Tellabs

Tellabs, Inc. is a telecommunications company that designs, develops and supports telecommunications networking products.^[1]

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.^[2]

Startup

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 The start-up only had a one-man research department, a second-hand soldering iron picked up for $25 and an outdated oscilloscope.

In a matter of months, Tellabs began making echo suppressors, which suppress annoying echoes on phone calls.^[2] 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.” 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.”

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.

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. By 1990, Tellabs had grown to 2,000 employees at 25 locations globally and sales of $211 millions.

Expansion during the 1980s and 1990

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.

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.”^[3]

In 1995, as the Internet was emerging, Tellabs launched its first Web site at 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.

Telecom bust

Richard 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. Pundits labeled Notebaert the “$6 billion man.”^[4]

However, as the Chicago Sun-Time also reported, the telecom industry also collapsed. 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.”^[4] Notebaert confirmed the $6 billion goal wouldn't be met: "Not by '03. Not unless we do some serious acquiring." The same paper soon reported that his job description changed “from empire builder to cost-cutter as he trimmed Tellabs' sails to ride out the recessionary storm.”^[5] In 2002, 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.^[6] The company continued downsizing.

Investor complaints and new Administration under Prabhu

Krish Prabhu, former chief operating officer of Alcatel, took over as CEO in February 2004. Prabhu saw opportunities as Internet use grew and demanded faster connections, as well as video and better VoIP (Voice over Internet Protocol) calling.^[7] In 2006 Tellabs acquired Advanced Fibre Communications (AFC), which made access gear linking phone companies to homes and small businesses.^[8] By then, more than half of wireless calls were being made on networks owned by Tellabs' customers.^[8] By 2007, nearly half of Tellabs' revenue came from products added since 2003.^[9]

Meanwhile, dissident shareholders sued Tellabs in federal court, alleging stock fraud. Tellabs management litigated the case all the way to the U.S. Supreme Court, Tellabs, Inc. v. Makor Issues & Rights, Ltd.. That decision reduced shareholder litigation under the Private Securities Litigation Reform Act of 1995 by imposing a scienter requirement, rather than allowing a factfinder to deduce management's fraudulent intent from suspicious circumstances.

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 the year. This would leave Tellabs with about 3,500 jobs, down from a peak of 9,000 during the boom in 2001.^[9] Prabhu stepped down in March 2008 for personal reasons; Birck praised him at his departure.^[10]

The Pullen Years

Tellabs internally promoted Robert W. Pullen, who had 23 years of varied experience at Tellabs, to succeed Pradhu as chief executive and president effective March 1, 2008. He was Chairman of the executive board of Telecommunications Industry Association.^[11]

Tellabs acquired WiChorus, a San-Jose based Silicon Valley start-up with a mobile packet core platform, in 2009. Pullen died of cancer at age 50 three years later.^[12]

Corporate affairs

Tellabs has its corporate headquarters in Naperville, Illinois, a Chicago suburb. It also has representation in 30 countries.^[8]

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.^[13][14]

Tellabs products and services include:

• Data products (Tellabs IntegratedMobile Solution) to 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 upgrade—to 3G and 4G—they have more data and video traffic, so they are moving to Ethernet-based versus circuit-based transport.^[14] Additional data products (provided by the Tellabs MultiservicePLuS Solution) 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 Multiprotocol Label Switching, which are newer and less expensive for businesses. Businesses can, and often do, mix these services.^[14] A third group of data products (provided by the Tellab AssuredEthernet Solution) deliver Ethernet services, primarily business data services.^[14]

• Access products to deliver phone, Internet, video, and data services to consumer homes—e.g. Verizon FiOS—provided by Tellabs DynamicHome Solution.^[14]

• Optical products to add more bandwidth where and when it's needed, provided by Tellabs Converged Transport Solution. Much of the traffic growth is created by telecom service providers adding video services, which take up to 25 times more bandwidth than phone calls. And other traffic growth supports businesses' data needs.^[14]

• Services include engineering, furnishing and installing new equipment; training; and professional consulting services such as network architecture and network optimization, provided by Tellabs Global Services Solution segment.^[14]

Some of Tellabs' customers include Verizon Communications, BellSouth, NTT Communications of Japan, British Telecommunications of United Kingdom, T-Mobile (globally), Telekom Malaysia, Telstra of Australia, Telkom South Africa, Telecom Italia and Vodafone (globally).^[8][15]

References

External links

• Official website