Posted by: Tom Nolle
Metro Area Networks
September 12 2007: Tellabs has been the target of acquisition rumors for a month or more, but Light Reading is now reporting that the suitors may be less interested since their own stocks have declined. Citing a UBS report, the article below suggests that because the share price of potential buyers like Nortel (the most likely, so we hear) has fallen, the acquisition would be harder to swallow. In addition, Tellabs has its own challenges with margins. OK, we don’t disagree with those points, but the stark fact is still that you have to have a metro product ecosystem to be a major player in the service provider equipment market today. Alcatel-Lucent has one and their competitors do not. Tellabs is perhaps the most complete metro story of the independent players, and the situation that UBS describes isn’t going to get better over time. We think Tellabs is still up for grabs, and that the odds still favor Nortel doing the deed.