WAYNE, N.J. — Tellabs said Tuesday (May 13) it is acquiring IP edge switch developer Vivace Networks for $135 million in cash and employee stock options. Through the acquisition Tellabs is hoping to strengthen its position in the edge switching market while increasing its stake in the IP infrastructure business.

Formed in 1999, Vivace is currently shipping two multiservice IP switches for edge networking applications. The Viva5100 multiservice IP switch offers more than 3000 DS-3 interfaces and 320 Gbit/s of full-duplex switching capacity in a half rack.

The Viva1050 is a service-edge switching platform that delivers up to 16 Gbit/s of port density. Tellabs said it would combine the products with its existing transport and data communication products to handle Layers 1, 2, and 3 processing in metro networking apps.

The Vivace acquisition is not Tellabs' first effort to expand into IP routing from its base in circuit-switching equipment. In 1999, the company acquired NetCore Systems Inc., a core-router startup, but virtually no technology remains at Tellabs from that acquisition.

About 18 months ago, however, Tellabs made a significant change in its strategy, reinforcing its good reputation with incumbent carriers by acquiring companes that fit its business plan better. Michael Howard, president and principal analyst at Infonetics Research, said that "the reputation of Tellabs notably improved, what with its acquisition of Ocular (Networks), its alliance with White Rock Networks, and its decision to cut back on a couple internal development projects." Howard said that the integration of Ocular's optical transport products into Tellabs product lines, including its popular 5500 platform, is an indication of the revitalized company. If Tellabs can follow that model with Vivace's edge-routing products, it could be a successful player in routing platforms, he said.

Once the acquisition is complete, Tellabs plans to retain Vivace's employees and offices in San Jose, Calif. Ken Koenig, Vivace's chief executive, will become Tellabs senior vice president of advanced data products.

The acquisition is expected to close in the third quarter of 2003. It is subject to federal antitrust scrutiny and Vivace stockholder approval.