Under terms of the agreement, Tellabs will pay approximately $110 million in cash to acquire the European businesses, including research, development, and manufacturing resources. It is anticipated that the deal will cut earnings per share by a penny in 1999, and add to earnings per share in 2000.
Alcatel's European unit specializes in managed, high-speed transport systems based on Synchronous Digital Hierarchy (SDH) and dense wavelength-division multiplexing (DWDM) technology.
The acquisition will extend Tellabs' global presence and complement its portfolio of managed access and transport systems, the company said.
"The European businesses will enhance our ability to bring global solutions to market and serve the needs of our global customers," Brian J. Jackman, president of Global Systems and Technology at Tellabs, said in a statement.
With the addition of the European businesses, Tellabs will increase its focus on the fast-growing market for fiber-optic networks worldwide.
The agreement covers the European businesses' operations in Copenhagen, Denmark, and Drogheda, Ireland. Tellabs also is acquiring sales and support offices in England, India, and Poland, and an interest in FIBCOM India, a joint venture in India, complementing its existing development and manufacturing operations in Finland and Ireland. As part of the agreement, Tellabs and Alcatel will enter into a technology cross-licensing arrangement.
The acquisition comes after Tellabs announced a 2-for-1 stock split in April. The shares have risen more than threefold since last October, when they plunged on concern the company's planned purchase of Ciena would hurt profits, Bloomberg reported.
Since Tellabs scrapped its plans with Ciena, however, the stock has rebounded on expectations of rising sales and profits.
The Lisle, Illinois-based company is seeing strong demand for both its traditional line of products for local-phone networks and newer products for networks that carry both voice and data traffic.