Nokia Siemens Naperville

During their second-quarter earnings conference call today, Tellabs executives understandably didn’t say much about recent rumors that the company is entertaining acquisition offers from Nokia Siemens Networks (though what they <I>did</I> say, you can read here).

Naperville, Ill.-based Tellabs has been regarded as a likely takeover target for some time, especially in the eyes of overseas vendors, but I still feel a bit sad about the prospects of another major U.S. telecom equipment company falling under foreign ownership. When the dust of telecom equipment consolidation settles, how much of the considerable U.S. telecom spending will flow to other nations? (Read more about this trend here.)

The North American access equipment space hasn’t been easy for overseas vendors to crack (market leader Alcatel being the obvious exception). So acquiring an existing player has been the best option for folks like NSN or Ericsson, which picked up both Redback Networks and Entrisphere. The question for NSN, should it end up with Tellabs, would be to what extent the obstacles to this market remain in place even after it has a U.S. property. Smaller players based here have enjoyed an advantage over larger rivals across the pond (again, with Alcatel the exception). For example, although Ericsson, Huawei Technologies, Siemens and ZTE round out the world’s top five DSL suppliers, none of them are a top-five player in the U.S., where the leading suppliers are Adtran, Calix, Tellabs and Zhone Technologies.

Even Tellabs learned how nimble this crowd of smaller U.S. firms can be when it won Verizon Communications as a customer. Focusing so much effort on keeping Verizon happy, Tellabs allowed Adtran, Calix and others to target the independent telcos it had neglected. Now Tellabs wants to win those independents back, but analysts say it won’t be easy. If Tellabs becomes part of NSN, it may be even harder for the company to unseat vendors based in the states whose focus is more local than global.

What do you think?

E-mail me at ed.gubbins@penton.com.