Tellabs’ Ed Kennedy |
As Rich Tatara, vice president of North American sales at Tellabs, puts it: “This is no longer Michael Birck’s Tellabs.”
Well, technically, it still is. Tellabs founder Birck remains chairman and CEO at Tellabs, roles he resumed after Richard Notebaert left the equipment supplier in June 2002 to lead Qwest Communications. While the 66-year-old Birck appears headed down the road to retirement, Ed Kennedy is injecting new energy into Tellabs.
The vendor has been saddled with a staid reputation since its inception in 1975. No more. Kennedy, who describes his management style as “kinetic,” is on the fast track to recast the old-style digital cross-connect and echo cancellation vendor into a leading player for IP-related equipment. Perhaps not surprisingly, Tellabs’ planned transition is analogous to what the company’s key customers, the incumbent telcos, are trying to do: utilize existing technology and market clout to move beyond basic transport and into the services layer.
In what many considered a surprise move, Birck named outsider Kennedy as president of North American operations and executive vice president after Tellabs’ acquired next-generation digital cross-connect vendor Ocular Networks in January 2002. Kennedy was Ocular’s founder. (Before founding Ocular, Kennedy was vice president of worldwide marketing for data products at Alcatel. Educated at Virginia Polytechnic Institute as an electrical engineer, he also held posts at Comsat, Fujitsu and Newbridge Networks.) At the same time, Birck tapped Anders Gustafsson to be president of Tellabs International and executive vice president of Tellabs. The appointments effectively divided Tellabs into two separate companies, one domestic and one international.
The Ocular deal, arranged by Birck and Notebaert, basically bought Tellabs a better mousetrap. “We [at Ocular] developed a high-density product the size of a microwave oven,” Kennedy says. “It replaced eight to nine refrigeratorsized devices from Tellabs.” Kennedy says Ocular so far has introduced 20 customers to Tellabs, which now markets the next-gen products under the name 5500/NGX-MX. More major contracts should be announced in the next few months, he says.
In addition to technology and customers, the Ocular deal brought Tellabs some good people, says Kennedy. Greg Nulty, now Tellab’s senior vice president of strategic planning, and Chris Roller, now vice president of engineering, also are former Ocular staffers.
But all that is old news. The latest news from Tellabs is its $135 million acquisition of Vivace Networks. The purchase of the multiservice edge switching vendor launches Tellabs onto the services layer, which Kennedy notes is a multibillion-dollar market. “As the market moves to IP, there will be movement from the transport layer upward,” he adds.
Vivace has made a good showing with its products, which are marketed as the Tellabs 8800 series. NTT Japan, which has built a nationwide MPLS-based network to support legacy and new IP services, is using the boxes in 30 central offices, with plans to install them in all of its central offices in Japan. And at SUPERCOMM it was announced MCI would use the boxes for protocol conversion at its peering points.“We’ll be shipping revenue this quarter from Vivace,” Kennedy says.
“Over the last couple of years, carriers have sweated their assets, they haven’t focused on new builds,” says Kennedy. “When they look at revenue opportunities going forward, they have to offer new services and those new services are higher speed data. So they need to migrate networks. If you look at RFP activity, they’re at a point where they have older networks and need to migrate that under the MPLS domain.”
Tellabs’ spending spree is not likely to stop with Vivace. “Tellabs is looking very strongly at acquisitions,” says Kennedy. “It just shows it is kind of a new Tellabs.” Kennedy declined to comment on what companies or product categories Tellabs is looking to add.
In any case, with no debt and nearly $1 billion cash on hand, Tellabs is well-positioned to pounce when an opportunity presents itself. “We’ve always been seen as a conservative company, accused of being a Midwest company,” says Tatara of Tellabs, which is based in Naperville, Ill., a Chicago suburb. “We never took on debt. We now have $900 million in the bank. So now it puts us in the position to do some acquisitions.”
Still, Tellabs, like the rest of the industry, has done its fair share of belt tightening. And it continues to do so. The company has gone through several restructurings and layoffs and is exploring ways to depreciate assets.
At the same time, Kennedy is trying to step up personal accountability and entrepreneurism at the company. “I try to make people get very focused on what they need to get done and eliminating roadblocks and instilling in people that you have to move quickly,” he says.
The downturn in the industry “left people numb, and we’re just starting to come of that,” says Kennedy, who believes the high-quality service provider turnout at SUPERCOMM in June was an indicator of industry stabilization.
To keep employee eyes on the prize, Kennedy is holding daily calls through the end of the quarter with senior sales, marketing and engineering staff to discuss revenue and current accounts.
Asked about Tatara’s comment that Tellabs is no longer Michael Birck’s company, Kennedy says “Mike and I have very different management styles. I’m more full-contact and I get in meetings and shake it up.”
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Company Factoids
• Tellabs owns 57 percent of the North American market for bandwidth management, according to research firm RHK. • The company is the No. 1 digital cross-connect provider in the United States, with more than 4,000 systems deployed. • Other products from Tellabs include optical switches, an Ethernetover- SONET virtual concatenation solution, a telephony distribution product for cable companies and echo cancellation technology. • Tellabs generates more than 36 percent of its revenue outside North America. |
New Products Acquired via Vivace
• The Tellabs 8860 Multi-service Switch Router — formerly the Viva5100 Multiservice IP Switch — offers 320gbps of full-duplex switching capacity in half a rack. The company says it’s ideal for larger central offices.
• The Tellabs 8820 Multi-service Switch Router — formerly the Viva1050 Multiservice IP Switch — is a service edge switching platform that provides up to 16gbps of port density in a compact form factor that suits small central offices, points of presence, carrier-owned customer premises or multitenant building locations.
