Tellabs

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Tellabs
Type	Public (NASDAQ: TLAB)
Founded	1975
Headquarters	Naperville, Illinois, United States
Key people	CEO: Rob Pullen Chairman: Mike Birck
Industry	Telecommunications Equipment
Products	fiber access, data network convergence, next-generation transport
Revenue	$ 2.041 billion USD (2006)
Employees	3,700
Website	www.tellabs.com, www.inspirethenewlife.com

Tellabs, Inc. (NASDAQ: TLAB) designs and manufactures telecommunications equipment for service providers.

Ranked among the BusinessWeek InfoTech 100^[1], Tellabs is part of the NASDAQ-100 Index, NASDAQ Global Select Market, Ocean Tomo 300 Patent Index and the S&P 500. Customers include T-Mobile and Verizon Communications^[2]

Along with stand-alone products, Tellabs offers integrated systems to telecom service providers, Multi-Service Operators (MSOs) and wireless companies that cover a variety of functions. Tellabs also has a Government Systems group that focus on serving federal government agencies and their changing needs.^[3]

Barron's Magazine reported that "Tellabs-built equipment helps wireless providers handle increased traffic. Its products also allow phone companies to offer voice, data and video services to residential homes over fiber connections."^[2]

1 History
2 Expands products, makes acquisitions
3 The "$6 Billion Man" arrives, with the telecom bust
4 Prabhu takes Tellabs in new directions
5 Corporate affairs
6 Products and services
7 Controversy
8 References
9 External links

[edit] History

Tellabs traces its roots to a meeting in 1975 over a kitchen table in suburban Chicago. In a booklet on Tellabs' first quarter century, Twenty-Five Years of Clear Ideas: Tellabs 1975-2000, founder Michael Birck, the first chief executive officer and still chairman, described the formation of the company.^[4]

Birck said that six men with backgrounds in electrical engineering and sales drank coffee and brainstormed ideas for a new telecom company. He said they wanted to build a company that offered customers products and services that met their specific needs.

The partners raised $110,000 in capital. They incorporated as Tellabs in the spring of 1975. The name combined the idea of telephones and laboratories.^[4]

The start-up only had a one-man research department, a second-hand soldering iron picked up for $25 and an outdated oscilloscope.^[4]

In a matter of months, Tellabs began making echo suppressors, which suppress annoying echoes on phone calls.^[4]

During this time, the founding partners drew no salaries. Family members supported the new company by mortgaging their homes, cleaning Tellabs' offices and even posing as assembly line workers when potential customers were taken through the “plant.”^[4]

Birck said, “None of the six of us gave any thought whatsoever to where we'd be 25 years hence--we were far more concerned with surviving the first year or two….We ended that first year with 20 employees, US$312,000 in sales and a modest loss.”^[4]

Tellabs continued to grow, adding plants and expanding its product line.

Hambrecht & Quist of San Francisco took the company public in July 1980. Tellabs ended 1980 with sales of $43.7 million.^[4]

In September 1981, Tellabs introduced the industry's first echo canceller, an advance over the original echo suppressors that synthesized an echo and electronically subtracted it.^[4]

By 1990, Tellabs had grown to 2,000 employees at 25 locations globally and sales of $211 million.^[4]

[edit] Expands products, makes acquisitions

Tellabs made several acquisitions and expanded globally in the 1980s and into the 1990s, including Coherent Communications Systems Corp. and Martis Oy in Finland. In 1991, the company took a new direction, releasing its SONET-based TITAN 5500 digital cross-connect system. These systems switch traffic from one circuit to another, connecting traffic inside and between networks.^[4]

SiliconIndia confirmed the Titan's success: “The product was superior to all others on the market and rapidly gained customer acceptance at a number of blue chip companies including MCI Inc., Sprint, the various RBOCs (Regional Bell Operating Companies), various cellular, paging and data service providers. Through the 1990s, Tellabs enjoyed rapid sales growth and was one of the top 10 stocks in all performance from 1991-1999. Sales increased tenfold from under $200 million to more than $2 billion and profitability increased more than twentyfold over that period.”^[5]

In 1995, as the Internet was emerging, Tellabs launched its first Web site at http://www.tellabs.com. That year, when the company had $600 million in revenue, Birck set a goal of “$2B by 2K”: $2 billion in revenue by the year 2000. When that objective was met during the telecom boom in 1999, Birck upped the goal to boost Tellabs from $2 billion in revenues in 2000 to $6 billion in 2003.^[4]

[edit] The "$6 Billion Man" arrives, with the telecom bust

Dick Notebaert, who had led Ameritech, the Midwestern AT&T spin-off until it was acquired by SBC in 1999, took over Tellabs as CEO in September 2000. Notebaert was dubbed by news media as the “$6 billion man.”^[6]

But it wasn't to be, as the telecom industry went into a nosedive. The Chicago Sun-Times reported: “Telecom went from boom to bust as venture capital dried up and customers cancelled orders for the sort of equipment made by Tellabs and its competitors, including Nortel Networks and Lucent Technologies.”^[6]

Notebaert confirmed the $6 billion goal wouldn't be met: "Not by '03. Not unless we do some serious acquiring." The Chicago Sun-Times said his job description changed “from empire builder to cost-cutter as he trimmed Tellabs' sails to ride out the recessionary storm.”^[7] Notebaert left Tellabs to run Qwest in 2002.

In 2003, following industry trends and after 28 years as a manufacturer, Tellabs sold its last plant in Illinois and outsourced its manufacturing.^[8] The company continued downsizing its operation.

[edit] Prabhu takes Tellabs in new directions

Krish Prabhu, former chief operating officer of Alcatel, took over as CEO in February 2004. Prabhu led the company in new directions to meet needs created by the public's growing use of the Internet and faster connections, enabling video and better VoIP (Voice over Internet Protocol) calling.^[9]

Tellabs acquired Advanced Fibre Communications (AFC), which made access gear linking phone companies to homes and small businesses.^[10] By 2007, nearly half of Tellabs' revenue came from products added since 2003.^[11]

Prabhu also presided over more cutbacks as the telecom industry continued to struggle. In January 2008, Tellabs announced that it was cutting 225 jobs during 2008. This would leave Tellabs with about 3,500 jobs, down from a peak of 9,000 during the boom in 2001.^[11]

Prabhu stepped down in March 2008 for personal reasons. He said in announcing his departure: "The Tellabs team has successfully broadened the product portfolio, established new relationships with large service providers, and made progress in repositioning the company. This is the right time for a new leader to begin the next chapter at Tellabs."^[12]

Birck said Prabhu was a good strategic planner, creating a "formidable" product line, especially digital products that enable Tellabs' telephone company customers to deliver video and other services to consumers' homes. He said industry consolidation made it difficult for suppliers to be profitable. He said the telephone companies "know how to wring it out of you. It's happening to all the suppliers."^[13]

Birck told the Chicago Sun-Times: "Honestly, this industry in its current state kind of wore the guy down."^[13]

Robert W. Pullen 45, who had 23 years of experience at Tellabs in research and development, sales, and services, took over as chief executive and president on March 1, 2008. He started his career at Tellabs in 1985 as an electrical engineer and had been senior vice president of optical networking.

[edit] Corporate affairs

Tellabs has its corporate headquarters in Naperville, Illinois, a Chicago suburb. It also has offices in 30 countries.^[10]

Tellabs' customers include wireline, wireless and cable TV companies and government agencies. Among then are Verizon Communications, BellSouth, NTT Communications of Japan, Telstra of Australia, Telkom South Africa, Telecom Italia and Vodafone in Hungary.^[10]

Tellabs says that more than half of wireless calls are made on networks owned by Tellabs' customers.^[10]

[edit] Products and services

Along with its stand-alone products, Tellabs offers integrated “solutions” with a variety of functions. Its equipment helps wireless providers handle increased traffic and allows phone companies to offer voice, data and video services to residential homes over fiber connections.^[14]

Tellabs solutions and products include:

'Tellabs IntegratedMobile Solution. These products transport mobile traffic between cell towers and switches, connecting within networks and to other networks (not by radio, but by wired connections). This is also known as mobile backhaul, and represents a large percentage of carriers' operating costs. As carriers go to 3G and 4G, they have more data and video traffic, so they are moving to Ethernet-based versus circuit-based transport.^[14]

'Tellabs DynamicHome Solution.. These products deliver the "triple play" -- phone, Internet and video services -- to consumer homes (e.g. Verizon FiOS), reaching from deep inside the network all the way to the device on the side of homes.^[14]

Tellabs Converged Transport Solution. These “next-generation transport” products helps service providers keep up with surging traffic growth by adding more bandwidth where and when it's needed. Much of this traffic growth is created by telecom service providers adding video services, which take up to 25 more bandwidth than phone calls, and other traffic growth supports businesses' data needs.^[14]

Tellabs MultiservicePLuS Solution. These products enable carriers to handle a mix of business data services, existing and new. Existing services include frame relay and asynchronous transport mode. These are still widely used and profitable to carriers. New services include Ethernet and IP/MPLS, which are new and less expensive for businesses. Businesses can, and often do, mix these services.^[14]

AssuredEthernet Solution. These products deliver Ethernet services, primarily business dataservices.^[14]
Tellabs Global Services Solution These products include engineering, furnishing and installing new equipment; training; and professional consulting services such as network architecture and network optimization.^[14]