Tellabs Shares Surge on Report of $7 Billion Bid by Nokia, Siemens

Shares of Tellabs surged Monday, after a financial news Web site reported the U.S. telecommunications equipment maker was entertaining a $7 billion bid by a joint venture of Nokia and Siemens.

TheStreet.com said Nokia Siemens Networks was offering about $16 to $17 per share for Tellabs, citing a source familiar with the deal.

That would be a 35 percent to 43 percent premium to Tellabs' closing price of $11.85 on Friday, trading on Nasdaq. The stock, frequently the target of merger speculation, rose to $14.11 in premarket trade.

An official from Tellabs, whose equipment is used to transmit data, video, and voice signals, was not available for comment. A Nokia Siemens spokesman said the company would not comment on market rumors.

J.P. Morgan analyst Ehud Gelblum said merger talks are likely, given Tellabs' previous comments that it was examining a variety of strategic alternatives, although he said the reported premium was "robust and perhaps implausible."

Tellabs has long been seen as a potential takeover target amid a wave of mergers in the sector, with equipment vendors merging to gain bargaining power over telephone carrier clients, which are also consolidating.

"From a Nokia Siemens perspective, a deal makes good sense, as it would give it an incumbent position as the wireless backhaul provider to all the major North American wireless providers," Gelblum said in a report.

But the analyst also said he believed Tellabs was not negotiating from a position of strength, as he expects its 2007 revenue to decline 3 percent and earnings per share to decline 25 percent year-over-year.

Shares in Nokia were down less than 1 percent in Helsinki trading, compared with a flat DJ Stoxx European technology index.

Analysts in Helsinki said the reported hefty premium would dent Nokia shares.

"With such a premium and as the timing is in the middle of Nokia Siemens Networks' own integration, the first impression of such a deal would be slightly negative," said Handelsbanken analyst Karri Rinta. "I cannot think of any other reason for the share price decline."

EQ analyst Jari Honko said: "This is not impossible, but the price seems high."