Nortel Takes Aim at Tellabs

Nortel, North America's largest telephone equipment producer, may be targeting Tellabs for a possible acquisition, according to a report in Light Reading, which says the proposed takeover price will fall between $14 and $15. Tellabs has experienced a recent slowdown in demand for its network switching equipment. However, analysts have said that a larger company could use Tellabs to increase its own products offering and secure a greater position with large U.S. communication companies. Nortel is in the midst of a corporate turnaround, but CEO Mike Zafirovski has made comments that he was comfortable growing the company through acquisitions. "We started discussions recently with companies that we believe can be adding to our growth trajectory," he said in an Aug. 2 interview with Reuters. "We're confident that we'll be able to successfully integrate other activities if the pricing is appropriate." One potential snag in the deal is that sources say the offer consists of both cash and stock. Tellabs prefers an all-cash deal. The deal may also hinge on Nortel finding financing in a currently shaky credit market. Tellabs shares were up $0.39 to $10.57, while Nortel slipped $0.12 to $17.48 at the close on Thursday.

Sources: Light Reading, TheStreet.com, Reuters
Commentary: Buyout Speculation Lifts Tellabs • Analysts React To Tellabs Buyout Rumor
Stocks/ETFs to watch: NT, TLAB

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.