Would Tellabs Consider Merging With Ciena Again?

Implications: 1.      Several years ago, the proposed merger between Tellabs and Ciena made a lot of sense. 2.      Now from Tellabs’ perspective, a potential marriage would appear even more favorable. 3.      Private equity firms taking over Ciena cannot be ruled out.

Analysis:  A sufficient amount of time has passed that there might not be any shaky feelings anymore by the board at Tellabs about possibly getting together with Ciena.  Tellabs might come to the conclusion that it is so far behind the curve right now on optical networking because of the problems it had in the past that a pickup of the leading optical networking player would be very worthwhile.  Overnight, the supplier would get the broadband switch that it desperately needs to remain a top player in the overall cross-connect space.  It would also obtain the very popular CN 4200 box.  In effect, Tellabs would be able to provide a full end-to-end optical solution from PONs to ultra long haul equipment. 

Tellabs has a large amount of cash available and would probably be willing to take on debt to complete such a deal.  However, it is interesting to note that Citadel Investment Group just recently grabbed a small stake in Ciena.  And so, perhaps, this move is just a precursor of an all-out purchase of Ciena by one or more private equity firms.