Tellabs Buys Future Networks For $181 Million

Tellabs, Inc., announced Monday its $181 million stock purchase of cable
modem maker Future Networks.

Included in the buyout are the 50 employees at Future Networks.

The deal integrates Future Networks product line of industry-standard Data
Over Cable Service Interface Specification (DOCSIS) cable modems into
Tellabs CABLESPAN platform, which officials hope will be the future in voice
over, data and video cable Internet services for businesses.

Cable has long been considered a poor platform for advanced business
services because of its shared-network architecture, which makes it hard to
guarantee bandwidth to specific customers.

Monday’s deal and last month’s announced partnership with Riverstone
Networks, a network management company, is expected to overcome cable’s
deficiencies and give business customers services like streaming video
conferencing and virtual private networking.

It’s a move that makes it a competitor for customers who have been dealing
mainly with the telephone companies and its Symmetrical Digital Subscriber
Line (SDSL) business services.

Cable telephony is a developing market that’s had a tough time finding
customers to its service. That fact was underscored by the Tellabs
below-trend growth in its CABLESPAN sales, despite a 33 percent sales
increase in its overall broadband access division in the fourth quarter of
2000.

The cutting-edge platform consists of an edge router run by the company’s
flagship product, the CABLESPAN 2700, a SALIX neighborhood packet voice
gateway and Future Networks cable modem line.

J. Thomas Gruenwald, Tellabs vice president and general manager, is
confident the buyout will reap rewards down the road, despite the short-term
six cents per share dilution the company’s stock will take in 2001.

“The addition of Future Networks vaults Tellabs into the leading position to
deliver to customers a best-in-class, end-to-end solution for data and voice
service delivery over cable and a seamless migration path for existing
customers,” Gruenwald said. “Future Networks, along with the recently
announced CABLESPAN 2700 bring proven next-generation technology and real
deployment experience.”

The buyout is expected to close out next month and dilute its earnings per
share by six cents in 2001. At press time, Tellabs had dropped 13/16 to 60
1/8.