Why would TLAB be a good takeover candidate? With a market cap of almost $5B, 40% of which is held in current assets, and quarterly revenues of around $500M ($60M net), and with the international market penetration TLAB has been able to attain, they could be an attractive takeover target for a similar network based company.
Tellabs, Inc. deals mostly with networks and network peripherals. Tellabs has been around for a long time and has significant experience in the network industry. In 2000, TLAB peaked its stock price at around $75 per share. Since then the company has dropped 85% in value. EPS during that time dropped roughly 66%.
While earnings have dropped, the potential for the international market has only increased. China and India are expected to more than double current internet users in the next few years, and companies that are able to take advantage of this will most likely see strong positive upside.
TLAB has a market cap of almost $5B, and equity of $2.9B. Annual revenues have been almost $2B, with almost $200M of net income.
While rumors of a LBO on TLAB have not really been circulating, a LBO is certainly a possibility. With just over 40% of their market cap in liquid assets ($2.1B) they could be a potentially profitable buyout. We might yet see some interest from private equity, as a lot of speculation is circulating that LBOs will only increase in the coming years.
Motorola, Inc. (MOT)
Historically TLAB has been rumored to be a takeover target of MOT. MOT has acquired several smaller companies over the past few years and recently received clearance to buy Netopia for $208M. MOT also recently announced they will acquire Tut Systems. As MOT has had a lot of experience buying and selling companies, there is always speculation on which company will be their next target.
MOT has a market cap of just over $50B, and liquid assets of almost $30B. While MOT focuses more on the mobility products, their Networks Segment is certainly a significant portion of their business. As such, an acquisition of TLAB could make sense, as their international market share would increase significantly.
As China and India expand their internet user base, we will most likely see many takeovers and leveraged buyouts of tech companies. TLAB could definitely be one of them.
Disclosure: Author is long TLAB.