Tellabs Buys Future Networks For $181 Million
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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.