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Tellabs CEO Assesses 2008, Looks Forward to 2009

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December 23, 2008

Tellabs CEO Assesses 2008, Looks Forward to 2009

By Greg Galitzine, Group Editorial Director

Tellabs designs, develops, deploys and supports solutions for telecom service providers worldwide. These service providers include wireline, wireless and cable TV companies, as well as government agencies including Verizon (News - Alert), NTT Communications of Japan, Telstra of Australia, Telkom South Africa and Telecom Italia.

Robert W. Pullen (News - Alert) is CEO and president of Tellabs. Pullen joined the company as an electrical engineer and has held a series of increasingly responsible positions in research and development, sales, marketing, and services. Prior to being named CEO in February 2008, Pullen was vice president and general manager of global services, where he introduced new professional services and grew services revenue 22% in 2007. From 2002 to October 2005, he was senior vice president of North American sales, where he successfully integrated two acquisitions and more than doubled North American sales from 2003 to 2005. Previously, Pullen was senior vice president of the optical networking group for Tellabs.
Pullen was kind enough to take the time to respond to a series of questions regarding the challenging environment that marked 2008 and offered his insights regarding the coming year.
GG: When you look back on 2008, was it a good year for your company?
RP: Yes, 2008 was challenging, yet Tellabs made good progress during my first year as CEO. We improved our profitability by making some tough decisions, such as discontinuing an unprofitable product developed for a single customer, and completing a $100 million plan to reduce our costs and expenses.
We launched new products such as the Tellabs 8605 and 8607 access switches, as well as the Tellabs 6335 switch node. In addition, we announced the new Tellabs 7300 Ethernet series, which will ship in the first half of 2009.
And we began to implement a new strategy to focus our portfolio, innovate in growth markets and execute flawlessly.
GG: What was your firm’s biggest achievement last year?
RP: We continued to add new Tier One customers such as BT (News - Alert) for our mobile backhaul solution, which enables mobile carriers to migrate smoothly to 3G and 4G services. So far we have won 81 customers with Tellabs Mobile Backhaul Solutions.
GG: What can we expect to see from your company for the next 12 months?
RP: You’ll see us continue to focus and innovate in our addressable markets of mobile backhaul, optical networking and business services. These are growing markets where our customers have business challenges that our innovations address.
GG: Do you think a new administration in Washington, D.C. will be good for the communications industry? If so, how? If not, why not?
RP: Yes, some of Obama’s proposals, such as investing in broadband infrastructure, could be good for the industry. There’s also an opportunity for our industry to play a role in energy, in terms of how to be smarter in managing energy use. For example, applying telecom and information technology can save energy through applications such as virtualization, smart logistics, smart buildings and smart power grids.
The U.S. needs a more coherent technology policy, and I think it could benefit from the leadership of a chief technology officer with the right experience in applying technology to save energy.
GG: In your view, please describe the future of the IP Communications industry?
RP: Over time IP will become the common currency for most, if not all, user services. IP represents the vast majority of total data traffic, while voice is well on its way to becoming mainly VoIP-based. Video services (which are already digitally encoded through the MPEG standards) will become either IPTV (News - Alert)-centric or be accessed through “over the top” connections via the Internet, in which the consumer will receive an IP flow that essentially comes straight from the content provider.
Tellabs is well-positioned to help service providers address IP needs, given our experience with wireless and wireline operators’ packet networks.
GG: How do the current market conditions affect your potential customers? Do you think they will hold off on purchasing new solutions or do you think the economic conditions will spur them to make purchases that will allow them to be more competitive?
RP: During tough times, different customers will take different approaches. As they tighten their belts, some will try to squeeze more out of existing assets, which is good for Tellabs core products. Others will accelerate the adoption of new technologies to reduce their capital and operating expenses, which is good for our growth products.
The economic slowdown certainly has negative impacts on end-users, both residential and business, which hurts service providers. New housing starts are down, which has a negative impact on access sales. Businesses have gone bankrupt or been integrated with other firms, which has a negative impact on demand for business services.
That said, bandwidth demand is still growing, and voice, video and data continue to converge. While demand for telecom services is solid, spending on telecom has flattened out. Service providers offer unlimited use at fixed prices, so revenue stays flat even as people use more. Still, I think our customers will have to spend in certain areas, such as mobile backhaul, optical networking, and business services, to remain competitive.
As service providers refine their business models to meet this challenge, we can help them succeed by:
·         reducing capital and operating expenses
·         generating new revenue and launching new services
·         optimizing existing and new networks
·         solving technology and business challenges.
GG: What sets your company’s solutions apart from the competition?
RP: One Tellabs differentiator is that we’re focused on professional services that maximize the value customers can get from their existing networks, combined with Tellabs solutions. Through innovation, we help our customers improve profitability, generate revenue and reduce costs.
For example, with the world’s first purpose-built mobile backhaul solution, we enabled service providers to cut backhaul costs by up to 60%. Since backhaul can be as much of 40% of a service provider’s operating expenses, such innovations can have a huge impact on our customers’ business models.
GG: If you had to make one bold prediction for 2009, what would it be?
RP: We see a significant role for telecom in reducing energy use in the years ahead. For example, Tellabs helped Brazilian railroad MRS Logistica centralize its management system to enable “smart logistics.” Now MRS can put more trains on the tracks, increasing its revenue and profit potential. Compared with trucks, trains save energy and reduce carbon emissions. We expect to see more and more communications applications that save energy and protect the environment.

Greg Galitzine is editorial director for TMC’s (News - Alert) IP Communications suite of products, including To read more of Greg’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Greg Galitzine

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