On 21 October 2013, Marlin Equity Partners announced that it had entered into an agreement to acquire Tellabs. Ovum’s Ron Kline, Principal Analyst, Network Infrastructure
views this as an aggressive move by Marlin to solidify its network
equipment portfolio building on its recent acquisitions of NSN's optical
networks business and Sycamore Networks (now Coriant and Coriant
America) in its quest to become a leading provider in the optical
networking market. Kline provides the following comments:
Marlin to the rescue
“Globally Tellabs ranks 12th in the optical networking market, ninth in service provider switching and routing, and 7th in the PON. Overall Tellabs was the 12th-ranked wireline equipment vendor in 2Q12 with a 2% share of the $40bn market. At the end of 2010 Tellabs ranked 8th among all telecom wireline equipment suppliers, however revenues from optical networking and switching and routing products have been under pressure, dropping every quarter since, pushing annualized revenues down 49% to $637m in 2Q13, from $1.25bn 4Q10. Most of the market declines can be traced to loss of business at its premier customers in North America, AT&T and Verizon, which transitioned to alternative platforms from Alcatel-Lucent and Fujitsu, respectively. The company has also struggled to get new products off the ground, failing in its attempt to enter the mobile packet core market through its acquisition of WiChorus and subsequent cancelation its SmartCore 9100 LTE and next-gen router 9200 SmartRouter in 2012.”
Marlin is assembling a strong stable of intellectual property
“Despite its recent struggles Tellabs has a number of product capabilities and core competencies and intellectual property that will complement the capabilities in Marlin's Coriant portfolio. While there is some overlap in optical networking technologies, e.g., ROADM and OTN switching, Coriant has been focused on the regional/core network while Tellabs has been focused in the metro. Tellabs also has products and expertise in IP/MPLS routing, carrier Ethernet and PON that will significantly strengthen Marlin's portfolio.”
Marlin investing for the long run
“This is Marlin Equity Partners's third acquisition of an optical networking vendor in the last 12 months, indicating that the company is serious about competing in a very difficult market. Although Marlin has not made any announcement Ovum expects the company to merge Tellabs with Coriant after the deal is finalized in 4Q13 creating a specialist vendor with expertise across layers 1-3 and products in the broadband access, switching and routing and optical networking product segments. Marlin has a lot to prove. While it is accumulating products and people, it is unclear how it will invest in new products to stem the long-term decline in revenues that’s plagued Tellabs in particular. The greatest synergies would come from combining Tellabs with Coriant. That is not an easy task, but the alternative of leaving the companies to operate independently pits them against each other: Coriant, for example, has relationships with Juniper and Adva, which directly compete with Tellabs. The two companies will also bump heads in the emerging OTN switching market, where both have product coincidentally named 7100.”
Marlin to the rescue
“Globally Tellabs ranks 12th in the optical networking market, ninth in service provider switching and routing, and 7th in the PON. Overall Tellabs was the 12th-ranked wireline equipment vendor in 2Q12 with a 2% share of the $40bn market. At the end of 2010 Tellabs ranked 8th among all telecom wireline equipment suppliers, however revenues from optical networking and switching and routing products have been under pressure, dropping every quarter since, pushing annualized revenues down 49% to $637m in 2Q13, from $1.25bn 4Q10. Most of the market declines can be traced to loss of business at its premier customers in North America, AT&T and Verizon, which transitioned to alternative platforms from Alcatel-Lucent and Fujitsu, respectively. The company has also struggled to get new products off the ground, failing in its attempt to enter the mobile packet core market through its acquisition of WiChorus and subsequent cancelation its SmartCore 9100 LTE and next-gen router 9200 SmartRouter in 2012.”
Marlin is assembling a strong stable of intellectual property
“Despite its recent struggles Tellabs has a number of product capabilities and core competencies and intellectual property that will complement the capabilities in Marlin's Coriant portfolio. While there is some overlap in optical networking technologies, e.g., ROADM and OTN switching, Coriant has been focused on the regional/core network while Tellabs has been focused in the metro. Tellabs also has products and expertise in IP/MPLS routing, carrier Ethernet and PON that will significantly strengthen Marlin's portfolio.”
Marlin investing for the long run
“This is Marlin Equity Partners's third acquisition of an optical networking vendor in the last 12 months, indicating that the company is serious about competing in a very difficult market. Although Marlin has not made any announcement Ovum expects the company to merge Tellabs with Coriant after the deal is finalized in 4Q13 creating a specialist vendor with expertise across layers 1-3 and products in the broadband access, switching and routing and optical networking product segments. Marlin has a lot to prove. While it is accumulating products and people, it is unclear how it will invest in new products to stem the long-term decline in revenues that’s plagued Tellabs in particular. The greatest synergies would come from combining Tellabs with Coriant. That is not an easy task, but the alternative of leaving the companies to operate independently pits them against each other: Coriant, for example, has relationships with Juniper and Adva, which directly compete with Tellabs. The two companies will also bump heads in the emerging OTN switching market, where both have product coincidentally named 7100.”
