Tellabs Troubles

1:25 PM -- The real problem with Tellabs' GPON efforts is twofold.

First, the press release was right. There's the customer problem. Verizon Communications Inc. (NYSE: VZ) just wants the stuff to be delivered more cheaply than Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) can make it. When carriers take a big risk, they have to pass that risk on to everyone in the food chain.

Second, Tellabs can't seem to source a good ONT (optical network terminal), the customer premises gear, that both works well and allows it to make some money after the sale to Verizon is complete. That might be as much of an industry problem as it is an issue of Tellabs screwing up.

Keep in mind: There haven't been a whole heck of a lot of optics breakthroughs happening at the customer premises side of the access business. There are some packaging innovations here and there, but nothing that truly drops the cost of making ONTs through the floor. The most urgent concern in that area is simply to make stuff cheaply, and for that, people just send more jobs to China.

That's called administration, not innovation.

Anyway, good for Tellabs for picking its battles and not trying to be everything to everyone. Lots of under-$10-billion market cap companies in telecom could learn a thing or two from Ciena Corp. (NYSE: CIEN) in that regard.

Ciena tried to own the metro network at one time. Now it's quite happy picking its spots and winning a few high-margin skirmishes on the outskirts of the larger wars among the larger equipment vendors.

Tellabs can do the same sort of cherry-picking in access. And maybe that will require a renewed investment in other access areas, and not a full-scale abandonment, as many have wanted.

— Phil Harvey, The Editor, Light Reading

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