Tomahawk, WI 10/23/2013 (BasicsMedia) – Tellabs, Inc. (NASDAQ:TLAB), with a market cap of around $874.91 million, operates as a marketer and designer of equipment and services to various providers of communication services right across the world. It caters for the needs of multiple system operators, communication service providers, wireless service providers, wireline service providers, and competitive service providers. The company is now the subject of a bid by a company known as Marlin Equity. It is important to look deeply into this bid and determine if it is necessary for TLAB or not.

TLAB Has Been Operating Under Tough Conditions

First, one needs to look at the prevailing circumstances under which TLAB has operated for the last few years. It now has to contend with some of the nimblest rivals in the market, and they seem to be winning this battle against TLAB. When the market or industry perceives that you are not doing as well as your rivals, shares suffer and this could be detrimental to the health of a company. Secondly, TLAB’s customer base has been shrinking for quite some time now and this has a negative effect on its financials. One of its options is to close shop or agree to be bought.

Marlin Equity Partners Places a Bid Worth $891 Million for TLAB

Marlin Equity Partners has placed a bid of $891 million for TLAB, whose market cap is $874.91 million. This may seem quite low bearing in mind TLAB’s market cap and the fact that it serves customers right across the globe. However, one also needs to consider that the company has posted losses for 11 consecutive quarters. It has fared badly against competition from other firms such as Huawei Technology Co Ltd, Cisco Systems Inc and Alcatel-Lucent SA. These scenarios have not augured well for TLAB hence being made the subject of a bid from Marlin Equity.

TLAB Continues Losing Its Customer Base

Verizon Communications has always been TLAB’s largest customer. However, its customer base has been affected by the constant consolidation measures in the industry it serves. Almost all its customers have consolidated their services, and these include Verizon Communications, AT&T Inc as well as Vodafone Plc. TLAB seemed to have only attracted the attention of Marlin Equity Partners, despite marketing itself to close to 30 other firms. However, the many troubles facing TLAB made it unattractive to other firms hence the lowly $891 million it received.

TLAB has gone through a period of restructuring, and now has a new chairman. Its co-founder, Michael Birck, who happens to be the second largest shareholders of TLAB, is in support of this deal. He says TLAB has lost a huge part of its competitive edge and cannot continue providing the highest quality of services and products to all its customers worldwide. Once TLAB is in the hands of a private investor, such as Marlin Equity Partners, I believe it will have the resources it needs in order to re-invest and reorganize itself better. It cannot compete the way it is right now.

This deal will benefit Marlin Equity Partners more than TLAB, after it also made other acquisitions of divisions owned by Nokia Siemens Network and Sycamore Networks.

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