Tellabs acquires Vivace Networks

Tellabs announced today that it is acquiring Vivace Networks in a cash and stock deal valued at $135 million.

The acquisition is the first major move since an executive shakeup that put Edward Kennedy in charge of the company’s North American unit. The deal also positions Tellabs as more than a provider of Layer 0 equipment, a move that the company believes is in step with its largest telco customers.

“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. They’re moving up the protocol stack and are spending a lot more money there.”

The acquisition, which is expected to close in the third quarter, positions the company as a more comprehensive provider of end-to-end services including frame relay. Going forward, it also give Tellabs entry into the MPLS-based services market, something Vivace has been putting most of its effort into lately, said Ken Koenig, chairman, CEO and president of Vivace.

On a product level, Tellabs will provide interfaces from its workhorse 5500 NGX into Vivace’s 7100 series switch. The company’s also will do some technology transfer into Tellabs product lines where it makes sense, Nulty said.

“The traditional Tellabs would provide an access and transport into that Vivace network,” Koenig said.

San Jose-based Vivace, which has about 100 employees, will continue to operate as a division within Tellabs but products will be re-branded. Koenig will become Tellabs senior vice president of advanced data products, reporting to Kennedy.