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Tellabs Talk Heats Up

Nortel is considering a bid for the telecom gear shop.

Updated from 11:10 a.m.

Tellabs

(TLAB)

has found another interested suitor as

Nortel

(NT)

steps up with a possible bid.

The Toronto telecom equipment supplier is considering a cash-and-stock offer for Tellabs, according to a source familiar with the discussion. A takeover price of $14 to $15 a share from Nortel was reported Thursday by

Light Reading

, a networking industry publication.

Tellabs and Nortel reps declined to comment.

Last month,

TheStreet.com

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reported that the gearmaking joint venture

Nokia

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Siemens

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was in deal discussions with Tellabs with a price tag of $16 to $17 a share. Unlike the Nortel discussions, which seem to be heating up, the Nokia Siemens approach was not considered imminent.

Tellabs, which has seen a big slowdown in demand for its network switching equipment, has made no secret that it is considering its strategic options. And while the company's prospects aren't exactly bright at the moment, analysts say larger players could use the acquisition to bolster product offerings and more importantly gain a larger position with big U.S. telcos.

Wireless infrastructure giant

Ericsson

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had explored a possible deal with Tellabs several months ago, and some industry watchers say there may be some renewed interest there.

Though there has been no shortage of deal speculation involving Tellabs of late, Nortel seems to be the most interested bidder at this point, say observers. Nortel has been struggling to turn its business around through cuts and refocused product efforts. A deal with Tellabs could help put the telecom titan back on a solid path in the U.S. market, say analysts.

Nortel's disadvantage might be the structure of the stock-and-cash proposal, says the source familiar with the discussions. Tellabs apparently prefers an all-cash offer, and that may force Nortel to seek financing in a cooling credit market.

Tellabs shares rose 39 cents to $10.64 and Nortel slipped 8 cents to $17.52 in late-morning trading Thursday.