NAPERVILLE, Illinois, July 22 /PRNewswire/ --

- Tellabs Reports Second-Quarter Revenue Of US$432 Million

Tellabs' second-quarter 2008 revenue totaled US$432 million, down 19% from US$535 million in the second quarter of 2007. International revenue rose 20% to US$145 million, up from US$121 million in the year-ago quarter.

Tellabs earned US$39 million or 10 cents per share on a GAAP (U.S. generally accepted accounting principles) basis, including a one-time benefit of US$35 million or 9 cents per share resulting from the favorable completion of IRS audits. In the second quarter of 2007, Tellabs earned US$30 million or 7 cents per share on a GAAP basis.

On a non-GAAP basis, Tellabs earned US$52 million or 13 cents per share, including a one-time benefit of US$35 million or 9 cents per share resulting from the favorable completion of IRS audits. This compares with US$38 million or 9 cents per share in the year-ago quarter. Non-GAAP results exclude a pretax charge of US$18.9 million, which includes US$7.9 million or 1.3 cents per share in equity-based compensation expense.

In the second quarter of 2008, GAAP and non-GAAP gross profit margins were 35%, better than expected, as:

-- Tellabs' gross profit margin improvements on the Tellabs 7100 system resulted from cost reductions, additional customers and a beneficial mix including more transponder cards.

-- Tellabs' gross profit margin improvements on the Tellabs 1600 optical network terminals resulted from lower shipments and cost reductions.

-- Other Tellabs' gross profit margin improvements resulted from aggressive cost management and a favorable product and customer mix.

In the first quarter of 2008, GAAP gross profit margins were 38% and non-GAAP gross profit margins were 39%.

"Three Tellabs products delivered record quarterly revenues in a tough market, and we're encouraged that Tellabs' innovations are gaining traction with customers worldwide," said Rob Pullen, Tellabs president and chief executive officer. "As we continued to apply focus and discipline, our second-quarter gross profit margins outperformed our expectations."

Broadband -- Second-quarter 2008 revenue from the broadband segment totaled US$231 million, down 6% from US$246 million in the second quarter of 2007. Within the broadband segment:

-- Data (multiservice routers) revenue was US$45 million, up 28% from US$35 million in the year-ago quarter. Quarterly revenue from the new Tellabs(R) 8600 managed edge system reached a new high.

-- Access revenue was US$103 million, down 23% from US$135 million in the year-ago quarter.

-- Managed access revenue was US$83 million, up 8% from US$77 million in the year-ago quarter. Quarterly revenue from the Tellabs(R) 6300 managed access system reached a new high.

Transport -- Second-quarter 2008 transport revenue totaled US$141 million, down 37% from US$223 million in the year-ago quarter. Quarterly revenue from the Tellabs(R) 7100 optical transport system reached a new high, excluding deferred revenue recognized in the year-ago quarter. During the second quarter of 2008, Tellabs recognized revenue from two Tellabs 7100 system customers outside the United States.

Services -- Second-quarter 2008 services revenue was US$60 million, down 8% from US$66 million in the year-ago quarter.

Third-Quarter 2008 Guidance -- The following statements are forward-looking statements that are based on current expectations and involve risks and uncertainties, some of which are set forth below. Given normal third-quarter seasonality, Tellabs expects third-quarter revenue to be flat to slightly down; the company also sees macroeconomic risks in the economy, in enterprise spending and in customers' capital expenditures. Non-GAAP gross margin is expected to be flat, plus or minus, based on product and customer mix. Non-GAAP operating expenses are expected to continue on a downward trajectory from the second quarter of 2008, as a result of the US$100 million cost and operating expense reduction plan announced in January. Non-GAAP gross margin excludes about US$1 million in equity-based compensation expense. Non-GAAP operating expense excludes about US$4 million in equity-based compensation expense.

Share Repurchase -- Since 2005, Tellabs has repurchased 93.1 million shares at a cost of US$804 million (about 20% of shares outstanding). Under previously announced share repurchase programs, Tellabs spent approximately US$1 million to repurchase 0.2 million shares during the second quarter of 2008. Tellabs significantly curtailed share repurchases during the second quarter, as it re-evaluates uses of cash as it works to position the company for future growth, and in light of capital market conditions.

Simultaneous Webcast and Teleconference Replay -- Tellabs hosted an investor teleconference to discuss its second-quarter 2008 results and provide its outlook for the third quarter of 2008. A taped replay of the call is available until midnight Central Daylight Time on Thursday, July 24, at +1-800-642-1687. (Outside the United States, call +1-706-645-9291.) When prompted, enter the Tellabs conference ID number: 54800101. A podcast of the call is available at http://www.tellabs.com/news/feeds/.

Tellabs advances telecommunications networks to meet the evolving needs of users. Solutions from Tellabs enable service providers to deliver high-quality voice, video and data services over wireline and wireless networks around the world. Tellabs (Nasdaq: TLAB) is part of the NASDAQ Global Select Market, Ocean Tomo 300(TM) Patent Index and the S&P 500. http://www.tellabs.com

Forward-Looking Statements -- This news release, which includes the results of operations discussion that follows, contains forward-looking statements, including but not limited to the guidance information contained in this release 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 competitive landscape, including pricing and margin pressures, the response of customers and competitors, industry consolidation, the introduction of new products, the entrance into new markets, the ability to secure necessary resources, the ability to realize anticipated savings under our cost-reduction initiatives, 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) and Tellabs logo 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.

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

Media, George Stenitzer, +1-630-798-3800, george.stenitzer@tellabs.com, or Investors, Tom Scottino, +1-630-798-3602, tom.scottino@tellabs.com, both of Tellabs ; NOTE TO EDITORS: The complete text of this release is available at http://www.tellabs.com/news/2008/2q08.pdf