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Tellabs looks to mobile backhaul and packet optical

21 February 2012
 
Optical vendor Tellabs has started a restructuring process that will see it reorganise its operations around mobile backhaul and packet-optical transport. The company plans to cut 530 jobs and consolidate R&D sites as it aims to save $100 million in operating costs.
 
Tellabs is not the first optical vendor to take this path. In November 2011, Nokia Siemens Networks said it would change its focus to mobile broadband (see NSN refocuses on mobile broadband and services).
 
“Our view is that the mobile Internet will drive the telecom industry’s future,” said Tellabs in an email. “We expect that within three years, most Internet traffic will be mobile, not fixed.” 
 
The networks that deliver the mobile Internet encompass mobile backhaul, packet optical and optical access networks (for the ability to offload mobile data using Wi-Fi), the company says. Products that will no longer be developed include the Tellabs SmartCore 9100 LTE product, although Tellabs will continue to support existing SmartCore 9100 WiMax customers.
 
The changes will affect about 530 people out of the total workforce of around 3,250, according to Tellabs. When this and the previously announced restructuring (in July 2011) are completed in the first quarter of 2013, the company expects to have about 2,700 employees.
 
Tellabs will also be consolidating its R&D sites, and plans to close facilities in Petaluma, California; Vancouver, Canada; Bangalore, India; and Karachi, Pakistan.
 
Tellabs had entered 2011 "in a difficult position driven by a dramatic change in business with one North American customer," Tom Minichiello, interim chief financial officer, told analysts on a conference call. But what is described in the official statement as “continuing economic uncertainty” has made it difficult to turn the company’s fortunes around.
 
Tellabs generated fourth quarter revenues of $317 million, compared with $410 million in the year-ago quarter, and a net loss of $5 million, compared with a net loss of $11 million in the year-ago quarter. Looking at the annual results, Tellabs reported revenue of $1.29 billion in 2011, compared with $1.64 billion in 2010. Overall in 2011 Tellabs lost $188 million, down from net earnings of $156 million the previous year.
 
In spite of the bottom line, Tellabs claims to have made real progress, expanding its customer base outside of North America to nearly half of the total. Its gross profit margin was also the highest in five quarters at 42.5%, compared with 38.0% in the year-ago quarter.
 
By Pauline Rigby