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Tellabs Second-Quarter Revenue Grows 52% to $463 Million.

NAPERVILLE, Ill., July 26 /PRNewswire-FirstCall/ -- Tellabs today reported second-quarter 2005 revenue of $463 million, up 52% from $304 million in the second quarter of 2004.

Tellabs earned $41 million or 9 cents per share in the second quarter of 2005 on a GAAP basis. On a non-GAAP basis, Tellabs had net income of $58 million or 13 cents per share, up from $26 million or 6 cents a share in the first quarter of 2005. Non-GAAP results exclude restructuring and other charges, amortization of purchased intangibles, deferred stock compensation, and long-term investment impairment charges.

"Strong customer demand across multiple product lines fueled Tellabs' best revenue quarter since 2001," said Krish A. Prabhu, Tellabs president and chief executive officer. "Our solid progress with the AFC and Vinci integrations is reflected in our improved margins and lower operating expenses."

Transport -- Revenue from transport systems totaled $159 million, down 4% from $165 million in the second quarter of 2004 and in line with $158 million in the first quarter of 2005.

Access -- Revenue from access products totaled $144 million, up 23% from AFC's $117 million in the second quarter of 2004. [Note: The access revenue category includes all products acquired through the acquisition of AFC, which closed on Nov. 30, 2004.]

Managed Access -- Revenue from managed access systems was $96 million, up 26% from $76 million in the second quarter of 2004.

Broadband Data -- Revenue from broadband data products was $9 million, up fourfold from $2 million in the second quarter of 2004.

Voice Quality Enhancement -- Revenue from voice-quality enhancement and other systems totaled $11 million, down 48% from $21 million in the second quarter of 2004.

Services -- Services revenue was $44 million, up 9% from $41 million in the second quarter of 2004.

Simultaneous Webcast and Teleconference Replay -- Tellabs will host an investor teleconference at 7:00 a.m. Central time today to discuss its second-quarter 2005 results. Internet users can hear a simultaneous webcast of the teleconference at http://tellabs.com/ ; click on the webcast icon. A taped replay of the call will be available beginning at approximately 9:00 a.m. Central time today, until 9:00 a.m. Central time on Thursday, July 28, at 800-633-8284. (Outside the United States, call 402-977-9140.) When prompted, enter the Tellabs reservation number: 21250821.

Tellabs delivers technology that transforms the way the world communicates(TM). Tellabs experts design, develop, deploy and support wireless and wireline network solutions. The company's comprehensive broadband portfolio enables carriers in almost 100 countries to succeed in the new competitive environment. Tellabs is part of the NASDAQ-100 Index. http://www.tellabs.com/ .

Forward-Looking Statements -- This news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks associated with: the introduction of new products, the entrance into new markets, the integration of new businesses, the ability to secure necessary resources, the response of customers and competitors, and the economic changes generally impacting the telecommunications industry. The company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after today or to reflect the occurrence of unanticipated events. For a more detailed description of the risk factors, please refer to the company's SEC filings.

Tellabs(R), Tellabs logo(R) and Technology that Transforms the Way the World Communicates(TM) are trademarks of Tellabs or its affiliates in the United States and/or other countries. Any other company or product names mentioned herein may be trademarks of their respective companies.
 TELLABS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)

 Three Months Ended Six Months Ended
 (In millions, except per-share data) 7/1/05 7/2/04 7/1/05 7/2/04
 Revenue
 Products $418.1 $263.5 $818.6 $495.6
 Services 44.4 40.8 79.5 72.5
 462.5 304.3 898.1 568.1
 Cost of Revenue
 Products 225.5 104.5 452.1 193.5
 Services 29.8 25.0 56.9 49.3
 255.3 129.5 509.0 242.8
 Gross Profit 207.2 174.8 389.1 325.3

 Gross profit as a percentage of
 revenue 44.8% 57.4% 43.3% 57.3%

 Gross profit as a percentage of
 revenue - products 46.1% 60.3% 44.8% 61.0%
 Gross profit as a percentage of
 revenue - services 32.9% 38.7% 28.4% 32.0%

 Operating Expenses
 Research and development 82.9 61.1 171.7 123.0
 Sales and marketing 45.4 39.1 91.6 76.4
 General and administrative 22.4 18.1 44.7 38.5
 Restructuring and other charges 1.2 (2.0) 14.4 14.2
 Amortization of purchased
 intangibles 9.2 3.9 20.2 7.8
 161.1 120.2 342.6 259.9

 Operating Earnings 46.1 54.6 46.5 65.4

 Other Income (Expense)
 Interest income, net 6.4 6.3 12.1 12.2
 Other expense, net (1.7) (1.0) (4.4) (2.0)
 4.7 5.3 7.7 10.2

 Earnings Before Income Tax 50.8 59.9 54.2 75.6
 Income tax expense (9.7) (10.3) (12.4) (12.6)
 Net Earnings $41.1 $49.6 $41.8 $63.0


 Net Earnings Per Share
 Basic $0.09 $0.12 $0.09 $0.15
 Diluted $0.09 $0.12 $0.09 $0.15

 Weighted Average Share Outstanding
 Basic 447.7 416.1 451.8 415.7
 Diluted 451.4 420.3 455.2 419.9

 Amortization of deferred stock
 compensation is included in the
 following cost and expense
 categories by period:

 Cost of revenue $0.1 $0.0 $0.2 $0.0
 Research and development 2.5 0.8 5.1 2.8
 Sales and marketing 0.1 0.0 0.2 0.1
 General and administrative 0.1 0.0 0.2 0.0
 $2.8 $0.8 $5.7 $2.9



 TELLABS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS

 7/1/05 12/31/04
 (In millions, except share data) Unaudited

 ASSETS
 Current Assets
 Cash and cash equivalents $276.6 $292.9
 Investments in marketable
 securities 770.7 823.3
 1,047.3 1,116.2

 Other marketable securities - Cisco
 stock 200.5 204.0

 Accounts receivable, net of returns
 and allowances of $25.0 and $16.6 261.9 309.4
 Inventories
 Raw materials 30.8 39.2
 Work in process 14.4 13.6
 Finished goods 100.7 63.6
 145.9 116.4
 Income taxes 62.0 62.5
 Miscellaneous receivables and other
 current assets 45.4 50.0
 Total Current Assets 1,763.0 1,858.5

 Property, Plant and Equipment 608.2 619.1
 Less: accumulated depreciation (304.2) (290.3)
 304.0 328.8
 Goodwill 1,117.4 1,092.3
 Intangible Assets, Net of
 Amortization 136.8 156.0
 Other Assets 121.8 126.0
 Total Assets $3,443.0 $3,561.6

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current Liabilities
 Accounts payable $78.9 $96.3
 Accrued liabilities 220.2 206.4
 Restructuring and other charges 12.0 13.4
 Cisco stock loan 200.5 204.0
 Income taxes 56.5 43.2
 Total Current Liabilities 568.1 563.3

 Long-Term Restructuring Liabilities 28.0 33.0
 Income Taxes 126.1 117.1
 Other Long-Term Liabilities 60.8 51.0

 Stockholders' Equity
 Preferred stock: authorized
 5,000,000 shares of $0.01 par value;
 no shares issued and outstanding - -
 Common stock: authorized
 1,000,000,000 shares of $0.01 par value;
 468,869,551 and 466,910,981 shares
 issued, including treasury stock 4.7 4.7
 Additional paid-in capital 1,155.5 1,145.9
 Deferred compensation expense (14.6) (21.8)
 Treasury stock, at cost: 21,407,413
 and 3,250,000 shares (262.2) (129.6)
 Accumulated other comprehensive
 income
 Cumulative translation
 adjustment 66.2 129.0
 Unrealized net losses on
 available-for-sale securities (3.1) (3.1)
 Fair value adjustments of cash
 flow hedges (0.4) -
 Total accumulated other
 comprehensive income 62.7 125.9
 Retained earnings 1,713.9 1,672.1
 Total Stockholders' Equity 2,660.0 2,797.2
 Total Liabilities and Stockholders'
 Equity $3,443.0 $3,561.6



 RESULTS OF OPERATIONS

 Forward-Looking Statements



This presentation contains forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements reflect management's expectations, estimates and assumptions, based on the information available at the time the document was prepared. These forward-looking statements include, but are not limited to, statements regarding future events, plans, goals, objectives and expectations. The words "anticipate," "believe," "estimate," "target," "expect," "predict," "plan," "possible," "intend," "likely," "will," "would," "should," "could," "may" and similar expressions are intended to identify forward-looking statements.

Results of Operations

For the second quarter of 2005, our revenue grew by 52% to $462.5 million compared to the second quarter of 2004. The increase in revenue includes $143.5 million in access revenue from AFC, a company we acquired in November 2004. Year-to-date revenue increased 58% to $898.1 million with access products contributing $271.3 to product revenue for the period. Driven by continued strong demand for our transport products and our managed access and broadband data products, revenue excluding the access product family was up 5% compared to the second quarter of 2004 and up 10% on a six-month basis compared to the first six months of 2004. We earned $41.1 million or $0.09 per share in the second quarter of 2005, compared with $49.6 million or $.12 per share in the second quarter of 2004. Net earnings for the six-month period was $41.8 million or $0.09 per share, compared with $63.0 million or $.15 per share in the first six months of 2004. The decline in earnings is primarily attributable to a 13 percentage point decline for the quarter and a 14 percentage point decline year-to-date in our overall gross margins as a result of the inclusion of the access products which typically carry lower gross margins than our other products.
 Revenue
 Second Quarter Year-to-Date
 2005 2004 Change 2005 2004 Change
 Transport $158.8 $164.7 (4)% $316.8 $300.8 5%
 Access 143.5 --- N/M 271.3 --- N/M
 Managed Access 96.4 76.4 26% 189.5 145.8 30%
 Voice Quality
 Enhancement 10.8 20.6 (48)% 25.8 43.3 (40)%
 Broadband Data 8.6 1.8 N/M 15.2 5.7 N/M
 Services 44.4 40.8 9% 79.5 72.5 10%
 Total $462.5 $304.3 52% $898.1 $568.1 58%

 North America $342.0 $211.9 61% $666.0 $384.8 73%
 International $120.5 $92.4 30% $232.1 $183.3 27%





Transport product revenue remained strong during the second quarter of 2005 although slightly down from the second quarter of 2004, while revenues for the year-to-date period of 2005 increased 5% over those in the same period of 2004. Wireless customers continued to be the prominent driver for transport product revenue for both the second quarter and year-to-date periods in 2005. For the second quarter of 2005, North American wireless customers accounted for approximately 56% of all transport product revenue compared with 60% in the second quarter of last year. Within the transport products category approximately 34% of 2005 second quarter revenue for our wideband cross connect platform came from new systems, system expansions and software upgrades, with the balance consisting of port card growth on our installed base. This result compares with 26% in the second quarter of 2004. Another measure of our wideband cross-connect demand is T-1 equivalents. We shipped approximately 1.9 million T-1 equivalents during the second quarter of 2005 compared to 1.8 million T-1 equivalents in the second quarter of 2004.

Revenue from our access products reached $143.5 million and $271.3 million for the quarter and year-to-date periods, respectively, in 2005. Both amounts are above last year's second quarter and year-to-date periods for AFC, and are more quarterly and first-half revenue than AFC ever reported. We estimate that half of the second quarter of 2005 access product revenue is related to fiber-to-the-premise and fiber-to-the-curb deployments, with the balance coming from copper-based access solutions.

Revenue from managed access products increased 26% and 30% for the second quarter and first half of 2005, respectively, compared to that of the comparable periods in 2004. The increase was due to strength in both our Tellabs 6300 managed transport systems and 8100 managed access systems.

Overall revenue from voice quality enhancement products declined 48% for the second quarter and 40% for the year-to-date period compared to the comparable periods of 2004. The decline reflects a strong first half of 2004 in which one large international order dominated our revenue in this category.

Broadband data revenue increased to $8.6 million during the second quarter compared to $1.8 million in the second quarter of 2004 and increased to $15.2 million on a year-to-date basis from $5.7 million in the comparable period in 2004. We have now shipped our Tellabs 8800 multi-service router product to fifteen revenue-generating customers, eleven of which are currently using the product to deliver live traffic as compared to two live networks at this time in 2004.

Our revenue from services increased $3.6 million and $7.0 million for the second quarter and year-to-date periods, respectively, from the comparative year-ago periods primarily due to higher product revenue.
 Gross Margin
 Second Quarter Year-to-Date
 2005 2004 Change 2005 2004 Change
 Consolidated Margin 45% 57% (12)% 43% 57% (14)%
 Product Margin 46% 60% (14)% 45% 61% (16)%
 Services Margin 33% 39% (6)% 28% 32% (4)%





Our overall margins declined during the second quarter and first-half of 2005 compared to the same periods in 2004 primarily due to the addition of AFC's lower margin access product line and a change in mix toward lower margin products.

The decline in product margins was due primarily to the same reasons noted above for the overall margin decline. Services margins were down as a result of the inclusion of access services.
 Operating Expenses
 Second Quarter Year-to-Date
 2005 2004 Change 2005 2004 Change
 Total Operating
 Expenses $161.1 $120.2 $40.9 $342.6 $259.9 $82.7
 Items included
 in the total:
 Restructuring and
 other charges 1.2 (2.0) 3.2 14.4 14.2 0.2
 Amortization of
 purchased
 intangibles 9.2 3.9 5.3 20.2 7.8 12.4
 Amortization of
 deferred stock
 compensation 2.7 0.8 1.9 5.5 2.9 2.6
 All other $148.0 $117.5 $30.5 $302.5 $235.0 $67.5





Our operating expenses increased as compared to the same period in 2004 primarily due to the addition of AFC's expenses, slightly offset by lower headcount and facility-related costs due to prior restructuring activities.

Restructuring and other charges for the second quarter and first half of 2005 were primarily due to a reorganization of our Denmark- and Finland-based businesses, the outsourcing of our North American Repair and Return and Prototype Lab to our current manufacturing vendors and the impact of the integration of AFC.

The increase in the amortization of purchased intangibles and deferred stock compensation is primarily due to the acquisitions of AFC and Vinci Systems, both in the fourth quarter of 2004.
 Other Income (Expense)
 Second Quarter Year-to-Date
 2005 2004 Change 2005 2004 Change
 Interest income,
 net $6.4 $6.3 $0.1 $12.1 $12.2 $(0.1)
 Other expense, net (1.7) (1.0) (0.7) (4.4) (2.0) (2.4)
 Total $4.7 $5.3 $(0.6) $7.7 $10.2 $(2.5)





Other expense, net increased during the second quarter and first six months of 2005 compared to that of the same periods in 2004 primarily due to charges of approximately $3.8 million in the second quarter of 2005 for other-than-temporary impairments related to long-term investments. These charges were partially offset by more favorable foreign currency transaction gains in 2005 compared to that in the comparable periods of 2004.

Income Taxes

For the second quarter and first six months of 2005, we recorded a tax expense of $9.7 million and $12.4 million, respectively, compared to a tax expense of $10.3 million and $12.6 million in the second quarter and first six months, respectively, of 2004. Overall, our tax rate continues to be affected by changes in the mix of income from domestic and foreign sources and the impact of the reversal of a valuation allowance on domestic tax expense.

Financial Condition, Liquidity & Capital Resources

Our principal source of liquidity remained our cash, cash equivalents and marketable securities, which increased by approximately $51.6 million during the quarter, and decreased $68.9 million since year end to $1,047.3 million. The use of cash reflects the impact of our previously announced stock repurchase program. During the second quarter of 2005, we repurchased $13.9 million (approximately 1.7 million shares) of our common stock, under a plan authorized by the board of directors in February of 2005 that enables us to repurchase up to $300 million worth of shares of our common stock. As of July 1, 2005, we have repurchased $132.6 million or 18.2 million shares under this plan.

We believe that the current level of working capital, particularly cash and marketable securities, is sufficient to meet our normal operating requirements for the foreseeable future. Further, we believe that sufficient resources exist to support our future growth and strategic needs. Future sources of working capital may be from cash-on-hand, cash generated from future operations, short-term or long-term financing, equity offerings or any combination of these sources.

Our current policy is to retain our earnings to provide funds to enhance stockholder value by expanding our business, repurchasing our common stock when we believe it to be undervalued and for operating activities. We do not anticipate paying a cash dividend in the foreseeable future.

Our Products

Transport products include Tellabs(R) 5000 digital cross-connect systems, including Tellabs(R) 5300 series and Tellabs(R) 5500 series, Tellabs(R) 6500 transport switch and Tellabs(R) 7100 optical transport system.

Access products include Tellabs(R) 1000 Multi-service Access series, the Tellabs(R) 1100 Multi-service Access series and the Tellabs(R) 1600 Optical Networking Terminal series products.

Managed Access products include Tellabs(R) 8100 managed access system, Tellabs(R) 6300 managed transport system and Tellabs(R) 2300 telephony distribution system.

Voice Quality Enhancement products include Tellabs(R) 3000 series of VQE products.

Broadband Data products include Tellabs(R) 8800 multi-service router series and Tellabs(R) 8600 managed edge system products.
 TELLABS, INC.
 NON-GAAP RESULTS OF OPERATIONS (1)
 (Unaudited)

 (In millions, except Three Months Ended Six Months Ended
 per-share data) 7/1/05 7/2/04 Change 7/1/05 7/2/04 Change
 Revenue
 Products $418.1 $263.5 $818.6 $495.6
 Services 44.4 40.8 79.5 72.5
 462.5 304.3 52.0% 898.1 568.1 58.1%
 Cost of Revenue
 Products 225.4 98.8 451.9 197.0
 Services 29.8 25.0 56.9 49.3
 255.2 123.8 508.8 246.3
 Gross Profit 207.3 180.5 14.8% 389.3 321.8 21.0%

 Gross profit as a
 percentage of revenue 44.8% 59.3% -14.5% 43.3% 56.6% -13.3%

 Gross profit as a
 percentage of revenue -
 products 46.1% 62.5% -16.4% 44.8% 60.3% -15.5%
 Gross profit as a
 percentage of revenue -
 services 32.9% 38.7% -5.8% 28.4% 32.0% -3.6%

 Operating Expenses
 Research and development 80.4 60.3 166.6 120.2
 Sales and marketing 45.3 39.1 91.4 76.3
 General and
 administrative 22.3 18.1 44.5 38.5
 148.0 117.5 302.5 235.0

 Operating Earnings 59.3 63.0 86.8 86.8

 Other Income (Expense)
 Interest income, net 6.4 6.3 12.1 12.2
 Other income (expense),
 net 2.1 (1.0) (0.6) (2.0)
 8.5 5.3 11.5 10.2

 Earnings Before Income Tax 67.8 68.3 98.3 97.0
 Income tax expense (9.9) (10.8) (14.2) (14.1)
 Net Earnings $57.9 $57.5 $84.1 $82.9


 Net Earnings Per Share
 Basic $0.13 $0.14 $0.19 $0.20
 Diluted $0.13 $0.14 $0.18 $0.20

 Weighted Average Share
 Outstanding
 Basic 447.7 416.1 451.8 415.7
 Diluted 451.4 420.3 455.2 419.9


 (1) In addition to reporting financial results in accordance with
 generally accepted accounting principles, or GAAP, Tellabs, Inc.
 provides non-GAAP results of operations as additional information for
 its operating results. These measures are not in accordance with, or
 an alternative for, GAAP and may be different from measures used by
 other companies. The non-GAAP results of operations eliminate
 certain items of expenses and losses from cost of goods sold,
 operating expenses and other income and expenses. The Company's
 management believes that this presentation allows investors to
 evaluate the current operational and financial performance of the
 Company's core business as an indicator of future operational and
 financial performance. The Company's management uses these measures
 for reviewing its financial results and for business planning and
 performance. Tellabs, Inc.'s management discloses this information
 externally along with a complete reconciliation of their comparable
 GAAP amounts, to provide access to the detail and general nature of
 adjustments made to GAAP financial results. Furthermore, while some
 of these items have been periodically reported in Tellabs, Inc.'s
 results of operations, including significant restructuring and other
 charges, their occurrence in future periods is dependent upon future
 business and economic factors, among other evaluation criteria, and
 may frequently be beyond the control of management.

 See the attached schedule disclosing the adjustments made to the
 above non-GAAP results of operations.



 Tellabs, Inc.
 Reconciliation of Non-GAAP Adjustments
 (Amounts in millions, except per-share data)
 (Unaudited)

 Three Months Ended Six Months Ended
 07/01/05 (a) 07/01/05 (b)
 As Adjust- Non- As Adjust- Non-
 Reported ments GAAP Reported ments GAAP
 Cost of Goods Sold 255.3 (0.1) 255.2 509.0 (0.2) 508.8

 Gross Profit 207.2 0.1 207.3 389.1 0.2 389.3

 Total Operating Expenses 161.1 (13.1) 148.0 342.6 (40.1) 302.5

 Other Income/(Expense) 4.7 (3.8) 8.5 7.7 (3.8) 11.5

 Income Tax Expense (9.7) (0.2) (9.9) (12.4) (1.8) (14.2)

 Net Earnings 41.1 16.8 57.9 41.8 42.3 84.1

 Earnings Per Share - Basic $0.09 $0.04 $0.13 $0.09 $0.10 $0.19
 Earnings Per Share - Diluted $0.09 $0.04 $0.13 $0.09 $0.09 $0.18


 Three Months Ended Six Months Ended
 07/02/04 (c) 07/02/04 (d)
 As Adjust- Non- As Adjust- Non-
 Reported ments GAAP Reported ments GAAP
 Cost of Goods Sold 129.5 (5.7) 123.8 242.8 3.5 246.3

 Gross Profit 174.8 5.7 180.5 325.3 (3.5) 321.8

 Total Operating Expenses 120.2 (2.7) 117.5 259.9 (24.9) 235.0

 Income Tax Expense (10.3) (0.5) (10.8) (12.6) (1.5) (14.1)

 Net Earnings 49.6 7.9 57.5 63.0 19.9 82.9

 Earnings Per Share - Basic $0.12 $0.02 $0.14 $0.15 $0.05 $0.20
 Earnings Per Share - Diluted $0.12 $0.02 $0.14 $0.15 $0.05 $0.20


 (a) The $0.1 million charge to Cost of Goods Sold reflects amortization
 of deferred compensation related to acquisitions.

 The $13.1 million charge to Operating Expenses reflects $9.2 million
 for amortization of purchased intangible assets, $2.7 million for
 amortization of deferred compensation related to acquisitions, $0.2
 million for severance and related costs due to the outsourcing for
 repair and return activities, $0.3 million for severance and related
 costs due to previously announced headcount reductions, $0.1 million
 for the impairment of property, plant and equipment disposed of or
 held for sale, $0.1 million for excess leased facilities, and $0.5
 million for other costs primarily related to excess software
 licenses.

 The $3.8 million charge to Other Expense reflects losses on the
 writedown of certain long-term equity investments.

 (b) The $0.2 million charge to Cost of Goods Sold reflects amortization
 of deferred compensation related to acquisitions.

 The $40.1 million charge to Operating Expenses reflects $20.2 million
 for amortization of purchased intangible assets, $5.5 million for
 amortization of deferred compensation related to acquisitions, $0.2
 million for severance and related costs dues to the outsourcing of
 repair and return activities, $11.3 million for severance and related
 costs due to previously announced headcount reductions primarily in
 Denmark, Finland, and the US, $3.1 million for the impairment of
 property, plant and equipment disposed of or held for sale, $0.4
 million in additional loss on the sale of the Denmark facility, $0.5
 million for other costs primarily related to excess software
 licenses, and a $1.1 million net accrual reversal for excess leased
 facilities due to favorable sublease activity.

 The $3.8 million charge to Other Expense reflects losses on the
 writedown of certain long-term equity investments.

 (c) The $5.7 million charge to Cost of Goods Sold reflects costs
 associated with the outsourcing of both US and Finland manufacturing
 operations: $4.5 million charge for loss on the sale of the North
 American manufacturing facilities, and $1.2 million charge for
 manufacturing transition costs for Finland manufacturing outsourcing.

 The $2.7 million charge to Operating Expenses reflects $3.9 million
 for amortization of purchased intangible assets, $0.8 million for
 amortization of deferred compensation related to acquisitions, $0.9
 million charge for severance and related charges, $0.6 million charge
 for the write-down of assets disposed of or held for sale, and $0.3
 million charge for costs related to excess facilities; offset by $1.9
 million reversal of excess facilities reserves that are no longer
 required, $1.2 million reversal of severance reserves recorded in
 prior periods that are no longer required, and $0.7 million reversal
 for proceeds received on sales of fixed assets in excess of original
 estimates.

 (d) The $3.5 million credit to Cost of Goods Sold reflects a $4.5 million
 charge for loss on the sale of the North American manufacturing
 facilities, and $4.0 million charge in costs associated with the
 outsourcing of Finland manufacturing operations; offset by a $12.0
 million reversal of a prior accrual for excess purchase commitments
 due to a favorable settlement. Charges for Finland manufacturing
 outsourcing were $2.3 million for inventory adjustments and $1.7
 million for transition costs.

 The $24.9 million charge within Operating Expenses represents $7.8
 million for amortization of purchased intangible assets, $2.9 million
 for amortization of deferred compensation related to acquisitions,
 $5.0 million charge for severance and related payments, $13.2 million
 charge for the write-down of assets disposed of or held for sale,
 $1.7 million charge for facilities consolidation expenses, and $2.4
 million charge for other obligations; partially offset by a $5.0
 million reversal of previously recorded expense relating to estimated
 salvage value on fixed asset disposals, $1.9 million reversal of
 excess facilities reserves that are no longer required, and $1.2
 million reversal of severance reserves recorded in prior periods that
 are no longer required.



CONTACT: Media, Ariana Nikitas, +1-630-798-2532, or ariana.nikitas@tellabs.com , or Investors, Tom Scottino, +1-630-798-3602, or tom.scottino@tellabs.com , both of Tellabs

Web site: http://www.tellabs.com/
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