Tellabs backs away from packet core

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Tellabs backs away from packet core

Will drop products it acquired with WiChorus, focus on mainstream offerings and undergo major cost cuts

By CAROLINE GABRIEL

Published: 1 February, 2012

Tellabs announced a restructuring program which will result in the loss of about 530 staff or 16% of its workforce. In addition, it will rein in its product offerings, backing away from the brave move it made into the mobile core when it acquired WiChorus in 2009.

The latest job losses are in addition to the 10% workforce reduction announced last July and will incur a charge of about $107m. They come after a turbulent 2011 when Tellabs reported full year revenue down 21.7% year-on-year to $.129bn, and a net loss of $188.4m, reversing 2010's gain of $155.6m. In the fourth quarter of 2011, the equipment maker saw a 23% revenue drop to $316.8m, though it reduced its Q410 loss of $10.9m to $4.9m.

These figures came at a time when nearly all infrastructure players are feeling the pinch of global recession and of spending slowdown at some carriers. However, there are factors specific to Tellabs too. One is the firm's reliance on its largest customer, AT&T, which has been slowing its capex investment in some key areas. The other is the difficulty of attempting an ambitious plan to expand the business during a period of economic uncertainty and rising competition from the likes of Cisco and Alcatel-Lucent.

These elements contributed to the latest decisions, as summarized by CEO Rob Pullen in a statement. "In a climate of economic uncertainty, Tellabs needs to align expenses with revenue. Unfortunately, our restructuring will affect about 530 people. We will reduce expense and stop new development work on the Tellabs SmartCore 9100 LTE product, while continuing to support Tellabs SmartCore 9100 WiMAX customers."

The SmartCore 9100 was the product acquired with WiChorus, which had made its name in the WiMAX field, notably at Clearwire, tapping into the trend for carriers to turn to specialized vendors for the newly sophisticated packet cores required for 4G build-outs.