SAN MATEO, Calif. Core-switch vendor Tellabs Inc. said Friday (Nov. 30) that it planned to acquire Ocular Networks Inc., a move that would give Tellabs an infusion of next-generation technology and expand its market into smaller installations.
The deal, for $300 million in cash and roughly $55 million in options, is expected to close in the first quarter of 2002.
Tellabs and Ocular both were building cross-connects to handle large amounts of traffic with fine granularity. Their products overlap somewhat, but Tellabs was aiming for core and metro-core network sales, while Ocular had its eye more on the metropolitan edge. Ocular thus would give Tellabs a good vector for expanding its markets, Tellabs chief executive Dick Notebaert told analysts.
Tellabs also would gain a good infusion of next-generation networking technology, said Jeffrey Lipton, an analyst with JP Morgan Hambrecht & Quist (San Francisco). "It's not going to solve all their problems, but it's a step in the right direction," he said.
Tellabs' Titan switches transport large amounts of bandwidth but groom traffic at the fine-grained DS-1 (1.544-Mbit/second) level. Ocular's Optical Service Xchange (OSX) 6000 likewise features high capacity and fine granularity, of up to 18,000 VT1.5s (1.5 Mbit/s) of traffic. But Ocular's systems are designed to handle both Sonet and Ethernet traffic, giving carriers an option to migrate to Ethernet gradually.
Such "next-generation" advances have tripped up Tellabs lately. For example, the company in early November canceled development of its Titan 6700, an electrical cross-connect that would have switched traffic at the OC-48 (2.5-Gbit/s) level much like the Aurora platform of Tellium Inc. or the CoreDirector from Ciena Corp.
With Ocular, Tellabs would have VT1.5 grooming "totally covered," and the company already has a solid foothold in STS-1 (51 Mbit/s) grooming with its Titan 6500, Lipton said. But he added that the company still has gaps to fill, such as the vacancy left by the scotched 6700. "Tellabs needs to do more good acquisitions to expand into next-generation opportunities," Lipton said.
The OSX 6000 and the company's smaller OSX 1000 have not begun production shipments but are in beta testing with customers, including U.S. incumbent carriers, said Ocular chief executive Ed Kennedy. Tellabs officials said they expect to gain $50 million to $100 million in revenues from Ocular's products in 2002, primarily in the last part of the year.