Tellabs shares sink on AT&T switch rumor

AT&T rumored to be switching to Cisco for cheaper routers

A research note penned by Morgan Stanley analysts sent shares of telecom equipment provider Tellabs downward today after the analysts wrote that AT&T is planning a shift toward buying cheaper routers from Cisco. 

The analysts said that while AT&T has relied on Tellabs equipment to expand the capacity of its 3G data network, the company will soon level off investments in that and buy routers from rival telecom equipment provider Cisco. Tellabs shares fell 6.5% in the wake of the note, dropping 44 cents to close at $6.37 per share.

Also read up on one of today's greatest tech debates: Cisco vs. Juniper 

The analysts estimated that AT&T accounts for roughly 40% of all Tellabs' sales of broadband data equipment, meaning any dip in purchases from the carrier would have a significantly negative impact on its bottom line. Tellabs said in its annual report that AT&T accounted for 21% of its total revenues overall, while Verizon accounted for 30%.

To continue reading, register here to become an Insider. You'll get free access to premium content from CIO, Computerworld, CSO, InfoWorld, and Network World. See more Insider content or sign in.

A research note penned by Morgan Stanley analysts sent shares of telecom equipment provider Tellabs downward today after the analysts wrote that AT&T is planning a shift toward buying cheaper routers from Cisco. 

The analysts said that while AT&T has relied on Tellabs equipment to expand the capacity of its 3G data network, the company will soon level off investments in that and buy routers from rival telecom equipment provider Cisco. Tellabs shares fell 6.5% in the wake of the note, dropping 44 cents to close at $6.37 per share.

Also read up on one of today's greatest tech debates: Cisco vs. Juniper 

The analysts estimated that AT&T accounts for roughly 40% of all Tellabs' sales of broadband data equipment, meaning any dip in purchases from the carrier would have a significantly negative impact on its bottom line. Tellabs said in its annual report that AT&T accounted for 21% of its total revenues overall, while Verizon accounted for 30%.

Tellabs spokesman George Stenitzer told Reuters that investors were overreacting to the news since "the solution we're providing to AT&T has a longer life and a longer runway in the network than the market has given it credit for."

Read more about lans & wans in Network World's LANs & WANs section.