Tellabs to acquire Vivace Networks for USD 135m

13 May 2003 High Wycombe, UK Lightwave Europe--Tellabs plans to acquire privately held Vivace Networks, a developer of multiservice IP edge switches, for USD 135 million in cash and stock options.

May 13th, 2003

- says it is expanding into the USD 3 billion global addressable market for service provider edge switches and routers

13 May 2003 High Wycombe, UK--Tellabs plans to acquire privately held Vivace Networks, a developer of multiservice IP edge switches, for USD 135 million in cash and employee stock options.

The move brings two complementary new products to Tellabs and enables the company to expand into the high-growth global service provider edge router and switch market, estimated at USD3 billion in 2003 and growing to USD5 billion by 2005, according to industry analyst Infonetics Research.

Vivace Networks, a four-year-old start-up based in San Jose, CA, recognised its first customer revenues in 2002.

"Acquiring Vivace is the next step on Tellabs' path to profitable growth," said Michael Birck, chairman and CEO of Tellabs.

"This move enables Tellabs to offer exactly what our customers around the world are looking for - a next-generation platform that helps service providers smoothly migrate from today's services to the most profitable data services of tomorrow."

"We're excited about bringing together Vivace and Tellabs, since our products complement each other perfectly and will combine to create even greater benefits for customers worldwide," said Ken Koenig, CEO and co-founder of Vivace Networks. "We look forward to joining our strengths with those of Tellabs to create products that best fit customers' rapidly growing needs for the converged, multiservice networks of the future."

Tellabs' acquisition of Vivace Networks is expected to close in the third quarter, subject to Hart-Scott-Rodino and Vivace stockholders' approval. Tellabs plans to retain Vivace Networks' employees and offices in San Jose. Koenig will become Tellabs senior vice president, advanced data products, and report to Ed Kennedy, president of Tellabs North America.

"Tellabs will offer customers a complete multiservice IP switch solution that combines Layer 2 and Layer 3 switching at the edge of the network," said Kennedy. "By adding Vivace products to Tellabs' portfolio of carrier-class transport and access systems, we can help customers around the world reduce operating and capital expenses as they deliver profitable new IP and MPLS data services."

"The vision of converged multiservice edge networks is what will drive service provider capex in the long run," said Kevin Mitchell, directing analyst with Infonetics Research. "Many top tier service providers have spoken publicly about their goal of building an IP/MPLS network to deliver both new and legacy data services to their customers."

With the addition of Vivace, Tellabs will be able to offer leading telecom service providers a complete, global transport and data solution to address Layer 1, 2 and 3 network applications. Vivace is currently shipping two multiservice IP switches for the edge of the network that complement the Tellabs® 5000, 6000 and 7000 series of transport and access systems.

Tellabs says that combining its own and Vivace's products will enable data solutions that collectively manage traffic at Layers 0/1 of the network (the physical layer) and seamlessly pass these services to data networking elements that operate at Layer 2 (data link layer) to Layer 3 (network layer).

This approach could provide one of the most cost-effective and complete transport and data networking solutions for service provider customers worldwide.

Tellabs transport and access products provide a complete bandwidth management solution in metro and regional networks. Vivace Networks' multiservice IP switches combine native Layer 2 switching and Layer 3 routing capabilities, enabling Frame Relay, ATM, Ethernet and IP services to be transported over an MPLS (Multi-Protocol Label Switching) core network.

Together, Tellabs and Vivace can enable service providers to leverage their existing infrastructure to cost-effectively migrate their existing Frame Relay and ATM data networks to the new profitable IP and MPLS services of the future. All of these services can be provided with true carrier-class quality of service (QoS) through a single cost-efficient platform that enables service providers to reduce their capital and operating costs.

Vivace Networks' Viva Multiservice IP switch family comprises two carrier-class systems that provide circuit-switched reliability and predictability over high-performance packet-based networks around the world. The Viva5100 Multiservice IP Switch offers over 3000 DS-3 interfaces and 320 Gbps of full-duplex switching capacity in half a rack, making it ideal for larger central offices.

The Viva1050 Multiservice IP Switch is a flexible high-performance service edge switching platform that provides up to 16Gbit/s of port density in a compact form factor ideal for small COs or points-of-presence (POPs), as well as carrier-owned customer-premise or multi-tenant building locations. Tier 1 carriers in both the United States and Asia have deployed Vivace products.

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