Anticipation grows for Tellabs M&A

UBS predicts Tellabs acquisition this year

After having cooled in the second half of last year, expectations for a Tellabs acquisition are rising once again with the start of the new year.

Speculation of a Tellabs takeover swelled last year only to fall silent again when Tellabs and some of its more likely acquirers dealt with disappointing quarterly earnings.

With a new quarter well underway and the search for a new Tellabs CEO ongoing since Krish Prabhu announced his resignation in November, analysts are hopeful that the equipment vendor will be ready to deal this year.

“With two CEOs resigning since 2002, no obvious internal replacement, a low growth industry, and low stock valuation, we believe this could be the year Tellabs gets acquired,” UBS Investment Research analyst Nikos Theodosopoulos wrote in a research note this morning.

As they were last year, Nokia Siemens Networks and Nortel Networks are viewed as the most likely vendors to make an offer for Tellabs, analysts say, though private equity firms are also a possibility.

Nokia Siemens has grown more acquisitive in recent months, though it has so far opted to purchase equipment vendors smaller than Tellabs.

Tellabs has a “pristine” balance sheet, Theodosopoulos said, and is well-positioned as a supplier to Verizon but has low future growth prospects. And its stock is currently trading lower, relative to sales, than its peers, which could further entice would-be buyers.