Summary
1. The continuing exit of Nortel from the telecom business has created an opportunity for Tellabs in the enterprise optical space. 2. Working with Verizon Business has its downside as well. 3. The development of integrated products for the enterprise sector can lead to Tellabs eventually doing more of the same in the public network.
Analysis
The source article states: “Tellabs doesn’t want to compete with less-expensive transport vendors on price.” This comment illustrates two important aspects about Tellabs under the relatively new leadership. First, the supplier no longer is willing to cross a particular line on price that does not produce adequate margins. Second, Tellabs is taking advantage of Verizon Business’ focus on large enterprises in which the profit potential can be much higher. However, Verizon knows how anxious the vendor is to get back to its previous status in the market and is undoubtedly receiving some concessions.
It is also impressive that Tellabs can take advantage of its existing PON technology. It is an area in which it has not been developing for the carrier side. Getting anything additional in terms of revenue in this space is a big plus.
