Financial Astrology of Tellabs, Inc.

FINANCIAL ASTROLOGY

First Trade Date for Tellabs, Inc.

Company Name	First Trade Date (yyyy-mm-dd)
Tellabs, Inc.	1980-07-11

Company Name	Symbol
Tellabs, Inc.	TLAB
History and Business of Company (this information may include date of incorporation)
Tellabs, Inc. and its subsidiaries design and market communications equipment to telecommunications service providers worldwide. We also provide installation and professional services that support our product offerings. Industry and technical terms used in this Form 10-K are described in the Glossary, which appears at the end of this Item I. Tellabs, Inc. was incorporated in 1975 as an Illinois corporation and was subsequently converted to a Delaware corporation in 1992. We have purchased several companies during our history. Most recently, in 2003, we acquired Vivace Networks, Inc., a leading developer of flexible, high performance multi-service routers and in 2002, we acquired Ocular Networks, Inc., a developer of optical solutions for the metropolitan optical networking market. Our products include solutions for next-generation optical networking, managed access, carrier-class data, voice-quality enhancement and cable telephony. For financial reporting purposes, the carrier-class data, voice-quality enhancement and cable telephony products are combined and referred to collectively as Other Products. Our products are sold in the domestic and international marketplaces (under both the Tellabs name and trademarks and under private labels) through our field sales force and selected distributors. Our customer base includes incumbent local exchange carriers (ILECs), independent telephone companies (ITCs), interexchange carriers (IXCs), local telephone administrations (PTTs-post telephone and telegraph administrations), other local exchange carriers (LECs), original equipment manufacturers (OEMs), cellular and other wireless service companies, cable operators, alternate service providers, competitive local exchange carriers (CLECs), Internet service providers and system integrators. Following years of unprecedented growth in our industry, the demand for telecommunications equipment unexpectedly began to decline precipitously in early 2001 as a result of industry overcapacity, an unfavorable regulatory environment, and excessive debt loads among many carriers. As a consequence, we experienced a 71% revenue decline over the period 2001 through 2003, and we incurred a net loss in each of those years. As market conditions deteriorated, we responded with a series of restructuring plans designed to match our manufacturing capacity and expenses with demand in order to restore profitability and renew growth. We closed manufacturing facilities in Ireland and Texas in 2001 and additional facilities in Ireland and New York in 2002. We reduced our workforce by 61%, from 8,900 during 2001 to 3,500 at the end of 2003. We exited a significant portion of the office space that we leased and owned in the United States, and we consolidated the majority of our U.S.-based workforce into our headquarters facility in Naperville, Illinois. We also reviewed our product portfolio and cut-back or stopped development efforts on some products due in part to customers' reluctance to deploy new technology. Further, in the second-half of 2003, we committed to outsource the majority of our remaining manufacturing activities. Manufacturing operations located in Bolingbrook, Illinois, were outsourced to Sanmina-SCI Corporation, an independent electronics manufacturing service (EMS), and manufacturing operations located in Espoo, Finland, were transferred to Elcoteq Network Corporation, a Finland-based EMS. We expect to benefit from outsourcing through lower component prices due to the EMS's purchasing power and through lower manufacturing costs due to their lower labor rates. The manufacturing operations in Illinois ceased at the end of October 2003, and the manufacturing operations in Finland were transferred to Elcoteq on January 1, 2004. As a result of the restructuring activities, we recorded restructuring charges for severance costs, facilities shutdown costs and other obligations. The decline in product demand over the three-year period also had a significant impact on the value of our inventory, resulting in the need to record reserves for excess and obsolete inventory and excess purchase commitments. We also recorded reserves for other impaired and surplus assets in each of the years 2001 through 2003. Those charges were significant in amount, and we encourage readers to refer to Note 3 to our consoidated financial statements in our 2003 Annual Report included herein as Exhibit 13 and is incorporated herein by reference. On November 5, 2003, Tellabs Chairman and CEO Michael Birck announced that an independent subcommittee of Tellabs directors would conduct a search for a new CEO to lead Tellabs. On February 12, 2004, the Tellabs board of directors appointed Krish Prabhu as CEO, president and director of Tellabs. Mr. Prabhu is a seasoned executive whose 24 years of telecommunications experience includes roles as chief operating officer of Alcatel Telecom and CEO of Alcatel USA. Mr. Birck will continue to serve as Tellabs Chairman.

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