Reuters | Shares in Tellabs Inc. fell 6.5 percent Tuesday after
Morgan Stanley downgraded the telecommunications equipment maker’s
shares citing an expectation that AT&T Inc would switch to Cisco
Systems.

Tellabs shares closed down 44 cents, to $6.31, on Nasdaq after Morgan
Stanley analyst Ehud Gelblum said AT&T is planning a “relatively
quick transition away from” Tellabs 8860 router to a product from Cisco
about a year from now.

AT&T declined comment, and a representative for Tellabs was not immediately available for comment.

Gelblum said in a research note that while AT&T is buying a lot of Tellabs gear this year to beef up its network to cope with increased wireless data traffic, he sees the orders falling off next year as Cisco wins more business at AT&T.

The analyst slashed his 2011 earnings per share estimate for Tellabs to 44 cents from 56 cents due to the increased competition.

Another analyst, Lawrence Harris from C.L. King, said he was also worried about Tellabs demand next year.

“2010 is going to be a great year but we could see a slowdown in growth in 2011,” he said.