Tellabs reports second-quarter revenue of $535 million

Naperville, Ill., July 26, 2007: Tellabs reported second-quarter 2007 revenue of $535 million, down 3% from $549 million in the second quarter of 2006.

Tellabs earned $30 million or 7 cents per share in the second quarter of 2007 on a GAAP basis, down 45% from $54 million or 12 cents per share in the second quarter of 2006. On a non-GAAP basis, Tellabs earned $38 million or 9 cents per share, down 48% from $73 million or 16 cents per share in the second quarter of 2006. Non-GAAP results for second-quarter 2007 exclude pretax charges of $14 million for special items, including $8 million or 1.2 cents per share in equity-based compensation expense.

“As the telecom industry transforms, Tellabs’ new technologies are taking root in our customers’ networks,” said Krish A. Prabhu, Tellabs president and chief executive officer. “We continue to focus on improving gross profit margins related to those products and technologies.”

Broadband — Second-quarter 2007 revenue from the broadband segment totaled $246 million, down 17% from $298 million in the second quarter of 2006. Within the broadband segment, second-quarter access revenue was $135 million, down 29% from $190 million in the second quarter of 2006. Second-quarter managed access revenue was $77 million, down 11% from $86 million in the second quarter of 2006. Second-quarter data revenue was a record $35 million, up 56% from $22 million in the year-ago quarter.

Transport — Second-quarter 2007 transport revenue totaled $223 million, including deferred revenue from two prior quarters, up 10% from $202 million in the second quarter of 2006.

Services — Second-quarter 2007 services revenue was $66 million, including deferred revenue from two prior quarters, up 34% from $49 million in the second quarter of 2006.

Third-Quarter 2007 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. Tellabs expects third-quarter revenue to be about $500 million, plus or minus.

Tellabs expects non-GAAP gross margin to be about 36%, plus or minus, depending on product mix; non-GAAP gross margin excludes about $1.5 million in equity-based compensation expense. Tellabs expects non-GAAP operating expense to be flat to slightly down compared with the second quarter of 2007; non-GAAP operating expense excludes about $6.5 million in equity-based compensation expense.

Share Repurchase — Under a previously announced share repurchase program, Tellabs repurchased 0.9 million shares at a cost of $10 million during the second quarter of 2007. Since 2005, Tellabs has repurchased 49.7 million shares at a cost of $500 million (about 11% of shares outstanding).

Teleconference replay — Tellabs hosted an investor teleconference to discuss its second-quarter 2007 results and provide its outlook for the third quarter of 2007. A taped replay of the call is available until 10:30 p.m. Central Daylight Time on Thursday, July 26. Call 706-645-9291 and when prompted, enter the Tellabs ID number 5440421. A podcast of the call is available at 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. Ranked among the BusinessWeek InfoTech 100, Tellabs (NASDAQ: TLAB) is part of the NASDAQ-100 Index, NASDAQ Global Select Market, Ocean Tomo 300™ Patent Index and the S&P 500. www.tellabs.com

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Forward-Looking Statements — This news release 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, 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.

MEDIA CONTACT: George Stenitzer, +1.630.798.3800, george.stenitzer@tellabs.com

INVESTOR CONTACT: Tom Scottino, +1.630.798.3602, tom.scottino@tellabs.com

Editor’s Note: The complete text of this release is available at www.tellabs.com/news/2007/2q07.pdf

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