Nokia Siemens Offers Tellabs a Takeover Deal

Updated from July 20

Tellabs (TLAB Quote) is entertaining a $7 billion takeover offer from Nokia Siemens, the big European networking equipment maker, says a source familiar with the deal.

Nokia Siemens Networks, a joint venture of Nokia (NOK Quote) and Siemens (SI Quote), is offering about $16 to $17 a share for the Naperville, Ill., phone system supplier. But a deal could take a while to complete because Tellabs' decision "is not imminent," according to the source.

A Tellabs representative declined to comment, and a Nokia Siemens rep wasn't immediately available. Tellabs shares rose 16% in early trading Monday.

The deal would give Nokia Siemens a big slice of the U.S. phone market and expand key relations with the big telcos like AT&T (T Quote) and Verizon (VZ Quote).

Another source familiar with Tellabs says Nokia Siemens entered the picture late last year after Ericsson (ERIC Quote) picked Redback over Tellabs in a $2.1 billion acquisition. Nokia Siemens stumbled soon after its creation last summer, and talks stopped.

But one reason the deal is back on, say the sources, is that Tellabs "is not recovering" from some recent setbacks. For example in April, Tellabs cut its sales outlook citing increased competition from rival Adtran (ADTN Quote) in the access equipment market.

In March, TheStreet.com reported that Tellabs was coming up as one of the losers in a big round of contracts with Verizon. The slowdown in industrywide telecom gear sales was apparent in Ericsson's second-quarter earnings report, which sent its shares tumbling 5% Friday.

"I think the consolidation in the industry has hurt them," one industry source says of Tellabs. "So they are probably hoping they can move this deal along."

Tellabs shares rose $1.90 early Monday to $13.75.

Want more? Check out TheStreet.com TV video. Scott Moritz answers why Nokia Siemens needs Tellabs.