Advanced Fibre Finds 'Sweet Spot' With Tellabs

Tellabs will control 75% of the new company. The deal is expected to close in the second half of this year and be accretive to 2005 earnings. The combined company will employ about 4,100 people.

"Together, Tellabs and AFC create a strategic global telecom equipment supplier that will lead the industry's shift to broadband data with end-to-end access and transport solutions," Tellabs CEO Krish Prabhu said. "Marrying the leader in access with the leader in transport positions us to grow with our customers in the industry's sweet spot of broadband services. This will enable us to help customers simplify networks, offer easier service provisioning and sharpen their competitive edge."

The deal came as another struggling telecom equipment maker, Ciena (CIEN Quote), sagged anew following its latest earnings disappointment. The problems at Tellabs and Ciena highlight the difficulty that networking companies have encountered amid the chilly spending environment for their big telco customers. Still, the combination had some observers sounding a hopeful note.

"AFC gets a big vote of confidence joining with Tellabs, and this will help them get more business from the Bells," says Greenholtz.