Tellabs (Nasdaq: TLAB) has always had a presence in the wireless backhaul market selling traditional TDM-based equipment to wireless operators long before the concept became a hip trend.
But the one thing that's probably keeping up CEO Rob Pullen at night is his competition, namely Alcatel-Lucent (NYSE: ALU) and Cisco (Nasdaq: CSCO) which are gaining more traction in one of Tellabs' key accounts: AT&T (NYSE: T).
What's caused all the concern at Tellabs and their status at AT&T is a Morgan Stanley report that says while Ma Bell will continue use the vendor's equipment for wireless backhaul in 2010, its presence will slowly be eclipsed by Cisco in 2011.
And while Tellabs performed relatively well in Q3 2010 with gains in both its services and transport business, its Q4 outlook indicated it might be entering into choppy waters. Tellabs forecast $410 million to $430 million in Q4 revenue, falling short of Wall Street's expectation of $442 million.
Even if AT&T doesn't completely oust Tellabs from its network given its long standing relationship with the carrier, the advent of increasing competition from Alcatel-Lucent and Cisco--both of which have been making aggressive inroads into larger carrier accounts--certainly is an ongoing nightmare that Pullen will find hard to wake up from.