Tellabs rises 8.1 percent as investors bet on 'good news'

Tellabs Inc., the supplier of network technology to AT&T Inc., rose to its highest in almost two years in Nasdaq trading as investors bet customer spending will pick up.

Tellabs gained 56 cents, or 8.1 percent, to $7.44 at 4 p.m. New York time on the Nasdaq Stock Market, the highest closing price since November 2007. The stock has risen 81 percent this year.

Investors are banking that clients including Verizon Communications Inc. will buy more of Tellabs' products in the second half as the economy recovers, boosting sales, said Michael Genovese, an analyst at Soleil Securities Corp. Some investors see Tellabs as an acquisition target, he said.

"They made a big bet," New York-based Genovese said of Tellabs' investors. He advises them to hold shares of Naperville-based Tellabs and doesn't own any himself. "They think there's good news coming."

Genovese estimates fiscal 2009 sales of $1.54 billion, in line with the average of 12 analysts surveyed by Bloomberg.

George Stenitzer, a spokesman for Tellabs, said the company doesn't comment on the day-to-day moves in its stock price "or the rumors behind that."

Trading of Tellabs call options, giving the right to buy shares, jumped to 16,769 contracts, nine times the four-week average and 22 times greater than the trading in puts, which give the right to sell. Call volume surged to a 14-month high on Sept. 17, when 17,126 contracts changed hands.

Investors betting on catalysts such as a takeover can use options because they amplify returns. The value of the options contracts can multiply when the underlying shares rise by a few percentage points.