TELLABS ADDS LAYER WITH VIVACE BUY

Tellabs' $135 million acquisition of Vivace Networks last week wasn't shocking for its dollar value, but it may signal the beginning of a newly aggressive strategic stance for a company better known for conservative strategy moves and a big pile of cash.

The acquisition is the first major move since an executive shakeup that put Ed Kennedy, who came to Tellabs with the acquisition of Occular Networks, in charge of the company's North American unit. It also was relatively affordable, given that the company has been sitting on more than $1 billion in cash and securities for several years.

“The Vivace product is really moving up the protocol stack into Layer 2 and Layer 3,” said Greg Nulty, senior vice president of planning for Tellabs. “The service providers are migrating their marketing and sales efforts from transport and to data services.” But while Tellabs is positioning the Vivace acquisition as way to step up the protocol stack, it's not the company's first move into Layer 2. Tellabs said last year it would add Layer 2 switching capability to its 6300 managed transport system.

With Vivace's gear in Tellabs' lineup of product offerings, the company has the means for a more natural migration — particularly when compared with competitors such as Lucent Technologies, Ciena and Nortel Networks, Kennedy said. The move also gives the company entry into the MPLS market.

“Pulling our transport portfolio upward into the Layer 2 space and converging with MPLS makes a lot more sense than trying to go from Layer 2 on down,” Kennedy said in a conference call with analysts. “It's the right technology and the right timing.”