMax and had not really started on LTE.  When that purchase was being done, most of the larger carriers had already made their EPC decisions for LTE.  By the time the WiChorus product was ready for LTE there were no longer majors choosing vendors that was all done.  So, there was nowhere for Tellabs to really go with it.


Some of the diligence team pointed this timeline out to Tellabs Management.  But, there was resistance to the idea of being a day late.  This is part of the problem with the way people are managing their business in carrier opportunities.  If you are not ready when people are selecting products, there is no second bite at the opportunity.  At least Tellabs recognized this now and stopped wasting more money on it.


seven


 

DCITDave
DCITDave
12/5/2012 | 5:43:47 PM
re: Tellabs to Restructure, Cut 530 Jobs


Indeed, will keep an eye on Juniper. They've got domain status at AT&T and that has to open a few more doors.

DCITDave
DCITDave
12/5/2012 | 5:43:47 PM
re: Tellabs to Restructure, Cut 530 Jobs


Yeah, I guess it's good that they realized they missed and are moving on. 


So what's the Tellabs growth story these days? Or do they need to buy something (else) and get more into network management/SPIT/software?

pdonegan67
pdonegan67
12/5/2012 | 5:43:47 PM
re: Tellabs to Restructure, Cut 530 Jobs







Juniper is going to be the interesting one.  Like Tellabs they are also late to market. And they will have to manage potential channel conflict with Ericsson and NSN in much the same way.

  

There are a couple of things that might be different, though. Extending Juniper’s existing footprint in the mobile operator’s core into the 3GPP-defined EPC does look that bit more compelling as a proposition compared with extending the 8800 and 8600 footprints. And they're also leveraging existing platforms rather than shelling out $165 million for a new one.








 

paolo.franzoi
paolo.franzoi
12/5/2012 | 5:43:45 PM
re: Tellabs to Restructure, Cut 530 Jobs


I think that is why the stock is taking a hit.  The only new thing is the 9200 which Rob says is not until 2013.


I think Tellabs really needs to look at themselves in terms of buying things.  The Finnish and Danish acquisitions are (to date) the only things that have remotely really worked.  The 7100 was an acquisition (sort of) but by the time that product did anything it was years (10?) after the acquisition of the group which had been shuttered and moved.


Maybe they should do what the guy who sold them Vinci did with the company he had before that.  It was ASC and he basically shut it down cleanly and gave the cash back to the shareholders.  In Tellabs case, find buyers for the products and give the proceeds back to the shareholders.  Much better than wrecking more shareholder value.


seven


 

null0
null0
12/5/2012 | 5:43:39 PM
re: Tellabs to Restructure, Cut 530 Jobs


I believe a decision was taken to acquire a company that would significantly grow Tellabs business. I believe the decision to pursue this strategy beyond 2011 was suspect.  On all levels the executive decision was flawed.

Less than 100 people were part of the wichorus organisation when acquired for $164M in 2009, more than 500 were descendant to that same organisation on February 1 2012.

mshain
mshain
12/5/2012 | 5:43:20 PM
re: Tellabs to Restructure, Cut 530 Jobs


 


If someone asks engineering heads at tellabs about what have they internally innovated on their own in last decade, the answer would be "hmm…argh... hmm…"  Similarly, if you would ask which acquisitions have they not destroyed in last decades due to internal politics, answer would be hand-waving.  The value they have destroyed over time is huge and the list is long and ratio is bad for a company this size.


 


tellabs team can give all kinds of justifications of this performance, but the facts and downward spiral remain.  So for a technology company that can neither stay on cutting-edge on their own nor can build an internal culture to integrate innovations from outside, it seems missing the basic ingredients of a technology company in today's world….....  


 


 

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