is a telecommunications company that designs and manufactures equipment for service providers.
Ranked among the BusinessWeek InfoTech 100, Tellabs is part of the NASDAQ-100
The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...
Index, NASDAQ Global Select Market, Ocean Tomo 300 Patent Index and the S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
. Over one third of the world's wireless calls travel via networks owned by Tellabs customers such as T-Mobile
T-Mobile International AG is a German-based holding company for Deutsche Telekom AG's various mobile communications subsidiaries outside Germany. Based in Bonn, Germany, its subsidiaries operate GSM and UMTS-based cellular networks in Europe, the United States, Puerto Rico and the US Virgin Islands...
and Verizon Communications
Verizon Communications Inc. is a global broadband and telecommunications company and a component of the Dow Jones Industrial Average...
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.
Tellabs acquired WiChorus, a startup recently.WiChorus is based out of SanJose.
Barron's is an American weekly newspaper covering U.S. financial information, market developments, and relevant statistics. Each issue provides a wrap-up of the previous week's market activity, news reports, and an informative outlook on the week to come....
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."
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
Michael J. Birck is a co-founder and current chairman of Tellabs Inc.- Early life :He was born January 25, 1938, in Missoula, Montana. He is from Clinton, Indiana. He received a BSEE degree at Purdue University in 1960 and an MSEE degree from New York University in 1962.- Professional career :Birck...
, the first chief executive officer and still chairman, described the formation of the company.
Birck said that six men with backgrounds in electrical engineering
Electrical engineering is a field of engineering that generally deals with the study and application of electricity, electronics and electromagnetism. The field first became an identifiable occupation in the late nineteenth century after commercialization of the electric telegraph and electrical...
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 suppressor
An echo suppressor is a telecommunications device used to reduce the echo heard on long telephone circuits, particularly circuits that traverse satellite links...
s, which suppress annoying echoes on phone calls.
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
Hambrecht & Quist was an investment bank based in San Francisco, California noted for its focus on the technology and internet sectors. H&Q was founded by William Hambrecht and George Quist in California, 1968....
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 million.
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.
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.
MCI, Inc. is an American telecommunications subsidiary of Verizon Communications that is headquartered in Ashburn, Virginia...
Sprint Nextel Corporation is an American telecommunications company based in Overland Park, Kansas. The company owns and operates Sprint, the third largest wireless telecommunications network in the United States, with 53.4 million customers, behind Verizon Wireless and AT&T Mobility...
, 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.”
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.
The "$6 Billion Man" arrives, with the telecom bust
Richard C. Notebaert is the former Chairman and CEO of Qwest, Tellabs and Ameritech. He was credited for saving Qwest and Tellabs from bankruptcy, and making Ameritech the most successful "Baby Bell"....
, who had led Ameritech
AT&T Teleholdings, Inc., formerly known as Ameritech Corporation , was a U.S. telecommunications company that arose out of the 1984 AT&T divestiture. Ameritech was one of the seven Regional Bell Operating Companies that was created following the breakup of the Bell System...
, the Midwestern AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
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.”
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
Alcatel-Lucent USA, Inc., originally Lucent Technologies, Inc. is a French-owned technology company composed of what was formerly AT&T Technologies, which included Western Electric and Bell Labs...
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.” Notebaert left Tellabs to run Qwest
Qwest Communications International, Inc. was a large United States telecommunications carrier. Qwest provided local service in 14 western U.S. states: Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming.On April...
In 2003, following industry trends and after 28 years as a manufacturer, Tellabs sold its last plant in Illinois and outsourced its manufacturing. The company continued downsizing its operation.
Prabhu takes Tellabs in new directions
Krish Prabhu, former chief operating officer of Alcatel
Alcatel Mobile Phones is a brand of mobile handsets. It was established in 2004 as a joint venture between Alcatel-Lucent of France and TCL Communication of China....
, 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.
Tellabs acquired Advanced Fibre Communications (AFC), which made access gear linking phone companies to homes and small businesses. By 2007, nearly half of Tellabs' revenue came from products added since 2003.
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.
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."
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."
Birck told the Chicago Sun-Times: "Honestly, this industry in its current state kind of wore the guy down."
The Pullen Years
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. He is Chairman of the executive board of Telecommunications Industry Association.
Tellabs has its corporate headquarters in Naperville, Illinois
Naperville is a city in DuPage and Will Counties in Illinois in the United States, voted the second best place to live in the United States by Money Magazine in 2006. As of the 2010 census, the city had a total population of 141,853. It is the fifth largest city in the state, behind Chicago,...
, a Chicago suburb. It also has offices in 30 countries.
Tellabs' customers include wireline, wireless and cable TV companies and government agencies—among them are Verizon Communications
Verizon Communications Inc. is a global broadband and telecommunications company and a component of the Dow Jones Industrial Average...
BellSouth Corporation is an American telecommunications holding company based in Atlanta, Georgia. BellSouth was one of the seven original Regional Bell Operating Companies after the U.S...
, NTT Communications of Japan, Telstra
Telstra Corporation Limited is an Australian telecommunications and media company, building and operating telecommunications networks and marketing voice, mobile, internet access and pay television products and services....
of Australia, Telkom South Africa, Telecom Italia
Telecom Italia is the largest Italian telecommunications company, also active in the media and manufacturing industries. Now a private concern listed on the Borsa Italiana, it was founded in 1994 by the merger of several state-owned telecommunications companies, the most important of which was...
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
Tellabs says that more than half of wireless calls are made on networks owned by Tellabs' customers.
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.
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.
- 'Tellabs DynamicHome Solution.. These products deliver phone, Internet and video services to consumer homes (e.g. Verizon FiOS).
- Tellabs Converged Transport Solution. These products add 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.
- 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.
- AssuredEthernet Solution. These products deliver Ethernet services, primarily business dataservices.
- 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.
Over one third of the world's wireless calls travel via networks owned by Tellabs customers such as T-Mobile and Verizon Communications. 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 focuses on serving federal government agencies and their changing needs.
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. Tellabs’ products and solutions include products that transport mobile traffic between cell towers, consumer “triple play” services (phone, internet and video), traffic surge devices for Service Providers and products for carriers to enhance their data service offerings.