10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file Number: 0-09692

TELLABS, INC.

(Exact name of registrant as specified in its charter)

Delaware	36-3831568
(State of Incorporation)	(I.R.S. Employer Identification No.)

One Tellabs Center, 1415 W. Diehl Road, Naperville, Illinois	60563
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (630) 798-8800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   x	Accelerated Filer  ¨
Non-Accelerated Filer  ¨	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

Common Shares, $0.01 Par Value – 397,419,649 shares outstanding on April 25, 2008.

TELLABS, INC.

INDEX

		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flow	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 4.	Submission of Matters to a Vote of Security Holders	23
Item 6.	Exhibits	24
SIGNATURE		25

2

PART I . FINANCIAL INFORMATION

Item 1. Financial Statements

TELLABS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

	First Quarter
	3/28/08			3/30/07
In millions, except per-share data
Revenue
Products	$	408.0		$	410.0
Services		56.1			41.9
Total revenue		464.1			451.9
Cost of Revenue
Products		242.8			233.0
Services		43.4			33.0
Total cost of revenue		286.2			266.0
Gross Profit		177.9			185.9
Gross profit as a percentage of revenue		38.3	%		41.1	%
Gross profit as a percentage of revenue - products		40.5	%		43.2	%
Gross profit as a percentage of revenue - services		22.6	%		21.2	%
Operating Expenses
Research and development		80.7			84.5
Sales and marketing		43.4			45.8
General and administrative		26.1			26.6
Intangible asset amortization		5.6			5.6
Restructuring and other charges		8.7			—
Total operating expenses		164.5			162.5
Operating Earnings		13.4			23.4
Other Income
Interest income, net		9.9			11.8
Other income, net		0.6			0.3
Total other income		10.5			12.1
Earnings Before Income Tax		23.9			35.5
Income tax expense		(7.3	)		(10.0	)
Net Earnings	$	16.6		$	25.5
Net Earnings Per Share
Basic	$	0.04		$	0.06
Diluted	$	0.04		$	0.06
Weighted Average Shares Outstanding
Basic		407.9			438.2
Diluted		408.9			443.2

The accompanying notes are an integral part of these statements.

3

TELLABS, INC.

CONSOLIDATED BALANCE SHEETS

	3/28/08			12/28/07
In millions, except share data	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	172.1		$	213.0
Investments in marketable securities		981.7			1,005.5
Total cash and investments		1,153.8			1,218.5
Other marketable securities		254.3			291.0
Accounts receivable, net of allowances of $3.2 and $3.0		367.2			363.8
Inventories
Raw materials		39.6			35.3
Work in process		10.6			11.7
Finished goods		115.6			124.2
Total inventories		165.8			171.2
Income taxes		11.0			10.6
Miscellaneous receivables and other current assets		57.6			56.6
Total Current Assets		2,009.7			2,111.7
Property, Plant and Equipment
Land		21.7			21.2
Buildings and improvements		213.5			209.6
Equipment		448.4			439.3
Total property, plant & equipment		683.6			670.1
Accumulated depreciation		(385.9	)		(367.7	)
Property, plant and equipment, net		297.7			302.4
Goodwill		1,113.0			1,110.5
Intangible Assets, Net of Amortization		61.4			67.0
Other Assets		154.7			155.0
Total Assets	$	3,636.5		$	3,746.6
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	81.0		$	91.3
Accrued compensation		47.2			49.1
Restructuring and other charges		15.9			10.8
Income taxes		85.6			83.8
Stock loan		254.3			291.0
Deferred revenue		35.8			30.0
Other accrued liabilities		113.2			117.0
Total Current Liabilities		633.0			673.0
Long-Term Restructuring Liabilities		12.5			14.4
Income Taxes		90.9			78.9
Other Long-Term Liabilities		68.8			67.0
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; 494,098,070 and 493,900,528 shares issued		4.9			4.9
Additional paid-in capital		1,467.7			1,459.5
Treasury stock, at cost: 96,691,726 and 75,177,591 shares		(938.8	)		(796.7	)
Retained earnings		2,129.9			2,113.3
Accumulated other comprehensive income		167.6			132.3
Total Stockholders’ Equity		2,831.3			2,913.3
Total Liabilities and Stockholders’ Equity	$	3,636.5		$	3,746.6

The accompanying notes are an integral part of these statements.

4

TELLABS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	First Quarter
	3/28/08			3/30/07
In millions
Operating Activities
Net earnings	$	16.6		$	25.5
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		21.8			23.3
Equity-based compensation		8.0			8.9
Deferred income taxes		(4.0	)		4.3
Restructuring and other charges		8.7			—
Other-than-temporary impairment charge		1.4			—
Net changes in assets and liabilities:
Accounts receivable		24.2			44.4
Inventories		9.7			(42.3	)
Miscellaneous receivables and other current assets		2.8			(3.0	)
Other assets		18.9			2.8
Accounts payable		(16.4	)		(21.3	)
Restructuring and other charges		(5.5	)		(2.0	)
Deferred revenue		5.8			24.6
Other accrued liabilities		(8.0	)		(28.7	)
Income taxes		0.7			(10.5	)
Other long-term liabilities		(2.6	)		1.5
Net Cash Provided by Operating Activities		82.1			27.5
Investing Activities
Capital expenditures		(7.1	)		(10.4	)
Disposals of property, plant and equipment		0.9			0.4
Payments for purchases of investments		(482.3	)		(273.7	)
Proceeds from sales and maturities of investments		506.3			270.6
Net Cash Provided by (Used for) Investing Activities		17.8			(13.1	)
Financing Activities
Proceeds from issuance of common stock under stock plans		0.4			4.7
Repurchase of common stock		(142.1	)		(25.5	)
Net Cash Used for Financing Activities		(141.7	)		(20.8	)
Effect of Exchange Rate Changes on Cash		0.9			2.2
Net Decrease in Cash and Cash Equivalents		(40.9	)		(4.2	)
Cash and Cash Equivalents - Beginning of Year		213.0			153.6
Cash and Cash Equivalents - End of Period	$	172.1		$	149.4

The accompanying notes are an integral part of these statements.

5

TELLABS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS, EXCEPT SHARE AND PER-SHARE DATA

1. Basis of Presentation

We prepared our accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial statements, the requirements of Form 10-Q and applicable rules of the U.S. Securities and Exchange Commission’s Regulation S-X. Therefore, they do not include all disclosures normally required by generally accepted accounting principles for complete financial statements. Accordingly, the financial statements and notes herein are to be read in conjunction with our Annual Report on Form 10-K for the year ended December 28, 2007.

In our opinion, the accompanying unaudited consolidated financial statements include all adjustments (consisting of normal recurring accruals) that are necessary for a fair presentation. Operating results for interim periods are not necessarily indicative of operating results for the full year.

2. New Accounting Pronouncements

We adopted the provisions of SFAS 157, Fair Value Measurements, for all financial assets and liabilities and recurring non-financial assets and liabilities and SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS 115, on December 29, 2007. The adoption of these standards had no effect on our beginning retained earnings or current earnings. Based on the provisions of FASB Staff Position (FSP) No. FAS 157-2, we have deferred adoption of SFAS 157 to fiscal year 2009 for all non-recurring non-financial assets that include property, plant and equipment, goodwill and intangible assets. See Note 9, Fair Value Measurements, for additional information.

In March 2008, the FASB issued SFAS 161, Disclosures About Derivative Instruments and Hedging Activities, an amendment of SFAS 133. SFAS 161 is designed to improve the transparency of an entity’s financial reporting by requiring enhanced disclosures about an entity’s derivative and hedging activities. SFAS 161 requires enhanced disclosures regarding:

• how and why an entity uses derivative instruments,

• how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations,

• and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.

SFAS 161 is effective for fiscal years and interim periods beginning on or after November 15, 2008. Currently, we are not able to estimate the impact SFAS 161 will have on our financial statements or disclosure requirements.

In December 2007, the FASB issued SFAS 141(R), Business Combinations. SFAS 141(R) establishes principles and requirements for an acquirer, that is designed to improve the relevance, representational faithfulness and comparability of information provided by a reporting entity in its financial reports about business combinations and its effects. SFAS 141(R) is effective prospectively to business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Currently, we are not able to estimate the impact SFAS 141(R) will have on our financial statements.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements (an amendment of ARB No. 51). SFAS 160 establishes accounting and reporting standards designed to improve the relevance, comparability and transparency of the financial information provided in a reporting entity’s consolidated financial statements. SFAS 160 requires:

• ownership interests in subsidiaries held by parties other than the parent to be clearly identified, labeled and presented in the consolidated balance sheet within equity, but separate from the parent’s equity,

• net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income,

• changes in the parent’s ownership interest to be accounted for as equity transactions, if a subsidiary is deconsolidated and any retained noncontrolling equity investment to be measured at fair value,

• and that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and noncontrolling owners.

SFAS 160 is effective for fiscal years and interim periods beginning on or after December 15, 2008. Currently, we are not able to estimate the impact SFAS 160 will have on our financial statements.

6

3. Restructuring and Other Charges

On January 21, 2008, our management committed to a plan to improve gross profit margins and reduce operating expenses. The cost of the plan is expected to be between $12 million and $14 million, which includes between $6 million and $7 million in severance charges for workforce reductions of approximately 225 employees and $6 million to $7 million in facility and asset related charges. Estimated cash payments under the plan are in the range of $11 million to $12 million.

We recorded $8.7 million related to these restructuring activities in the first quarter of 2008, of which $6.4 million is severance expenses, $1.8 million is facility and asset related expenses, and $0.5 million is non-cancelable software licenses.

As of March 28, 2008, we had $28.4 million accrued for restructuring plans. The 2008 restructuring plan balance of $7.3 million consists of $5.8 million in cash severance that we expect to pay through the fourth quarter of 2008, $0.6 million in net lease obligations that expire by 2009, and $0.9 million in non-cash asset write downs. The 2007 restructuring plan balance of $1.8 million primarily consists of cash severance that we expect to pay through the fourth quarter of 2008. The $19.3 million balance for previous restructuring plans for the years 2001 through 2006 relates to net lease obligations that expire by 2012.

The following table summarizes restructuring and other charges recorded for the plans mentioned above, as well as adjustments to reserves recorded for prior restructurings:

	First Quarter
	3/28/08		3/30/07
Severance and other termination benefits	$	6.4	$	—
Facility and other exit costs		1.8		—
Other obligations		0.5		—
Total restructuring and other charges	$	8.7	$	—
Total of above items related to cost of revenue	$	4.0	$	—
Total of above items related to operating expenses	$	4.7	$	—

The following table summarizes our restructuring and other charges activity, by segments, for the first quarter of 2008, and the status of the reserves at March 28, 2008:

			First Quarter Activity
	Balance at 12/28/07		Restructuring Expense		Cash Payments			Other Activities 1			Balance at 3/28/08
2008 Restructuring Plans
Broadband	$	—	$	3.2	$	(0.1	)	$	—		$	3.1
Transport		—		2.4		(0.1	)		(0.6	)		1.7
Services		—		3.1		(0.4	)		(0.2	)		2.5
Subtotal 2008 Restructuring		—		8.7		(0.6	)		(0.8	)		7.3
2007 Restructuring Plans
Broadband		3.6		—		(1.8	)		—			1.8
Transport		0.4		—		(0.4	)		—			—
Subtotal 2007 Restructuring		4.0		—		(2.2	)		—			1.8
Previous Restructuring Plans
Broadband		5.5		—		(0.7	)		—			4.8
Transport		15.7		—		(1.2	)		—			14.5
Subtotal Previous Restructuring		21.2		—		(1.9	)		—			19.3
Total All Restructuring Plans	$	25.2	$	8.7	$	(4.7	)	$	(0.8	)	$	28.4

¹ Other activities include the effects of currency translation, write downs of property, plant and equipment to be disposed, and other charges in the reserve that do not flow through restructuring expense.

7

4. Equity-Based Compensation

The Tellabs, Inc. 2004 Incentive Compensation Plan provides for the grant of short-term and long-term incentives, including stock options, stock appreciation rights (SARs), restricted stock and performance stock units. Our stockholders previously approved 39,139,977 shares for grant under the plan, of which 20,473,655 remain available for grant at March 28, 2008. Under the 2004 plan and predecessor plans, we granted awards at market value on the date of grant. Subsequent to the end of the first quarter, on April 24, 2008, stockholders approved the Tellabs, Inc. Amended and Restated 2004 Incentive Compensation Plan, which authorized an additional 14,750,000 shares for issuance.

Stock Options

Stock options granted in the first quarters of 2008 and 2007 generally vest over three years from the date of the grant. We recognize compensation expense on a straight-line basis over the service period based on the fair value of the stock options on the grant date. Compensation expense for stock options was $3.8 million for the first quarter of 2008 and $6.7 million for the first quarter of 2007. Options granted but unexercised generally expire 10 years from the grant date.

We estimate the fair value of stock options using the Black-Scholes option-pricing model. This model requires the use of assumptions that will have a significant impact on the fair value estimate. The following table summarizes the assumptions used to compute the weighted average fair value of current period stock option grants:

	First Quarter
	3/28/08		3/30/07
Expected volatility	43.6	%	43.9	%
Risk-free interest rate	2.9	%	4.7	%
Expected term (in years)	4.6		4.6
Expected dividend yield	0.0	%	0.0	%

We based our calculation of expected volatility on a combination of historical and implied volatility for options granted in the first three months of 2008 and 2007. We based the risk-free interest rate on the U.S. Treasury yield curve in effect at the date of grant. We estimated the expected term of the options using their vesting period, post-vesting employment termination behavior and historical exercise patterns.

The following is a summary of the activity in our stock options during 2008 as of March 28, 2008:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding – beginning of year	36,988,654		$	17.25
Granted	170,250		$	6.57
Exercised	(94,425	)	$	3.78
Forfeited/expired	(1,004,287	)	$	17.10
Outstanding – end of period	36,060,192		$	17.24	4.7	$	1.3
Exercisable – end of period	32,427,370		$	17.98	4.3	$	1.3
Shares expected to vest	35,447,819		$	17.35	4.7	$	1.3
Weighted average fair value of options granted during the quarter			$	2.65

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on our closing stock price as of March 28, 2008, that the option holders would have received had all holders exercised their options as of that date. The aggregate intrinsic value of exercised stock options during the first quarter of 2008 was $0.3 million.

8

As of March 28, 2008, we had $12.7 million of unrecognized compensation cost related to stock options that we expect to recognize over a weighted average period of 1.6 years.

Cash-Settled Stock Appreciation Rights

Our 2004 Incentive Compensation Plan also provides for the granting of cash-settled SARs in conjunction with, or independent of, the stock options under the plans. These SARs allow the holder to receive in cash the difference between the cash-settled SARs’ grant price (market value of our stock on the grant date) and the market value of our stock on the date the holder exercises the SAR. These cash payments were negligible in the first quarter of 2008 and 2007. The cash-settled SARs are generally assigned 10-year terms. Cash-settled SARs generally vest over three years from the grant date. At March 28, 2008, there were 235,003 cash-settled SARs outstanding with exercise prices that ranged from $6.01 to $70.06. The weighted average price of the 17,200 cash-settled SARs granted in the first quarter of 2008 was $6.66 and the weighted average price of the 21,200 cash-settled SARs granted in the first quarter of 2007 was $10.21.

Restricted Stock

We granted 144,927 restricted shares in the first quarter of 2008 and 7,250 restricted shares in the first quarter of 2007. All of the shares granted in the first quarter of 2008 vest over a three-year period. Of the 7,250 shares granted in the first quarter of 2007, 3,250 vest over a two-year period and 4,000 shares vest over a one-year period. We recognize compensation expense on a straight-line basis over the vesting periods based on the market price of our stock on the grant date. Compensation expense was $4.1 million for the first quarter of 2008 and $1.8 million for the first quarter of 2007. The weighted average issuance price of restricted stock granted in the first quarter of 2008 was $6.90 per share and the weighted average issuance price of restricted stock granted in the first quarter of 2007 was $10.44 per share. Our non-vested stock award activity for 2008 follows:

	First Quarter
	3/28/08
	Shares		Weighted Average Grant Date Fair Value
Non-vested – beginning of year	3,221,011		$	10.28
Granted	144,927		$	6.90
Vested	(36,625	)	$	12.81
Forfeited	(95,369	)	$	10.49
Non-vested – end of period	3,233,944		$	10.10

As of March 28, 2008, we had $20.2 million of unrecognized compensation cost related to restricted stock that we expect to recognize over a weighted average period of 1.0 years.

Performance Stock Units

We granted 777,000 performance stock units (PSUs) in the first quarter of 2008. We did not grant PSUs in the first quarter of 2007. The PSUs granted in the first quarter of 2008 entitle the recipients to receive shares of our common stock commencing in March 2009, contingent on the achievement of company operating income and revenue-based targets for the 2008 fiscal year. Following achievement of these financial measures and subject to continued employment, one-third of such shares will be issued in annual installments in March 2009, March 2010 and March 2011. At minimum target performance, we will issue one-half share for each PSU granted and at maximum target performance, we will issue two shares for each PSU granted. The weighted average price of PSUs granted in the first quarter of 2008 was $5.40 per share.

We granted 270,000 PSUs in the third quarter of 2006, of which 50,000 PSUs were forfeited in 2007. The PSUs granted in the third quarter of 2006 entitle the recipients to receive shares of our common stock in March 2008, contingent on the achievement of cumulative company operating income and revenue-based targets for the 2006 and 2007 fiscal years. Based on cumulative actual performance in 2006 and 2007, we issued 44,000 shares of the total PSUs based on attainment tied to the revenue objective in the first quarter of 2008. We granted a total of 375,000 PSUs in 2007, of which 40,000 PSUs were forfeited in 2007. None of the 2007 grants were earned, since 2007 performance fell below threshold performance. Compensation expense for PSUs was $0.1 million for the first quarter of 2008 and $0.1 million for the first quarter of 2007. Our PSU activity for 2008 follows:

9

	First Quarter
	3/28/08
	Shares		Weighted Average Grant Date Fair Value
Non-vested – beginning of year	555,000		$	12.07
Granted	777,000		$	5.40
Vested	(44,000	)	$	11.37
Cancelled	(511,000	)	$	12.13
Non-vested – end of period	777,000		$	5.40

As of March 28, 2008, we had $4.1 million of unrecognized compensation cost related to PSUs, based on our most recent forecast performance, that we expect to recognize over a weighted average period of 1.5 years.

Equity-Based Compensation Expense

The following table sets forth the total equity-based compensation expense resulting from stock options, stock appreciation rights, restricted stock, performance stock units and our employee stock purchase plan (suspended effective April 25, 2007):

	First Quarter
	3/28/08		3/30/07
Cost of revenue – products	$	0.7	$	0.6
Cost of revenue – services		1.0		0.9
Research and development		2.7		3.5
Sales and marketing		1.6		1.8
General and administrative		2.0		2.1
Equity-based compensation expense before income taxes		8.0		8.9
Income tax benefit		2.8		3.0
Total equity-based compensation expense after income taxes	$	5.2	$	5.9

5. Retiree Medical Plan

The following table sets forth the components of the net periodic benefit costs for our retiree medical plan:

	First Quarter
	3/28/08			3/30/07
Service cost	$	0.2		$	0.3
Interest cost		0.2			0.2
Expected return on plan assets		(0.1	)		(0.1	)
Net periodic benefit cost	$	0.3		$	0.4

We currently do not anticipate contributing to the plan in 2008, as it is adequately funded at this time.

6. Product Warranties

We provide warranties for all of our products. The specific terms and conditions of those warranties vary depending on the product. We provide a basic limited warranty, including parts and labor, for all products except access products, for periods ranging from 90 days to 5 years. The basic limited warranty for access products covers parts and labor for periods ranging from 2 to 6 years.

Our estimate of warranty liability involves many factors, including the number of units shipped, historical and anticipated rates of warranty claims and cost per claim. We periodically assess the adequacy of our recorded warranty liability and adjust the amounts as necessary. We classify the portion of our warranty liability that we expect to incur in the next 12 months as a current liability. We classify the portion of our warranty liability that we expect to incur more than 12 months in the future as a long-term liability. Our product warranty liabilities are as follows:

10

	First Quarter
	3/28/08			3/30/07
Balance – beginning of period	$	49.1		$	45.0
Accruals for product warranties issued		1.8			5.6
Settlements		(1.7	)		(3.4	)
Other adjustments to accruals for product warranties issued		(1.9	)		(0.7	)
Balance – end of period	$	47.3		$	46.5
Balance sheet classification - end of period	Balance at 3/28/08			Balance at 3/30/07
Other accrued liabilities	$	22.9		$	23.9
Other long-term liabilities		24.4			22.6
Total product warranty liabilities	$	47.3		$	46.5

7. Stock Repurchase Programs

On January 24, 2008, our Board of Directors authorized a one-year extension of the purchase of our outstanding stock under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. We intend to continue to use cash generated by employee stock option exercises (other than those of company officers and board members) to repurchase stock in the manner provided under this program. As of March 28, 2008, we purchased 7.2 million shares of our common stock under this program since February 2006, at a total cost of $91.2 million, including $0.4 million (0.1 million shares) in the first quarter of 2008.

On July 31, 2006, our Board of Directors authorized a repurchase program of up to $300 million of our outstanding common stock. As of February 1, 2008, we purchased 37.0 million shares of our common stock under this program at a total cost of $300 million, completing this program. This total includes purchases of $29.9 million (4.6 million shares) in the first quarter of 2008.

On November 8, 2007, our Board of Directors authorized a new repurchase program of up to $600 million of our outstanding common stock. As of March 28, 2008, we purchased 16.8 million shares of our common stock under this program at a total cost of $111.5 million, leaving $488.5 million available to be purchased under this program.

We provide no assurance that we will continue our repurchase activity and we may change our repurchase activity in the future.

In addition, in the first quarter of 2008, we purchased 31,651 shares for $0.3 million to cover withholding taxes on shares issued under employee stock plans.

We record repurchased shares as Treasury stock.

8. Comprehensive Income

Comprehensive income (net of tax) for the first quarter of 2008 and 2007 consists of the following:

	First Quarter
	3/28/08			3/30/07
Net earnings	$	16.6		$	25.5
Other comprehensive income:
Foreign currency translation adjustments		34.4			4.4
Unrealized gain on available-for-sale securities		4.0			0.1
Fair value adjustments of cash flow hedges		(3.0	)		0.1
Comprehensive income	$	52.0		$	30.1

9. Fair Value Measurements

We adopted the provisions of SFAS 157, Fair Value Measurements and SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS 115, on December 29, 2007.

SFAS 157, Fair Value Measurements, defines fair value, establishes a fair value hierarchy that prioritizes the sources used to measure fair value and expands disclosures about fair value measurements. SFAS 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1 - Observable inputs such as quoted prices in active markets;

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• Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining fair value for recurring financial assets and liabilities, we separate our financial instruments into three categories: marketable securities, other marketable securities and stock loan and derivative financial instruments. These assets and liabilities are all valued based on the market approach that uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Marketable Securities

We use a third-party provider to determine fair values of our marketable securities. The third-party provider receives market prices for each marketable security from a variety of industry standard data providers, security master files from large financial institutions, and other third-party sources with reasonable levels of price transparency. The third-party provider uses these multiple prices as inputs into a pricing model to determine a weighted average price for each security. We classify our marketable securities as Level 2 based upon the other than quoted prices with observable market data. The type of instruments valued based upon the observable market data include U.S. and foreign government bonds, agency securities, state and municipal obligations, investment grade corporate bonds, certain mortgage and asset-backed bonds and certain bank securities.

Other Marketable Securities

We classify our holdings in other marketable securities (Cisco common stock) as a Level 1 of the fair value hierarchy because this common stock is an actively traded security that trades through a governed exchange.

Derivative Financial Instruments

Our foreign currency forward contracts are executed as exchange-traded. Market participants can be described as large money center or regional banks. Exchange-traded derivatives typically fall within Level 1 or Level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not.

We have elected to value our derivatives as Level 2, using observable market data at the measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted). Mid-market pricing is used as a practical expedient for fair value measurements. Key inputs for currency derivatives are the spot rate, interest rates and credit derivative markets. The spot rate for each currency is the same spot rate used for all balance sheet translations at the measurement date. The following values are calculated from commonly quoted intervals available from a third-party financial information provider. Forward points and LIBOR rates are used to calculate a discount rate to apply to our assets and liabilities. One-year credit default swap spreads are used to discount derivative assets, all of which have final maturities of less than 12 months. We calculate the discount to the derivative liabilities to reflect the potential credit risk to lenders and have used the spread over LIBOR based on the credit risk of our counterparties. Each asset is individually discounted to reflect our potential credit risk and we have used the spread over LIBOR based on similar credit risk. We do not adjust the fair value for immaterial credit risk.

We have applied a valuation method for our financial assets and liabilities and recurring non-financial assets consistently during this period and prior periods. The following table sets forth by level within the fair value hierarchy “Financial instruments owned at fair value.” As required by SFAS 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

			Fair Value Measurements at March 28, 2008
Description	Balance at 3/28/08		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Investments in marketable securities
U.S. government debt obligations	$	134.7	$	—	$	134.7	$	—
U.S. government-sponsored enterprise (agency) debt obligations		272.1		—		272.1		—
Municipal tax-exempt debt obligations		211.8		—		211.8		—
Corporate debt and asset-backed obligations		128.2		—		128.2		—
Foreign government debt obligations		154.0		—		154.0		—
Foreign bank and corporate debt obligations		63.5		—		63.5		—
Preferred and common stocks		17.4		—		17.4		—
Other marketable securities		254.3		254.3		—		—
Total Assets	$	1,236.0	$	254.3	$	981.7	$	—
Liabilities
Stock loan	$	254.3	$	254.3	$	—	$	—
Derivative financial instruments		0.7		—		0.7		—
Total Liabilities	$	255.0	$	254.3	$	0.7	$	—

Fair Value Option

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS 115. SFAS 159 allows a fair value option election for certain financial assets and liabilities with changes in fair value recognized in earnings as they occur. SFAS 159 allows the fair value option election on an instrument by instrument basis at initial recognition. We adopted the provisions of SFAS 159 on December 29, 2007. At December 29, 2007 (date of adoption) and March 28, 2008, we did not elect the fair value option election for any eligible financial assets and liabilities.

10. Derivative Financial Instruments

Financial Instruments and Market Risk

We conduct business on a global basis in U.S. and foreign currencies, so our financial results are subject to risks associated with fluctuating foreign exchange rates. To mitigate these risks, we have a foreign currency exposure management program, which uses derivative foreign exchange contracts to address nonfunctional currency exposures that are expected to be settled in one year or less. We enter into derivative foreign exchange contracts only to the extent necessary to meet our goal of mitigating nonfunctional foreign currency exposures. We do not enter into hedging transactions for speculative purposes. The derivative foreign exchange contracts consist of foreign currency forward and option contracts.

Derivative financial contracts involve elements of market and credit risk not recognized in the financial statements. The market risk that results from these contracts relates to changes in foreign currency exchange rates, which generally are offset by changes in the value of the underlying assets or liabilities being held. Credit risk relates to the risk of nonperformance by a counterparty to one of our derivative contracts. We do not believe there is a significant credit risk associated with our hedging activities because the counterparties are all large international financial institutions. We monitor the counterparties’ credit ratings and other market data to minimize our credit risk. In addition, we also limit the aggregate notional amount of agreements entered into with any one financial institution to mitigate credit risk.

Non-designated Hedges

We use derivative contracts to manage overall foreign currency exposures that are remeasured through income. We record these contracts on the balance sheet at fair value. Changes in the fair value of these contracts are included in earnings as part of Other

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income, net. We had a net gain of $0.4 million in the first quarter of 2008 and a negligible amount in the first quarter of 2007. Receivables resulting from the contracts are included in Miscellaneous receivables and other current assets, while payables from the contracts are included as part of Other accrued liabilities. We do not engage in hedging specific individual transactions.

Cash Flow Hedges

We use derivative contracts designated as cash flow hedges to mitigate currency risk related to an imbalance of nonfunctional currency denominated costs and related revenue. We conducted monthly effectiveness tests of our derivative contracts on a spot-to-spot basis, which excludes forward points. In the first quarter of 2008, we recorded a gain of $0.3 million related to forward points in Other income, net. Effective gains and losses from our derivative contracts are recorded in Accumulated other comprehensive income until the underlying transactions are realized, at which point they are reclassified to Other cost of revenue. Ineffectiveness of our derivative contracts is recorded to Other income, net. We did not have any ineffective derivative contracts in the first quarter of 2008. We recorded nominal ineffectiveness in the first quarter of 2007. If it becomes probable that an anticipated transaction, that is hedged will not occur, we immediately reclassify the gains or losses related to that hedge from Accumulated other comprehensive income to Other income, net. At March 28, 2008, we had an unrealized loss of $3.4 million in Accumulated other comprehensive income, which is expected to be reclassified to income within the next twelve months at the prevailing market rate. We held derivatives designated as cash flow hedges at the end of the quarter.

The following table summarizes the impact of cash flow hedges on Accumulated other comprehensive income:

	First Quarter
	3/28/08			3/30/07
Unrealized (loss) gain at beginning of period	$	(0.4	)	$	0.2
Net loss during the period		(3.3	)		(0.1	)
Reclassifications to expense		0.3			0.2
Unrealized (loss) gain at end of period	$	(3.4	)	$	0.3

11. Income Taxes

For the first quarter of 2008, we recorded tax expense of $7.3 million at an effective tax rate of 30.5% compared with a tax expense of $10.0 million and a rate of 28.2% for the first quarter of 2007. Our effective rate differs from the U.S. federal statutory rate of 35% due to the impact of generating a greater percentage of our earnings from foreign operations that are taxed at lower rates.

12. Operating Segments

We report operating results for three segments: Broadband, Transport and Services.

Our Broadband segment includes access, managed access and data product portfolios that facilitate the delivery of bundled voice, video and high-speed Internet/data services over copper-based and/or fiber-based networks and delivery of next-generation wireline and wireless services. Access offerings include the Tellabs^® 1000 multiservice access series, the Tellabs^® 1100 multiservice access series and the Tellabs^® 1600 optical network terminal (ONT) series. Managed access products include the Tellabs^® 2300 cable telephony distribution system, the Tellabs^® 6300 managed transport system and the Tellabs^® 8100 managed access system. Data products include the Tellabs^® 8600 managed edge system and the Tellabs^® 8800 multiservice router series.

Our Transport segment includes solutions that enable service providers to transport service and manage optical bandwidth by adding capacity when and where it’s needed. Wireline and wireless carriers use these products within the metropolitan portion of their transport networks to support wireless services, business services for enterprise customers, and triple-play voice, video and data services for residential customers. Product offerings include the Tellabs^® 3000 voice quality enhancement products, the Tellabs^® 5000 series of digital cross-connect systems, the Tellabs^® 5500 NGX transport switch and the Tellabs^® 7100 optical transport system (OTS).

Our Services segment delivers deployment, support, professional consulting, training and systems integration services to our customers. These services support all phases of the network: planning, building and operating.

We define segment profit (loss) as gross profit less research and development expenses. Segment profit excludes sales and marketing expenses, general and administrative expenses, the amortization of purchased deferred stock compensation and intangibles, restructuring and other charges, and the impact of equity-based compensation (which includes restricted stock and performance stock units granted after June 30, 2006, and stock options).

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Financial information for each operating segment is as follows:

Revenue

	First Quarter
	3/28/08		3/30/07
Broadband	$	202.1	$	218.7
Transport		205.9		191.3
Services		56.1		41.9
Total segment revenue	$	464.1	$	451.9

Segment Profit (Loss) and Reconciliation to Operating Earnings

	First Quarter
	3/28/08			3/30/07
Broadband	$	8.7		$	(14.8	)
Transport		79.2			110.9
Services		13.7			9.9
Total segment profit		101.6			106.0
Sales and marketing expenses		(43.4	)		(45.8	)
General and administrative expenses		(26.1	)		(26.6	)
Equity-based compensation and deferred stock compensation not included in segment profit		(4.4	)		(4.6	)
Intangible asset amortization		(5.6	)		(5.6	)
Restructuring and other charges		(8.7	)		—
Operating earnings	$	13.4		$	23.4

Our segments use many of the same assets. For internal reporting purposes, we do not allocate assets by segment and therefore no asset, depreciation and amortization, or capital expenditure by segment information is provided to our chief operating decision maker.

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

Introduction and Overview of Business

Tellabs designs, develops, deploys and supports telecommunications networking products around the world. Our product portfolio includes solutions for wireline and wireless transport, access networking, broadband data, optical transport and voice-quality enhancement.

We generate revenue principally through the sale of telecommunication products, both as stand-alone products and as elements of integrated systems, to communications service providers worldwide. We also generate revenue by providing services related primarily to our own products and systems.

Our Broadband segment includes the access, managed access and data product portfolios that facilitate the delivery of bundled triple-play services and next-generation wireline and wireless services. We earn revenue from our Broadband segment globally. Revenue from our access products is earned primarily in North America for the support of copper-based and fiber-based networks. Access product revenue is driven by consumer demand for the triple-play of bundled voice, video and high-speed Internet/data services in addition to competition among traditional telecommunications companies and cable service operators to be the sole provider of triple-play services. Revenue for our managed access products is earned primarily outside North America. Managed access product revenue is driven by business services for voice and high-speed data as well as network access services for wireless communications. Revenue from our data products is earned globally. Data product revenue is driven by consumer demand for wireless and wireline carriers to deliver business services and next-generation wireless services.

Our Transport segment includes digital cross-connect systems, converged transport systems and voice quality enhancement products. These products enable service providers to manage bandwidth, improve voice quality and transport traffic by adding capacity when and where it is needed. Revenue from our Transport segment is primarily earned in North America. Transport product revenue is driven by the needs of service providers to support wireless services, business services for enterprises and triple-play voice, video and data services for consumers.

Our Services segment delivers deployment, support, professional consulting, training and systems integration services to Tellabs customers. These services support various phases of the network including planning, installation and on-going support. Revenue from our Services segment is earned globally. Deployment service revenue makes up almost half of our Services revenue, which arises primarily from sales of our transport products in North America, and tends to lag product sales by approximately one fiscal quarter. In addition, revenue comes from support agreements, professional consulting and training.

We operate in a dynamic industry in which both our customers and competitors have consolidated, creating more pricing pressure.

In the first quarter of 2008, North American wireless customers purchased at reduced levels, particularly the Tellabs^® 5500 digital cross-connect system, thus adversely affecting our overall revenue and profitability. It is not clear whether or when these customers will resume spending at previous levels.

We are transforming the company from a business based primarily on the circuit-switched Time Division Multiplexing (TDM) technology used in our digital cross-connect and managed access products to a business based on packet-switching and Internet Protocol (IP) technology used in our converged transport, access and multi-service data products. These products are taking root as service providers transform their networks to next-generation capabilities. Some of these products carry gross profit margins lower than our historical average. The mix of our products can affect overall profitability in any given quarter.

On April 2, 2008, we announced the discontinuation of our gigabit passive optical network (GPON) next-generation fiber access activities with one large North American carrier. We also announced, on April 8, 2008, the discontinuation of our investment in the Tellabs^® 8865 GPON optical line terminal (OLT) for fiber access networks, for which this carrier was the initial targeted customer. While our fiber access revenues declined in the first quarter, we have a strong embedded base of fiber access equipment in carrier networks and remain committed to the fiber access business, including the Tellabs^® 1100 multi-service access products, which include GPON capabilities.

Management continues to prepare and implement initiatives to improve our overall performance. On January 21, 2008, we committed to a plan to bring our operating expenses as well as our cost to produce products and deliver services in line with our current revenue and market conditions. On April 30, 2008, our management initiated a plan to consolidate several of our facilities as a result of the discontinuation of the Tellabs^® 8865 OLT and headcount reductions announced in September 2007 and January 2008. To further improve financial performance and fund growth initiatives, we plan to free up resources to create innovative products and services that help our customers succeed.

In accordance with the provisions of SFAS 142, Goodwill and Other Intangible Assets, we review goodwill annually for impairment, unless potential interim indicators exist that could result in an impairment. Our market capitalization has continued to be under our book value per share throughout 2008. Should our market capitalization not sufficiently recover, we may perform an interim step one review of our goodwill during the second quarter of 2008. If such review indicates our carrying value is greater than the fair value, we will complete a step two analysis and determine if a goodwill impairment is necessary. At this time, we cannot estimate the impact, if any, an impairment may have on our financial statements.

RESULTS OF OPERATIONS

For the first quarter of 2008, our revenue was $464.1 million, up 2.7% from $451.9 million in the first quarter of 2007. Revenue growth in our Transport and Services segments was partially offset by a decline in our Broadband segment.

Consolidated gross margin decreased 2.8 percentage points to 38.3% in the first quarter, compared with 41.1% in the first quarter of 2007. The impact from a product-mix shift was partially offset by cost reductions.

Operating expenses increased by $2.0 million to $164.5 million in the first quarter of 2008, compared with $162.5 million in the first quarter of 2007. Expenses from restructuring activities were partially offset by cost reductions.

Net earnings for the first quarter of 2008 were $16.6 million or $0.04 per share (basic and diluted) compared with $25.5 million or $0.06 per share (basic and diluted) in the same period of 2007.

Revenue (in millions)

	First Quarter
	2008		2007		Change
Products	$	408.0	$	410.0	$	(2.0	)
Services		56.1		41.9		14.2
Total revenue	$	464.1	$	451.9	$	12.2

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Revenue from products decreased $2.0 million in the first quarter of 2008 compared with the first quarter of 2007. The decrease in the quarter was due to lower Broadband segment revenue partially offset by higher Transport segment revenue. Broadband segment revenue was lower from our access and managed access products, partially offset by higher revenue from data products. Revenue from our Transport segment was higher from our Tellabs^® 7100 optical transport systems (OTS), partially offset by lower revenue from our Tellabs^® 5500 digital cross-connect.

Services revenue increased $14.2 million in the first quarter of 2008 compared with the same period in 2007. During the quarter, our revenue increased from professional services, deployment and support services.

On a geographic basis, revenue from customers in North America was $349.5 million in the first quarter of 2008, up 2.4% from a year ago. Revenue from customers outside North America was $114.6 million in the first quarter of 2008, up 3.7% from a year ago.

Gross Margin

	First Quarter
	2008		2007		% Point Change
Products	40.5	%	43.2	%	(2.7	)%
Services	22.6	%	21.2	%	1.4	%
Consolidated	38.3	%	41.1	%	(2.8	)%

Our products margin decreased in the first quarter compared with the same period in 2007. The decrease was primarily due to a product mix shift, which contained fewer Tellabs^® 5500 digital cross-connects and more Tellabs^® 7100 OTS, partially offset by cost improvements, including lower product warranty costs.

Our services margin increased in the first quarter of 2008 compared with the first quarter of 2007, primarily due to increased revenue from higher-margin professional services.

Operating Expenses (in millions)

	First Quarter							Percent of Revenue
	2008		2007		Change			2008		2007
Research and development	$	80.7	$	84.5	$	(3.8	)	17.4	%	18.7	%
Sales and marketing		43.4		45.8		(2.4	)	9.4	%	10.1	%
General and administrative		26.1		26.6		(0.5	)	5.6	%	5.9	%
Subtotal		150.2		156.9		(6.7	)	32.4	%	34.7	%
Intangible asset amortization		5.6		5.6		—
Restructuring and other charges		8.7		—		8.7
Total operating expenses	$	164.5	$	162.5	$	2.0

Operating expenses increased by $2.0 million to $164.5 million in the first quarter of 2008, compared with $162.5 million in the first quarter of 2007. Total operating expenses increased due to our restructuring and other charges for the first quarter of 2008. These charges were for severance and facility-related costs and reflect our $100 million cost-reduction program, announced in the first quarter of 2008, to better align our operating expenses with current revenue and market conditions.

All other categories of operating expenses decreased this quarter compared to the prior year quarter, as a result of headcount reductions and other cost savings associated with the $100 million cost-reduction program.

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Other Income (in millions)

	First Quarter
	2008		2007		Change
Interest income, net	$	9.9	$	11.8	$	(1.9	)
Other income, net		0.6		0.3		0.3
Total other income	$	10.5	$	12.1	$	(1.6	)

Interest income, net, was lower in the first quarter of 2008 compared with the first quarter of 2007 due to lower invested balances and lower interest rates. Other income, net was higher in the first quarter of 2008 due primarily to net gains of $1.4 million from the sale of investments in marketable securities and $0.3 million from the sale of a long-term equity investment. Our gains were partially offset by a charge of $0.8 million for an other-than-temporary impairment from investments in marketable securities and a charge of $0.6 million for the write-down of a long-term equity investment.

Income Taxes

Our effective tax rate was 30.5% for the first quarter of 2008, compared with a rate of 28.2% in the first quarter of 2007. The change in our rate was primarily attributable to the exclusion of a benefit for U.S. research and development credits in the current year due to the expiration of the statute, partially offset by a shift in earnings to lower tax jurisdictions.

Segments

Segment Revenue (in millions)

	First Quarter
	2008		2007		Change
Broadband	$	202.1	$	218.7	(7.6	)%
Transport		205.9		191.3	7.6	%
Services		56.1		41.9	33.9	%
Total segment revenue	$	464.1	$	451.9	2.7	%

Segment Profit (Loss)* (in millions)

	First Quarter
	2008		2007			Change
Broadband	$	8.7	$	(14.8	)	NM
Transport		79.2		110.9		(28.6	)%
Services		13.7		9.9		38.4	%
Total segment profit	$	101.6	$	106.0		(4.2	)%

* We define segment profit (loss) as gross profit less research and development expenses. Segment profit excludes sales and marketing expenses, general and administrative expenses, the amortization of purchased deferred stock compensation and intangibles, restructuring and other charges, and the impact of equity-based compensation (which contains restricted stock and performance stock units granted after June 30, 2006, and stock options).

Broadband

Revenue

Revenue from our Broadband segment was $202.1 million in the first quarter of 2008, down $16.6 million from the prior-year quarter. Revenue declines from our access and managed access products were partially offset by growth from our data products.

First quarter access revenue decreased to $99.9 million in 2008 from $121.2 million in 2007. Access revenue was lower for the quarter for copper-based platforms and from one major customer transitioning from a broadband passive optical network (BPON) to a gigabit passive optical network (GPON). Our access revenue decrease was partially offset by higher revenue from our optical network terminal (ONT). Approximately 69% of access revenue came from fiber-based platforms in the first quarter of 2008, with the balance coming from copper-based platforms.

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Managed access revenue declined to $58.8 million in the first quarter of 2008 from $68.7 million in the same quarter of 2007. Revenue decreased in the quarter due to lower demand for our Tellabs^® 8100 managed access system primarily in the EMEA region, that was partially offset by higher revenue from our Tellabs^® 6300 SDH transport products from a diversified customer base.

Data product revenue was $43.4 million in the first quarter of 2008, up 50.7% from $28.8 million in the first quarter of 2007. Our data product revenue increased from new customers in several geographic regions outside North America for wireless backhaul applications and from existing customers in North America.

Segment Profit (Loss)

Our Broadband segment profit was $8.7 million in the first quarter of 2008, compared with a loss of $14.8 million in the first quarter of 2007. The increase in our segment profit for the quarter was primarily due to lower product costs and lower expenses from a reduction in headcount, partially offset by lower revenue.

Transport

Revenue

Revenue from our Transport segment grew by $14.6 million to $205.9 million in the first quarter of 2008, compared with $191.3 million in the first quarter of 2007. Our revenue growth in the quarter was driven by the continued rollout of our Tellabs^® 7100 OTS with a reconfigurable optical add/drop multiplexer (ROADM) and a new network buildout we began this year with a major North American service provider. This growth was partially offset by lower revenue from our Tellabs^® 5500 digital cross-connects.

During the first quarter of 2008, approximately 44% of the Tellabs^® 5500 digital cross-connect product revenue came from new systems, system expansions and system upgrades. The remaining balance of 56% consisted of port-card growth on the installed base. We shipped approximately 2.3 million T-1 equivalents during the first quarter of 2008 and approximately 2.4 million T-1 equivalents during the first quarter of 2007.

Segment Profit

Our Transport segment profit was $79.2 million in the first quarter of 2008, down from $110.9 million in the first quarter of 2007. The decrease for the quarter was due to a product mix shift, which contained fewer Tellabs^® 5500 digital cross-connects and other mature Transport products and more Tellabs^® 7100 optical transport systems.

Services

Revenue

Revenue from our Services segment grew by $14.2 million to $56.1 million for the first quarter of 2008, compared with $41.9 million in the first quarter of 2007. During the quarter, our revenue increased from professional services, as well as deployment and support services that include revenue for the rollout of our Tellabs^® 7100 optical transport systems.

Segment Profit

Our Services segment profit was $13.7 million for the first quarter of 2008, up $3.8 million from the first quarter of 2007. The increase for the first quarter was due to higher revenue, including higher-margin professional and support services.

Financial Condition, Liquidity & Capital Resources

Our principal source of liquidity remained our cash, cash equivalents and marketable securities of $1,153.8 million as of the end of the first quarter of 2008, which decreased by $64.7 million during the quarter. The decrease in the first quarter was primarily driven by cash used to repurchase our common stock, partially offset by cash from operating activities for the quarter of $82.1 million.

During the first quarter of 2008, we repurchased a total of 21.5 million shares of our common stock at a cost of $141.8 million. Our repurchases include $111.5 million under our $600 million repurchase program, $29.9 million under our $300 million share repurchase program and $0.4 million under our 10b5-1 share repurchase program. During the first quarter we completed our $300 million share repurchase program.

Since 2005, we repurchased 92.9 million shares of our common stock at a cost of $802.7 million under all stock repurchase programs.

We provide no assurance that we will continue our repurchase activity and we may change our repurchase activity in the future.

Based on historical performance and current forecasts, we believe that our cash and marketable securities will satisfy our working capital needs, capital expenditures and other liquidity requirements related to our existing operations for the next twelve months. Future available sources of working capital, including cash, cash equivalents, marketable securities, cash generated from future operations, short-term or long-term financing, equity offerings or any combination of these sources, should allow us to meet our long-term liquidity needs. Our current policy is to use our liquidity, financial strength and stability to expand our business, potentially through acquisitions, to repurchase our common stock and to fund our business operations. We do not anticipate paying a cash dividend.

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Subsequent Event

On April 30, 2008, our management initiated a plan to consolidate several of our facilities as a result of the discontinuation of the Tellabs^® 8865 optical line terminal and headcount reductions announced in September 2007 and January 2008. Restructuring actions under this plan are expected to be completed by the end of 2008. We expect to record pretax restructuring charges of approximately $13 million during 2008, primarily from facilities reductions and fixed asset write downs. Estimated cash payments under this plan are expected to be in the range of $5 million to $6 million beginning in the fourth quarter of 2008 and will continue for net lease obligations that expire in 2014. We anticipate a second quarter 2008 non-cash charge of approximately $6 million.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

There were no material changes in our critical accounting policies during the quarter.

Outlook for Second Quarter

We expect second quarter revenue to be in the range of $425 million to $445 million. We expect gross margin for the second quarter to be 31%, plus or minus, as a result of product mix. We expect our second quarter 2008 operating expenses, excluding restructuring charges, to be about flat to slightly down compared with the first quarter of 2008.

Forward-Looking Statements

This Management’s Discussion and Analysis and other sections of this Form 10-Q, including the statements under the caption “Outlook for Second Quarter”, contain 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 current and available information 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,” “project,” “intend,” “likely,” “will,” “should,” “could,” “may,” “foreseeable,” “would” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause our actual performance or achievements to be materially different from any future results, performance or achievements expressed or implied by those statements. Important factors that could cause our actual results to differ materially from those in forward-looking statements include, but are not limited to: economic changes impacting the telecommunications industry; financial condition of telecommunications service providers and equipment vendors, including any impact of bankruptcies; the impact of customer and vendor consolidation; new product acceptance; product demand and industry capacity; competitive products and pricing; competitive pressures from new entrants to the telecommunications industry; initiatives to improve profitability that may have financial consequences including further restructuring charges, exiting businesses and product areas; impairment charges and other cost cutting initiatives and related charges and costs; manufacturing efficiencies; research and new product development; protection of and access to intellectual property, patents and technology; ability to attract and retain highly qualified personnel; availability of components and critical manufacturing equipment and capacity; foreign economic conditions, including currency rate fluctuations; the regulatory and trade environment; the impact of new or revised accounting rules or interpretations, including revenue recognition requirements; availability and terms of future acquisitions; divestitures and investments; uncertainties relating to synergies; charges and expenses associated with business combinations and other transactions; and other risks and future factors that may be detailed from time to time in the Company’s filings with the SEC. Our actual future results could differ materially from those predicted in such forward-looking statements. In light of the foregoing risks, uncertainties and other factors, investors should not place undue reliance on forward-looking statements in determining whether to buy, sell or hold any of our securities. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the operations, performance, development and results of our business. We undertake no obligation to publicly update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to future results over time. The foregoing discussion should be read in conjunction with the risk factors, financial statements and related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 28, 2007.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of March 28, 2008, there were no material changes to our market risks disclosure in our Annual Report on Form 10-K for the year ended December 28, 2007.

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 28, 2008. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There were no changes during the period covered by this Form 10-Q in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Makor Issues & Rights, Ltd. v. Tellabs, Inc. On June 18, 2002, a class action complaint was filed in the United States District Court of the Northern District of Illinois against Tellabs, Michael Birck (Chairman of the Board of Tellabs) and Richard Notebaert (former CEO, President and Director of Tellabs). Thereafter, eight similar complaints were also filed in the United States District Court of the Northern District of Illinois. All nine of these actions were subsequently consolidated, and on December 3, 2002, a consolidated amended class action complaint was filed against Tellabs, Mr. Birck, Mr. Notebaert, and certain other of our current or former officers and/or directors. The consolidated amended complaint alleged that during the class period (December 11, 2000-June 19, 2001) the defendants violated the federal securities laws by making materially false and misleading statements, including, among other things, allegedly providing revenue forecasts that were false and misleading, misrepresenting demand for our products, and reporting overstated revenue for the fourth quarter 2000 in our financial statements. Further, certain of the individual defendants were alleged to have violated the federal securities laws by trading our securities while allegedly in possession of material, non-public information about us pertaining to these matters. The consolidated amended complaint seeks unspecified restitution, damages and other relief.

On January 17, 2003, Tellabs and the other named defendants filed a motion to dismiss the consolidated amended class action complaint in its entirety. On May 19, 2003, the Court granted our motion and dismissed all counts of the consolidated amended complaint, while affording plaintiffs an opportunity to replead. On July 11, 2003, plaintiffs filed a second consolidated amended class action complaint against Tellabs, Messrs. Birck and Notebaert, and many (although not all) of the other previously named individual defendants, realleging claims similar to those contained in the previously dismissed consolidated amended class action complaint. We filed a second motion to dismiss on August 22, 2003, seeking the dismissal with prejudice of all claims alleged in the second consolidated amended class action complaint. On February 19, 2004, the Court issued an order granting that motion and dismissed the action with prejudice. On March 18, 2004, the plaintiffs filed a Notice of Appeal to the United States Federal Court of Appeal for the Seventh Circuit, appealing the dismissal. The appeal was fully briefed and oral argument was heard on January 21, 2005. On January 25, 2006, the Seventh Circuit issued an opinion affirming in part and reversing in part the judgment of the district court, and remanding for further proceedings. On February 8, 2006, defendants filed with the Seventh Circuit a petition for rehearing with suggestion for rehearing en banc. On April 19, 2006, the Seventh Circuit ordered plaintiffs to file an answer to the petition for rehearing, which was filed by the plaintiffs on May 3, 2006. On July 10, 2006, the Seventh Circuit denied the petition for rehearing with a minor modification to its opinion, and remanded the case to the district court. On September 22, 2006, defendants filed a motion in the district court to dismiss some (but not all) of the remaining claims. On October 3, 2006, the defendants filed with the United States Supreme Court a petition for a writ of certiorari seeking to appeal the Seventh Circuit’s decision. On January 5, 2007, the defendants’ petition was granted. The United States Supreme Court heard oral arguments on March 28, 2007. On June 21, 2007, the United States Supreme Court vacated the Seventh Circuit’s judgment and remanded the case for further proceedings. On November 1, 2007, the Seventh Circuit heard oral arguments for the remanded case. On January 17, 2008, the Seventh Circuit issued an opinion adhering to its earlier opinion reversing in part the judgment of the district court, and remanded the case to the district court for further proceedings. We believe that we have valid defenses to the lawsuit.

Brieger v. Tellabs, Inc. On April 5, 2006, a class action complaint was filed in the United States District Court of the Northern District of Illinois against Tellabs, Michael Birck, Richard Notebaert and current or former Tellabs employees who, during the alleged class period of December 11, 2000, to July 1, 2003, participated on the Tellabs Investment and Administrative Committees of the Tellabs, Inc. Profit Sharing and Savings Plan (“Plan”). Thereafter, two similar complaints were filed in the United States District Court of the Northern District of Illinois.

The complaints allege that during the alleged class period, the defendants allegedly breached their fiduciary duties under the Employee Retirement Income Security Act by, among other things, continuing to offer Tellabs common stock as a Plan investment option when it was imprudent to do so and allegedly misrepresenting and failing to disclose material information necessary for Plan participants to make informed decisions concerning the Plan. Further, certain of the defendants allegedly failed to monitor the fiduciary activities of the fiduciaries they appointed and certain of the defendants allegedly breached their duty of loyalty by trading Tellabs stock, while taking no protective action on behalf of Plan participants. The complaints seek unspecified restitution, damages and other relief.

On June 28, 2006, the Court consolidated all three actions and on August 14, 2006, plaintiffs filed a consolidated class action complaint. On September 15, 2006, defendants filed a Motion to Dismiss, or in the Alternative, for Summary Judgment seeking the

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dismissal with prejudice of all claims in the consolidated amended class action complaint. On February 13, 2007, the court denied defendants’ motion and on April 17, 2007, denied Tellabs’ motion for leave to certify an issue for interlocutory appeal to the United States Federal Court of Appeal for the Seventh Circuit. Plaintiffs moved to certify a class, discovery was conducted to determine the propriety of class certification, and Tellabs opposed class certification. On September 20, 2007, the court granted plaintiff’s motion to certify a class. Merits discovery is now proceeding, and a trial is currently scheduled for October 20, 2008. We believe that we have valid defenses to the lawsuit.

QPSX Developments 5 Pty Ltd. v. Ciena Corporation et al. On October 1, 2007, Tellabs was served with a complaint filed in the United States District Court for the Eastern District of Texas against Tellabs and several other companies in a case captioned QPSX Developments 5 Pty Ltd. v. Ciena Corporation et al., Civil Action No. 2:07-cv-118. The complaint alleges infringement of U.S. Patent No. 5,689,499, and seeks unspecified damages including enhanced damages, as well as interest, costs, attorney fees and other remedies including injunctive relief. On November 21, 2007, Tellabs filed its answer, defenses and counterclaims in response to the complaint. We believe that we have valid defenses to the lawsuit.

Fujitsu Network Communications Inc. v. Tellabs, Inc. On January 28, 2008, Fujitsu Network Communications, Inc. and Fujitsu Limited filed a complaint in the United States District Court for the Eastern District of Texas against Tellabs in a case captioned Fujitsu Network Communications, Inc. and Fujitsu Limited v. Tellabs, Inc. and Tellabs Operations, Inc., Civil Action No. 6:08-cv-00022-LED. The complaint alleges infringement of U.S. Patent Nos. 5,526,163, 5,521,737, 5,386,418 and 6,487,686, and seeks unspecified damages including enhanced damages, as well as attorney fees and other remedies including injunctive relief. On March 21, 2008, Tellabs filed its answer, defenses and counterclaims in response to the complaint. We believe that we have valid defenses to the lawsuit.

Fenner Investments, Ltd. v. 3COM Corp. et al. On February 26, 2008, Fenner Investments, Ltd. (“Fenner”) instituted in the United States District Court for the Eastern District of Texas, Tyler Division, an action alleging patent infringement in a case captioned Fenner Investments, Ltd. v. 3COM Corp. et al., Civil Action No. 08-CV-00061 (“the Fenner litigation”). On February 28, 2008, Fenner filed Plaintiff’s First Amended Complaint for Patent Infringement (“the First Amended Complaint”) adding additional defendants to the Fenner litigation, including Tellabs, Inc. and Tellabs North America, Inc. (“the Tellabs defendants”). The First Amended Complaint alleged infringement of U.S. Patent No. 7,145,906 (“the ‘906 patent”), and sought unspecified damages including enhanced damages, as well as interest, costs, attorney fees and other remedies including injunctive relief. On April 21, 2008, the Court granted an Unopposed Joint Motion, ordering Fenner to file a Second Amended Complaint on or before May 2, 2008. At the same time, the Court gave the defendants until May 16, 2008 to answer or otherwise respond to the Second Amended Complaint. Fenner’s Second Amended Complaint alleges that all defendants are infringing the ‘906 patent and that at least certain individual ones of the defendants, not including the Tellabs defendants, are infringing U.S. Patent 5,842,224 (“the ‘224 patent”). Fenner’s Second Amended Complaint also seeks unspecified damages, as well as interest, costs, attorney fees and other remedies including injunctive relief. Fenner served the Second Amended Complaint on Tellabs on May 6, 2008, and Tellabs is first reviewing Fenner’s Second Amended Complaint and intends to answer or otherwise respond to the Second Amended Complaint by May 16, 2008.

Apart from the matters described above, we are subject to various legal proceedings, claims and litigation arising in the ordinary course of business. Based on our historical experience for these types of litigation, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our results of operations, financial position or cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 28, 2007. The risk factors described in our Annual Report could materially adversely affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently consider immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Common Stock:

Period of Purchases	Total Number of Shares Purchased	Average Purchase Price Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Remaining Dollar Value of Shares Available to be Purchased Under the Programs (in millions) (1)
12/29/07 through 2/1/08	5,046,445	$	6.49	5,046,445	$	597.2
2/2/08 through 2/29/08	16,424,792	$	6.64	16,424,792	$	488.5
3/1/08 through 3/28/08	11,247	$	6.34	11,247	$	488.5
Total	21,482,484	$	6.60	21,482,484

(1) The amounts in this column represent the remaining amounts under the current $600 million program described below and does not include amounts remaining under the $300 million program, also described below, which was completed January 2008. The Rule10b5-1 repurchase program described below does not have a repurchase amount limit; therefore, it is not included in the remaining value of shares.

On January 24, 2008, our Board of Directors authorized a one-year extension of the purchase of our outstanding stock under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. We intend to continue to use cash generated by employee stock option exercises (other than those of company officers and board members) to repurchase stock in the manner provided under this program. As of March 28, 2008, we purchased 7.2 million shares of our common stock under this program at a total cost of $91.2 million, including $0.4 million (0.1 million shares) in the first quarter of 2008.

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On July 31, 2006, our Board of Directors authorized a repurchase program of up to $300 million of our outstanding common stock. As of February 1, 2008, we purchased 37.0 million shares of our common stock under this program at a total cost of $300 million, completing this program. This includes purchases of $29.9 million (4.6 million shares) in the first quarter of 2008.

On November 8, 2007, our Board of Directors authorized a repurchase program of up to $600 million of our outstanding common stock. As of March 28, 2008, we purchased 16.8 million new shares of our common stock under this program at a total cost of $111.5 million, leaving $488.5 million available to be purchased under this program.

We provide no assurance that we will continue our repurchase activity and we may change our repurchase activity in the future.

In addition, in the first quarter of 2008, we purchased 31,651 shares for $0.3 million to cover withholding taxes on shares issued under employee stock plans.

We record repurchased shares as Treasury stock.

Item 4. Submission of Matters to a Vote of Security Holders

We held our annual meeting of stockholders on April 24, 2008. The following directors were re-elected to serve until the annual meeting of stockholders in 2011:

Director	For	Against	Abstain
Frank Ianna	349,456,985	5,157,694	3,253,748
Stephanie Pace Marshall	334,876,577	19,763,073	3,228,777
William F. Souders	345,613,641	8,920,457	3,334,329

The following directors continued to hold office after the annual meeting: Bo Hedfors, Michael E. Lavin, Jan H. Suwinski, Michael J. Birck, Fred A. Krehbiel, Robert W. Pullen and Linda Beck.

Our stockholders voted to approve the proposal to approve the amended and restated 2004 Incentive Compensation Plan in accordance with the following vote:

For	Against	Abstain
252,219,187	44,209,051	3,110,935

Our stockholders voted to approve the proposal to ratify the appointment of Ernst & Young LLP, independent registered public accounting firm, as our independent auditors for 2008 in accordance with the following vote:

For	Against	Abstain
351,143,567	3,701,696	3,023,165

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Item 6. Exhibits

(A) Exhibits

10.43	Letter Agreement with Steve McCarthy
10.44	Executive Performance Stock Units Award Statement.
10.45	Letter Agreement with Carl DeWilde
11	Computation of Per Share Earnings
31.1	CEO Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2	CFO Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1	CEO Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.2	CFO Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TELLABS, INC.
(Registrant)
	/s/ Thomas P. Minichiello
	Thomas P. Minichiello
	Vice President of Finance and Chief Accounting Officer
	(Principal Accounting Officer and duly authorized officer)
	May 6, 2008
	(Date)

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EX-10.43

Exhibit 10.43

August 27, 2007

Mr. Stephen M. McCarthy

Re:    Agreement and General Release

Dear Steve,

This Letter Agreement, including the General Release contained in Attachment A (collectively, the “Agreement”), confirms our understanding concerning your retirement from Tellabs, Inc. and any and all of its subsidiaries (hereinafter collectively referred to as “Tellabs”). The parties are entering into this Agreement as a final and complete resolution of all matters relating to your employment at Tellabs. In consideration of the mutual covenants and promises herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, and to avoid any dispute, it is agreed by and between the parties as follows:

1. We mutually agree that you are voluntarily retiring from Tellabs as Executive Vice President Global Sales & Services, Tellabs, Inc., effective December 28, 2007 (Retirement Date). Tellabs has agreed that your last day of work will be August 22, 2007 and you have agreed that you are resigning your officer positions with Tellabs effective August 22, 2007. You will remain on payroll through the Retirement Date and may be called upon during this time to assist the Company transition your duties and responsibilities.

2. Tellabs will provide you with a total lump sum payment of $344,500.00 (the equivalent of your annual base salary) subject to appropriate taxes and withholdings which will be deducted from this payment. The lump sum payment will be made on December 28, 2007, so long as you have delivered an executed copy of this Agreement to Tellabs and not exercised your right of revocation as described in paragraph 17 below.

3. The value of any earned but not taken vacation time as of your Retirement Date will be paid in a lump sum after your Retirement Date.

4. Provided you execute and do not revoke the Agreement, you will be credited with additional service for the purpose of determining your benefits under the Tellabs Stock Option Plan. Pursuant to the Tellabs Stock Option Plan, 50% of your

Confidential – Agreement and General Release – Page 1 of 8

unvested equity (RSU’s and stock options) will vest as of the Retirement Date and you will have 3 years to exercise all of your vested options, or until the original option expiration date, whichever is earlier. No PSU’s will vest. You will, however, continue to remain bound by all laws relating to transactions involving company stock, including but not limited to laws prohibiting the sale of stock while in the possession of material non-public inside information. In the event of any conflict between this paragraph and the provisions of the Tellabs Stock Option Plan, the terms of the Tellabs Stock Option Plan shall govern; provided, however, that nothing in the Tellabs Stock Option Plan shall be construed to conflict with the credit of additional service for purposes of vesting 50% of your unvested equity.

5. You will cease to be eligible for any Tellabs benefits (other than those specifically described herein) as of the Retirement Date. Provided you execute and do not revoke the Agreement, you will treated for the purpose of determining your eligibility and benefits under the Tellabs Retiree Medical Plan, as accumulating 70 points. Based on this status, you understand that you have the following options: (a) You have met the eligibility requirements for and may therefore enroll in the Retiree Medical Plan. Information regarding this plan will be sent to you by the Benefits Department under separate cover. You must complete the enrollment form and return it to Deb Ragusa within 31 days of your Retirement Date to enroll in the Plan. (b) You may elect, in accordance with the federal statute (COBRA), to continue your medical, dental and/or vision benefits for up to 18 months following your Retirement Date. You have the option of enrolling in the Retiree Medical Plan for your medical benefits and, enrolling in dental and/or vision through COBRA. If you choose to enroll in medical benefits through COBRA rather than Retiree Medical, you will not be eligible to enroll in the Retiree Medical Plan at a later date. Tellabs will pay the cost of Retiree Medical for you through December 31, 2008. Cost associated with continuation of coverage after December 31, 2008 and for all dental and/or vision coverage will be your responsibility. Please contact Deb Ragusa, Manager, Benefits, for information on the COBRA and Retiree Medical Plans.

6. Your Tellabs Advantage Program vesting will be calculated based on your Retirement Date.

7. You are required to submit a final expense report, settle any company advances, and return all Tellabs property, including credit cards and files, prior to September 7, 2007.

Confidential – Agreement and General Release – Page 2 of 8

8. You have agreed that you will not criticize or in any way disparage Tellabs, its subsidiaries and any of their officers, directors, employees or agents. Tellabs agrees that it will comply with company guidelines regarding standard references.

9. You agree to continue to be bound by the terms of the Confidentiality Agreement and Intellectual Property Agreement signed by you during your employment with Tellabs. You agree to keep all company proprietary information confidential.

10. You acknowledge that the benefits provided in this Agreement exceed the benefits you would normally receive and that those extra benefits are provided by Tellabs in exchange for you agreeing to the terms and conditions of this Agreement, including the General Release contained in Attachment A.

11. You agree that without written consent of Tellabs, you will not disclose, disseminate or publicize or cause or permit to be disclosed, disseminated or publicized, any of the terms of this Agreement or the fact that you have entered into this Agreement to any person, corporation, association, governmental agency or other entity other than your legal counsel, accountants, immediate family members and bona fide potential employers and except as required by law and as necessary to enforce the terms of this Agreement. You agree that any such legal counsel, accountants, family members and/or bona fide potential employers shall be bound by this confidentiality provision.

12. You agree to cooperate with Tellabs in any current or future litigation or potential litigation or other legal matters in any reasonable manner as Tellabs may request, including but not limited to meeting with and fully and truthfully answering the questions of Tellabs or its representatives or agents, and testifying and preparing to testify at any deposition or trial, subject to reimbursement for reasonable expenses incurred as a result of such cooperation.

13. You agree that for a period of twelve months following the Retirement Date, you will not, directly or indirectly, on your own behalf or on behalf of any other person or entity,

(i) perform any services or acts for yourself or any person or entity who is in competition with any business, services or products being offered for sale or produced by Tellabs or of any of its subsidiaries (including but not limited to, data, voice or video transport, switching/routing, network access system and/or voice quality enhancement products or solutions to service providers or end users);

Confidential – Agreement and General Release – Page 3 of 8

(ii) own an interest in participate in or be connected as an owner, partner, stockholder, employee, director, officer, agent, consultant or otherwise, with or without compensation, any corporation, partnership, proprietorship, firm, association, person, or other entity producing, providing, or soliciting business which directly or indirectly competes with the services and business of Tellabs or any subsidiary;

(iii) solicit for employment, or employ or retain, any person who was employed by Tellabs or any of its subsidiaries (other than persons employed in a clerical or other non-professional position) within the twelve-month period preceding the date of such hiring; or

(iv) call upon or solicit any entity which, as of the Retirement Date, is or during the preceding twelve months was, a customer of Tellabs or its subsidiaries, or any entity which was not such a customer but with respect to which Tellabs or its subsidiaries has within the twelve months preceding the Retirement Date, made a proposal for such entity to become a customer, for the purpose of providing products or services (including but not limited to data, voice or video transport, switching/routing, network access system and/or voice quality enhancement products or solutions).

Nothing in subparagraph (ii) above, will prohibit you from acquiring or holding not more than one percent of any class of publicly traded securities of any such business; provided that such securities entitle you to no more than one percent of the total outstanding votes entitled to be cast by security holders of such business in matters on which such security holders are entitled to vote.

Nothing contained in this paragraph 13 shall invalidate or affect any non-disclosure, assignment of intellectual property, non-competition, non-solicitation or other similar covenant or agreement that currently exists between you and Tellabs or a subsidiary and any such covenants and agreements shall continue in full force and effect.

You agree that the protective covenants set forth in this paragraph 13 are reasonable and necessary to protect the legal interests of Tellabs. You further agree that in addition to any other remedies Tellabs may have, Tellabs shall be entitled to injunctive relief in the event of any actual or threatened breach of such covenants.

Confidential – Agreement and General Release – Page 4 of 8

14. You acknowledge and agree that no promises or representations were made which do not appear written herein and that this Agreement contains the entire agreement of the parties as to the subject matter hereof. The Executive Continuity and Protection Program is expressly superseded by this Agreement and will no longer have any force or effect and will be null and void after the effective date of this Agreement.

15. The internal law (and not the law of conflicts) of the State of Illinois will govern all questions concerning the construction, validity, and interpretation of this Agreement. In the event that part or all of this Agreement or the attached General Release is found to be invalid, you recognize that Tellabs shall have the right to discontinue any payments made in accordance with the Agreement and to seek repayment of any and all amounts paid to you hereunder, in addition to any other amounts to which Tellabs may be entitled as a matter of law.

16. Notwithstanding any provision herein to the contrary, you agree that all benefits and payments described herein will cease if you become employed by Tellabs or any of its affiliates while you are still entitled to any such benefits or payments.

17. You are being provided with twenty-one days to consider the terms and conditions of this Agreement, including the General Release contained in Attachment A. You will have seven days following the execution of this Agreement to revoke this Agreement. The Agreement shall not become effective or enforceable until the revocation period has expired. If you choose to revoke your signature, you must do so in writing and deliver it to the attention of Linda Pfluger, Director Human Resources, One Tellabs Center, 1415 West Diehl Road, MS 16, Naperville, IL 60563, no later than 5:00 PM (CST) on the seventh day after signing the Agreement and General Release.

18. You acknowledge that you have thoroughly read and understand all of the provisions of this Agreement (including the General Release contained in Attachment A), that you have been advised to consult with an attorney prior to signing this Agreement, and that you are signing this Agreement knowingly and voluntarily.

Confidential – Agreement and General Release – Page 5 of 8

Sincerely,
/s/ James M. Sheehan
James M. Sheehan	Date
EVP and General Counsel, Tellabs, Inc
AGREED:
/s/ Stephen M. McCarthy
Stephen M. McCarthy	Date

The undersigned certifies that Stephen M. McCarthy appeared before me and signed this document and verified that he signed this document voluntarily.

Witness Date

Confidential – Agreement and General Release – Page 6 of 8

Attachment A

GENERAL RELEASE

THIS AGREEMENT CONTAINS A GENERAL RELEASE

YOU ARE ADVISED TO CONSULT AN ATTORNEY

READ CAREFULLY BEFORE YOU SIGN!

I acknowledge that the benefits provided in the Agreement dated August 27, 2007 exceed the benefits I would normally receive and that those extra benefits are provided by Tellabs in exchange for my signing the Agreement, including this General Release.

In consideration for the benefits I will receive, I agree to release Tellabs, Inc., its affiliated companies and their officers, directors, agents and employees from any claims or actions of any kind, arising on or before the effective date of the Agreement, that I might have against them regarding or relating in any way to my employment with Tellabs or the termination of that employment. I understand that this release applies to all claims and actions I might have for wrongful discharge, breach of contract, violations of Title VII of the Civil Rights Act of 1964, the Age Discrimination Employment Act of 1967 (as amended by various congressional enactments, including the Older Workers Benefit Protection Act of 1990), and any and all claims under any other statute, regulation, Executive Order, Ordinance, or common law, and all other claims and actions related to my employment with Tellabs or the termination of that employment.

I represent that I have not filed any complaints, claims or actions against Tellabs with any state, federal or local agency or court and that I will not do so at any time hereafter, except as provided in the last sentence of the preceding paragraph. Provided, nothing in this Agreement shall be construed to prohibit me from filing a charge or complaint, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission (“EEOC”) or participating in any investigation or proceeding conducted by the EEOC.

I acknowledge that I have been advised to consult with an attorney prior to signing this Agreement, including this General Release, and that I have been provided at least 21 days in which to consider the terms of the Agreement and this General Release. Once I have signed the Agreement and this General Release, I understand that I shall have until 7 days after the execution date to revoke my agreement to the terms of the Agreement and this General Release (the “Revocation Period”). In the event that I elect to revoke within the Revocation Period, I will return this Agreement to Linda Pfluger, Director, Human Resources, Tellabs, 1415 W. Diehl Road,

Confidential – Agreement and General Release – Page 7 of 8

MS16, Naperville, Illinois, along with my decision in writing to revoke the Agreement. I understand that the Agreement, including this General Release, will become effective after the Revocation Period has expired, provided I have not revoked my agreement.

I acknowledge that I have read the Agreement, including this General Release, and that I have full knowledge and understanding of the terms and conditions contained in the Agreement and General Release, and that I am signing them voluntarily.

/s/ Stephen M. McCarthy
Stephen M. McCarthy	Date

Confidential – Agreement and General Release – Page 8 of 8

EX-10.44

Exhibit 10.44

TELLABS, INC. 20     Executive Performance Stock Units Award Statement for:

%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%

Congratulations, you were granted a          Executive Performance Stock Units (PSU) Award on              by the Compensation Committee of the Tellabs, Inc. (the “Company”) Board of Directors. The following summarizes your PSU Award:

PERFORMANCE STOCK UNITS AWARD
PSUs Awarded:	PSUs (subject to the vesting and payout terms provided for in the Terms of the              Executive Performance Stock Units Award Agreement)
PERFORMANCE TARGETS/PAYOUT/VESTING:
Performance Targets:	operating earnings and revenue, as detailed in the Terms of the              Executive Performance Stock Units Award Agreement attached to this PSU Statement.
Payout Range:	Up to two (2) shares of Tellabs common stock may be earned for each PSU based upon levels of 2008 operating earnings and revenue achieved, as detailed in the Terms of the              Executive Performance Stock Units Agreement attached to this PSU Statement.
Vesting and Payout Dates:	Except in limited circumstances, earned shares will vest and be issued to you in equal annual installments in March             , March              and March             , if you are continually employed by the Company or its subsidiaries through those vesting dates. The vesting and payment provisions are detailed in the Terms of the              Executive Performance Stock Units Award Agreement attached to this PSU Statement.

This PSU Award is issued under the Tellabs, Inc. 2004 Incentive Compensation Plan (“Plan”) in consideration of you remaining an employee of the Company and/or one of its subsidiaries. If you accept the terms of this PSU Award, you consent to be bound by all of the terms and conditions of this PSU Award Statement, which includes the accompanying Terms of the 2008 Executive Performance Stock Units Award Agreement, and the Plan. You also acknowledge that you have been given access to the summary description of the Plan and a copy of the Plan.

To the extent not otherwise defined herein, capitalized terms shall have the meaning ascribed to them in the Plan.

This Award Statement, including the accompanying Terms of the 2008 Executive Performance Stock Units Award Agreement, constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933, as amended.

1

TELLABS, INC. Terms of the 20__ Executive Performance Stock Units Award Agreement

Type of Award:

Performance Stock Units (“PSUs”), representing an opportunity to earn shares of common stock of Tellabs, Inc. (the “Company” or “Tellabs”). The number of shares, if any, earned with respect to the PSUs will depend upon the Company’s certified financial results during the              fiscal year as compared to the Performance Targets described below, and, except as provided below, your right to receive any shares earned will depend on your continued employment through the vesting dates.

Performance Targets:

The performance targets will be achieved if the Company’s              certified operating earnings exceed a minimum of $145.0 million or the Company’s              total revenue exceeds a minimum of              million, respectively (“Performance Targets”). “Operating earnings” and “revenue” for the measurement period and the resulting              operating earnings and              revenue shall be the amounts certified by the Company’s Compensation Committee based upon the Company’s published financial results for              determined on a GAAP basis, with operating earnings adjusted to exclude the effects of (a) purchased intangible asset amortization, (b) acquisition-related charges (such as in-process R&D, amortization of deferred compensation, closing costs), (c) equity-based compensation award expenses under SFAS 123R, (d) restructuring charges and certain asset impairment charges, and (e) expenses related to employee bonus accrual for fiscal year             . The amounts as certified are referred to below as “             Operating Earnings” and “             Revenue,” respectively. The financial statements contained in the Company’s Form 10-K filed with the United States Securities and Exchange Commission for the Company’s              fiscal year shall qualify as certified financial results for the Company’s Compensation Committee to certify PSUs earned.

2

Shares Earned:	The number of shares of Tellabs stock earned with respect to each PSU granted is determined based on the certified levels of 2008 Operating Earnings and 2008 Revenue achieved, and the weighting factor and payout rate set forth in the following table (with straightline extrapolation between performance levels):
			PERFORMANCE ($M)
		WEIGHTING	MINIMUM	PLAN	MAXIMUM
	Operating Earnings
	Revenue
	Payout Rate		.5x	1.0x	2.0x
	The “payout rate” reflects the number of shares earned per PSU as a result of the corresponding financial performance achieved, adjusted to reflect the applicable weighting factor. The maximum payout rate is 2.0x, or two (2) shares per PSU.
	For example, if              Operating Earnings is $             million and              Revenues is $             million, then the “payout rate” will be 1.5x, or 1.5 shares of common stock for each PSU, determined as follows:
	PERFORMANCE	RESULTS ($M)	PAYOUT RATE	WEIGHTING	WEIGHTED PAYOUT RATE
	Operating earnings
	Revenue
	Total “Payout Rate”				1.5x
Vesting and Issuance of Shares:	Subject to the provisions below relating to termination of employment or Change in Control, your right to receive any earned shares will vest as follows, provided you remain continuously employed by Tellabs through the applicable vesting date: •        One-third will vest on March 1, 2009; •        One-third will vest on March 1, 2010; and •        One-third will vest on March 1, 2011 Once vested, the earned shares of Tellabs stock will be issued to you no later than March 15th following the vesting date. Once vested, those shares are no longer at risk of forfeiture.

3

Effect of Termination of Employment and Change in Control:

Except as provided below, all PSUs held by you and your right to receive unvested earned shares will be forfeited and/or cancelled if you cease to be an employee of the Company and/or one of its subsidiaries.

In the event of termination of your employment due to death, disability or involuntary termination by the Company without cause (referred to as a “qualifying termination”), a prorated portion of your PSUs, or if applicable, a prorated portion of your earned but unvested shares, will not be forfeited and cancelled, but instead may vest and be issued as described below. The prorated amount of shares that will not be forfeited or cancelled will be a portion of the total number of shares scheduled to vest on the next vesting date multiplied by a fraction (not greater than one), the numerator of which is the number of full months of employment you completed during the 12 months immediately preceding the vesting date through the date of your qualifying termination and the denominator of which is 12. By way of example: If you have a qualifying termination on December 1,         , the prorated amount which would not be forfeited would be 9/12ths of the earned shares, if any, that would otherwise have become vested and issued at the March 1,          vesting date; any other earned shares will be forfeited. The prorated amount, if any, will be issued at the time vested shares otherwise issuable on March 1,          are issued. If the qualifying termination occurs on February 1,          the prorated amount would be 11/12ths and you would become fully vested and receive 11/12ths of the unvested earned shares, if any, scheduled to vest on the March 1,          vesting date; all other unvested earned shares will be forfeited or cancelled. The prorated earned shares that become vested will be issued as promptly as practicable and in no event later than thirty (30) days after termination of employment. Your employment will be deemed to have been terminated by the Company with “cause” in the event the Compensation Committee determines that the termination was due to your willful failure to perform your duties after written notice and chance to cure, your gross negligence or willful misconduct with respect to your duties, your knowing violation of a material requirement of the Company’s Integrity Policy, code of conduct, the Sarbanes-Oxley Act of 2002 or other material provision of securities law or your conviction for a felony or crime involving moral turpitude, dishonesty, fraud, theft or similar acts.

4

Effect of Change in Control:	In the event of a Change in Control prior to certification by the Compensation Committee of the number of shares earned based on certified              Operating Earnings and              Revenue, shares of Tellabs stock will be deemed to be earned with respect to the outstanding PSUs at a payout rate of 1.0 shares for each PSU or, if greater, the payout rate determined by the Compensation Committee based on the Committee’s assessment of the Company’s financial performance as of the Change of Control taking into account the Performance Targets as of such Change of Control, but in no event greater than the maximum payout rate, and such earned shares shall be fully vested as of the date of the Change of Control. In the event of a Change in Control after the number of shares earned has been certified, all unvested earned shares shall be fully vested as of the date of the Change in Control. Earned shares that become vested due to a Change in Control shall be issued on or as promptly as practicable, and in no event later than thirty (30) days after date of the Change of Control.
No Voting or Dividend Rights; Adjustments:	Since PSUs and unvested earned shares do not represent actual shares, you do not have any voting rights or dividend rights under the PSUs or with respect to any unvested earned shares. The number of PSUs and/or number of shares of stock issuable with respect to a PSU or unvested earned shares shall be adjusted in the event of a stock dividend, split or other corporate event as more fully set forth in the Plan.
Tax Considerations:	Refer to the accompanying Summary of Tax Considerations.
Transferability:	No PSUs or unvested earned shares granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution.

5

TELLABS, INC.

Summary of Tax Considerations

Relating to Executive Performance Stock Units Awards under the Plan

Set forth below is a summary of certain tax consequences relating to the Executive Performance Stock Units Awards (“PSUs) and unvested earned shares relating thereto, under the Tellabs, Inc. 2004 Incentive Compensation Plan, as amended. This discussion does not purport to be complete and does not cover, among other things, state, provincial and local tax treatment, and should not be considered tax advice by the Company. This summary is provided merely to inform you of certain potential tax consequences. The taxes applicable to you may vary depending on your personal situation, and the Company strongly recommends that you consult with your own tax advisors regarding the actual tax consequences to you.

UNITED STATES

Federal Income Tax Considerations: No income is recognized upon receipt of an award of PSUs or the determination of the number of earned shares relating to the PSU award. At the time vested earned shares are issued, income equal to the then fair market value of stock issued is recognized. The capital gain or loss holding period for any stock begins when ordinary income is recognized. Any subsequent capital gain or loss is measured by the difference between the fair market value of the stock upon which the ordinary income recognized was based and the amount received upon sale or exchange of the shares.

Tax Withholding: Any income or other tax withholding which applies at the time shares are issued will be satisfied by the Company withholding from the shares of stock issuable, a number of shares of stock then having a fair market value equal to the amount sufficient to satisfy the minimum statutory Federal, state and local tax (including the FICA and Medicare tax obligation) withholding required by law.

6

EX-10.45

Exhibit 10.45

April 17, 2008

Mr. Carl DeWilde

Re:    Agreement and General Release

Dear Carl,

This Letter Agreement, including the General Release contained in Attachment A (collectively, the “Agreement”), confirms our understanding concerning your retirement from Tellabs, Inc. and any and all of its subsidiaries (hereinafter collectively referred to as “Tellabs”). The parties are entering into this Agreement as a final and complete resolution of all matters relating to your employment at Tellabs. In consideration of the mutual covenants and promises herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, and to avoid any dispute, it is agreed by and between the parties as follows:

1. We mutually agree that you are voluntarily retiring from Tellabs as Executive Vice President Global Sales & Services, Tellabs, Inc., effective August 8, 2008 (Retirement Date). Tellabs has agreed that your last day of work will be May 30, 2008 and you have agreed that you are resigning your officer positions with Tellabs effective May 30, 2008. You will use your accrued and unused vacation from June 30, 2008 to August 8, 2008. You will remain on payroll through the Retirement Date and may be called upon during this time to assist the Company transition your duties and responsibilities.

2. Tellabs will provide you with a total severance payment of $333,666.00 subject to appropriate withholdings. The severance payment will be made in installments. These installments shall be of the same amount and paid on the same schedule as your regular current base salary installment payments and shall begin on the first payroll date following the Retirement Date that is at least seven days after you deliver an executed copy of this Agreement to Tellabs and so long as you have not exercised your right of revocation as described in paragraph 15 below. The installments will be paid until the total severance payment is fully paid. All payments are subject to regular tax withholdings.

Confidential – Agreement and General Release – Page 1 of 6

3. Equity which has not been earned and/or vested as of the Retirement Date will be forfeited. You will not be eligible to earn any of the 2008 PSU’s. You will have 3 months from the Retirement Date to exercise any options that are vested as of the Retirement Date. You will, however, continue to remain bound by all laws relating to transactions involving company stock, including but not limited to laws prohibiting the sale of stock while in the possession of material non-public inside information.

4. The value of any earned but not taken vacation time as of your Retirement Date will be paid in a lump sum after your Retirement Date.

5. You will cease to be eligible for any Tellabs benefits (other than those specifically described herein) as of the Retirement Date. You may elect, in accordance with the federal statute (COBRA), to continue your medical, dental and/or vision benefits for up to 18 months following your Retirement Date. Tellabs will pay the cost of COBRA for 11 months after your Retirement Date. Cost associated with continuation of coverage after 11 months will be your responsibility. Please contact Debra Ragusa, Manager, Benefits, for information on the COBRA.

6. Your Tellabs Advantage Program vesting will be calculated based on your Retirement Date.

7. You are required to submit a final expense report, settle any company advances, and return all Tellabs property, including credit cards and files, prior to August 8, 2008.

8. You have agreed that you will not criticize or in any way disparage Tellabs, its subsidiaries and any of their officers, directors, employees or agents. Tellabs agrees that it will comply with company guidelines regarding standard references.

9. You agree to continue to be bound by the terms of the Confidentiality Agreement and Intellectual Property Agreement signed by you during your employment with Tellabs. You agree to keep all company proprietary information confidential.

10. You acknowledge that the benefits provided in this Agreement exceed the benefits you would normally receive and that those extra benefits are provided by Tellabs in exchange for you agreeing to the terms and conditions of this Agreement, including the General Release contained in Attachment A.

Confidential – Agreement and General Release – Page 2 of 6

11. You agree to cooperate with Tellabs in any current or future litigation or potential litigation or other legal matters in any reasonable manner as Tellabs may request, including but not limited to meeting with and fully and truthfully answering the questions of Tellabs or its representatives or agents, and testifying and preparing to testify at any deposition or trial, subject to reimbursement for reasonable expenses incurred as a result of such cooperation.

12. You acknowledge and agree that no promises or representations were made which do not appear written herein and that this Agreement contains the entire agreement of the parties as to the subject matter hereof. The Executive Continuity and Protection Program is expressly superseded by this Agreement and will no longer have any force or effect and will be null and void after the effective date of this Agreement.

13. The internal law (and not the law of conflicts) of the State of Illinois will govern all questions concerning the construction, validity, and interpretation of this Agreement. In the event that part or all of this Agreement or the attached General Release is found to be invalid, you recognize that Tellabs shall have the right to discontinue any payments made in accordance with the Agreement and to seek repayment of any and all amounts paid to you hereunder, in addition to any other amounts to which Tellabs may be entitled as a matter of law.

14. Notwithstanding any provision herein to the contrary, you agree that all benefits and payments described herein will cease if you become employed by Tellabs or any of its affiliates while you are still entitled to any such benefits or payments.

15. You are being provided with twenty-one days to consider the terms and conditions of this Agreement, including the General Release contained in Attachment A. You will have seven days following the execution of this Agreement to revoke this Agreement. The Agreement shall not become effective or enforceable until the revocation period has expired. If you choose to revoke your signature, you must do so in writing and deliver it to the attention of Linda Pfluger, Director Human Resources, One Tellabs Center, 1415 West Diehl Road, MS 16, Naperville, IL 60563, no later than 5:00 PM (CST) on the seventh day after signing the Agreement and General Release.

Confidential – Agreement and General Release – Page 3 of 6

16. You acknowledge that you have thoroughly read and understand all of the provisions of this Agreement (including the General Release contained in Attachment A), that you have been advised to consult with an attorney prior to signing this Agreement, and that you are signing this Agreement knowingly and voluntarily.

Sincerely,
/s/ James M. Sheehan
James M. Sheehan	Date
EVP and General Counsel, Tellabs, Inc
AGREED:
/s/ Carl A. DeWilde
Carl A. DeWilde	Date

The undersigned certifies that Carl DeWilde appeared before me and signed this document and verified that he signed this document voluntarily.

Witness Date

Confidential – Agreement and General Release – Page 4 of 6

Attachment A

GENERAL RELEASE

THIS AGREEMENT CONTAINS A GENERAL RELEASE

YOU ARE ADVISED TO CONSULT AN ATTORNEY

READ CAREFULLY BEFORE YOU SIGN!

I acknowledge that the benefits provided in the Agreement dated April 17, 2008 exceed the benefits I would normally receive and that those extra benefits are provided by Tellabs in exchange for my signing the Agreement, including this General Release.

In consideration for the benefits I will receive, I agree to release Tellabs, Inc., its affiliated companies and their officers, directors, agents and employees from any claims or actions of any kind, arising on or before the effective date of the Agreement, that I might have against them regarding or relating in any way to my employment with Tellabs or the termination of that employment. I understand that this release applies to all claims and actions I might have for wrongful discharge, breach of contract, violations of Title VII of the Civil Rights Act of 1964, the Age Discrimination Employment Act of 1967 (as amended by various congressional enactments, including the Older Workers Benefit Protection Act of 1990), and any and all claims under any other statute, regulation, Executive Order, Ordinance, or common law, and all other claims and actions related to my employment with Tellabs or the termination of that employment.

I represent that I have not filed any complaints, claims or actions against Tellabs with any state, federal or local agency or court and that I will not do so at any time hereafter. Provided, nothing in this Agreement shall be construed to prohibit me from filing a charge or complaint, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission (“EEOC”) or participating in any investigation or proceeding conducted by the EEOC.

I acknowledge that I have been advised to consult with an attorney prior to signing this Agreement, including this General Release, and that I have been provided at least 21 days in which to consider the terms of the Agreement and this General Release. Once I have signed the Agreement and this General Release, I understand that I shall have until 7 days after the execution date to revoke my agreement to the terms of the Agreement and this General Release (the “Revocation Period”). In the event that I elect to revoke within the Revocation Period, I will return this Agreement to Linda Pfluger, Director, Human Resources, Tellabs, 1415 W. Diehl Road,

Confidential – Agreement and General Release – Page 5 of 6

MS16, Naperville, Illinois, along with my decision in writing to revoke the Agreement. I understand that the Agreement, including this General Release, will become effective after the Revocation Period has expired, provided I have not revoked my agreement.

I acknowledge that I have read the Agreement, including this General Release, and that I have full knowledge and understanding of the terms and conditions contained in the Agreement and General Release, and that I am signing them voluntarily.

/s/ Carl DeWilde
Carl DeWilde	Date

Confidential – Agreement and General Release – Page 6 of 6

EX-11

TELLABS, INC.

COMPUTATION OF PER SHARE EARNINGS

In millions, except per share amounts

	First Quarter
	03/28/08		03/30/07
Numerator:
Net earnings	$	16.6	$	25.5
Denominator:
Denominator for basic earnings per share—Weighted average shares outstanding		407.9		438.2
Effect of dilutive securities:
Stock options and awards		1.0		5.0
Denominator for diluted earnings per share—Adjusted weighted average shares outstanding and assumed conversions		408.9		443.2
Net earnings per share – basic	$	0.04	$	0.06
Net earnings per share – diluted	$	0.04	$	0.06

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert W. Pullen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tellabs, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 6, 2008

/s/ Robert W. Pullen

Robert W. Pullen

Chief Executive Officer

26

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy J. Wiggins, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tellabs, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 6, 2008

/s/ Timothy J. Wiggins

Timothy J. Wiggins

Chief Financial Officer

27

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tellabs, Inc. (the “Company”) on Form 10-Q for the quarter ended March 28, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert W. Pullen, the Chief Executive Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert W. Pullen

Robert W. Pullen

Chief Executive Officer

Date: May 6, 2008

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

28

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tellabs, Inc. (the “Company”) on Form 10-Q for the quarter ended March 28, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy J. Wiggins, the Chief Financial Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Timothy J. Wiggins

Timothy J. Wiggins

Chief Financial Officer

Date: May 6, 2008

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

29