Good season for start-up acquisition

Tellabs is indicating it may be willing to use its strong balance sheet for some down-market M&A, something that we think might be a very good idea for a lot of the larger players in the current market.

The industry is filled with small startups, some of which have good technology and strong roles in the network of the future, but little mindshare or account control. As investor fears mount, the price of these smaller players is dropping, making them a decent buy.

We believe that the deals will have to be made before the end of 1Q09, however, because it’s likely the new administration will be able to move forward enough that a recovery (not a full one, mind you) will be visible in the second half.