Tellabs' stock down on fear AT&T is switching to Cisco

Tellabs (NasdaqGS: TLAB) is feeling the pain of a Morgan Stanley analyst research note that says AT&T (NYSE: T) is going to make Cisco (NasdaqGS: CSCO) its preferred routing supplier of choice. Of course, the street did not like this news and punished Tellabs by driving down its shares more than 6.3 percent yesterday.

Ehud Gelblum, a Morgan Stanley analyst, wrote in a research note that AT&T is going to make a "relatively quick transition away from" Tellabs' 8860 router to a Cisco platform sometime in 2011.

Although neither AT&T nor Cisco would comment on the situation, Tellabs spokesman George Stenitzer said in a Reuters article that investors were overreacting to nothing more than a rumor. "We continue to compete for future business at AT&T and other companies," he said. "The solution we're providing to AT&T has a longer life and a longer runway in the network than the market has given it credit for."

Gelblum wrote that while AT&T will continue to purchase Tellabs equipment for wireless backhaul needs throughout 2010, demand for its equipment will decline in 2011 as it incorporates more Cisco gear in its network.

For more:
- Reuters has this article

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