Tellabs connects with wireless future

Tellabs Inc. made its bones developing and selling fixed-line network infrastructure gear to big phone companies. The company’s flagship products were its cross-connects for central offices, which gathered, sorted and delivered communications traffic within networks. But as traditional phone companies watched the advent of wireless services impact their bottom lines, they adjusted in part by cutting back drastically on their infrastructure spending.
The Naperville, Ill.-based company responded by moving more aggressively into other markets, including wireless broadband and fiber-optic networking. Today, its 5500 digital cross-connect is one of the company’s signature wireless solutions for helping North American carriers handle backhaul. The platform sports an integrated Asynchronous Transfer Mode, Ethernet, echo cancelling and grooming functionalities.
Indeed, as networks converge and there is a greater mix of traffic on the networks (think voice, data, video), Tellabs feels it is positioned to play an intricate role in delivering that traffic and maintaining quality of service.
During a recent interview, Tellabs’ Chief Technology Officer Tom Gruenwald pointed out that Tellabs has found its wireless groove and has a strong market position. “About two-thirds of all cellular calls made today go through a Tellabs network,” declared Gruenwald.
For instance, Gruenwald noted that its wireless equipment is sold in large part through L.M. Ericsson and is installed in Cingular Wireless L.L.C.’s national network. “We’re trying to be good at three or four things rather than trying to be all things to all people,” said Gruenwald. “If you get too big, you often lose your customer focus. We decided we wanted to be really good at a few things.”
Between 2003 and 2006, Tellabs transformed itself, more than doubling its profits from $354 million in 2003 to $750 million at the close of the company’s fiscal third quarter in 2006.
The vendor is relying less on transport product revenues and increasingly from managed access, services, data and access. While Tellabs draws a large portion of its current revenues from transport products, the vendor’s reliance on transport product sales has steadily declined, having fallen from 50 percent in 2003 to 39 percent today-even as the pie has increased. During the same period, managed access revenues dropped from 34 percent to 15 percent, while access product revenues increased from none to 32 percent. Data-inspired revenues rose only 4 percent, and services fell from 15 percent to 9 percent.
Overall, Tellabs said its growth areas are next-generation transport, mobile backhaul, business services and residential broadband. Tellabs services TDM and mobile backhaul needs, along with most of its business services delivery with its 8800/8600 Multi-Service Routers, providing a migration solution to packet-based infrastructure.
Mark Tharby, director of Market Strategy at Tellabs, explained that the company’s Next-Generation Transport is powered with its 7100 Optical Transport System, the design of which is intended to reduce the costs associated with high-bandwidth transport traditionally associated with delivering data and video. Tharby said the 7100 system delivers more flexibility with less capex and opex.
Gruenwald stressed that in the age of converged networks, mobility is a feature, not just a service for delivering voice.
Case in point, Tellabs’ Fiber to the Home product is in place within Verizon Communications Inc.’s fixed networks, and eventually could be used to deliver content from within the home to anywhere.
Tharby added that Tellabs’ message to carriers is “Don’t worry about the network, let us do that. Worry about services and bringing in revenue.”