Tellabs will acquire AFC in a cash and stock merger valued at $1.9 billion (19-May-04 prices). The merger brings together Tellabs’ portfolio of transport and switching solutions with AFC’s products for the access network. Both companies are suppliers to RBOCs. Tellabs also has a significant international presence.
AFC’s portfolio includes its flagship AccessMAX platform, which is capable of being configured as a digital loop carrier, DSLAM, or optical line terminal. The AccessMAX was recently enhanced with a new Gateway Processing Engine (GPE) that provides media gateway functionality. The new GPE plug-in card enables AccessMAX systems to use the H.248 media gateway control protocol to interface with a softswitch, such as the Nortel Networks’ Succession CS 2000. The combined solution allows subscriber calls initiated from traditional analog telephones to be converted into packets and switched efficiently through a converged packet network.
AFC is a lead supplier for Verizon’s FTTP initiative. The company is providing Verizon with the central office and premises electronics, or “active” elements for the FTTP network. Earlier this week, Verizon reconfirmed previously announced plans to pass about 1 million homes in parts of nine states by the end of this year. AFC’s FTTP solution is based on a passive optical networking (PON) plug-in card that transforms the AccessMAX platform into an optical line terminal (OLT). The implementation, which is based on the ITU-T G.983 standard, supports a 32:1 PON split with a 20 km reach. The network supplies 622 Mbps downstream and 155 Mbps upstream. The OLT could be deployed either in the central office or in a remote terminal. AFC said a unique architectural element of its FTTP solution is that the AccessMAX integrates voice gateway functionality, enabling packetized voice traffic to be handed off from the same platform to a variety of voice interfaces, including GR-303/V5.2, TR-08/V5.1, and TR-57.
Tellabs’ portfolio includes next-generation optical networking, managed access, carrier-class data, voice quality enhancement and cable telephony platforms.
The combined company would employ about 4,100 people worldwide. The deal has been approved by the boards of each company. AFC stockholders will receive 1.55 shares of Tellabs common stock and $7.00 in cash for each AFC share. John Schofield will become chief operating officer and a director of Tellabs. The Tellabs board will be expanded to include three AFC directors, including Schofield, increasing the size of Tellabs’ board to 12 members. The deal is expected to close in the second half of 2004. Upon completion of the transaction, Tellabs stockholders will own approximately 75% of the company and AFC stockholders will own 25%. http://www.tellabs.comhttp://www.afc.com
- In April, Tellabs reported its first quarterly profit in 2 years. Q1 revenue was $264 million, up 19% from $223 million in the first quarter of 2003. Tellabs earned 3 cents per share or $13 million in the first quarter of 2004. Excluding restructuring charges of $7 million, Tellabs’ non-GAAP earnings were 5 cents per share or $20 million. Tellabs said stronger revenues, improved margins and lower expenses contributed to its first profitable quarter in two years.
- In April, AFC reported Q1 revenue (GAAP) of $92.8 million. Revenues generated by North American Access (NAA), a business unit of Marconi Communications, were included in the results from the 20-Feb-2004 acquisition date through quarter end. Revenues in Q4 2003 were $84.8 million. Revenues for the first quarter of 2003 were $80.5 million. Net loss for Q1 2004 was $2.7 million, or $0.03 loss per share. The first quarter of 2004 included costs associated with the acquisition of NAA. Net income in the fourth quarter of 2003 was $5.7 million, or $0.06 per share.
- In February, Krish Prabhu was appointed president and CEO of Tellabs. Michael J. Birck, a company founder and CEO of Tellabs for 27 of its 29 year history, continues as chairman of the board. Prabhu, 49, previously served as chief operating officer of Alcatel Telecom and CEO of Alcatel USA.
- In 2003, Tellabs acquired Vivace Networks for $135 million in cash and employee stock options. Vivace developed am IP/MPLS edge switch for delivering native Frame Relay, ATM, Ethernet and IP services. It scales to 320 Gbps of full-duplex switching in half of a 7 foot rack and a multi-chassis system could scale up to 256 customer ports at 10 Gbps. A single Universal Line Card accepts a flexible set of different Physical Line Modules spanning DS3 – OC-192/STM-64. The product line has subsequently been enhanced and expanded.
