Exhibit 19.1
Fellow Stockholders:
"The Adventure Continues" was the theme of Tellabs' January sales
meeting and of our recently published 1997 annual report. That theme
was certainly appropriate for the first quarter of 1998, as the company
continued the trends of revenue and earnings growth that have typified
its performance over the past several years. Revenue in the quarter
amounted to $327.5 million, a record high for first quarter sales and a
32.5 percent increase over revenue of $247.1 million in the first
quarter a year ago. As usual, sales of the TITAN (a registered
trademarks of Tellabs Operations, Inc.) 5500 digital cross-connect
system led the way, increasing by 40 percent over sales in the first
quarter of 1997. Echo canceller sales were particularly robust during
the quarter, and sales of the MartisDXX (a registered Finnish trademark
of Tellabs Oy) system were up too, despite a persistently difficult
market.
Net earnings for the quarter amounted to $68.2 million, just over 8
percent above earnings in the first quarter a year ago. First-quarter
earnings a year ago, however, benefited from a sale during the quarter
of stock held by the company as an investment that added $13.9 million
to the bottom line. Excluding that income, earnings this quarter were
up 38.6 percent over those a year ago. Earnings per share on a diluted
basis - a phrase you will have to become accustomed to, says the FASB -
were 37 cents this quarter and 34 cents last year including the stock
sale and 27 cents without it.
As noted, TITAN 5500 system sales were strong throughout the quarter,
both for new installations and for upgrades. The announcement during
the quarter by Bell Atlantic that Tellabs had been selected as its
supplier for wideband digital cross-connect systems for the next five
years reinforces the attractiveness of the TITAN product as a primary
service-provisioning vehicle in backbone telecommunications networks.
SONET-based system architectures continue to be the choice of service
providers for high-traffic-density networks in North America, though the
nature of the traffic traversing those networks is changing from
primarily voice to primarily data traffic, and from mostly time-division
to packet- and cell-based protocols.
Sales of the MartisDXX digital networking multiplexer increased over
those a year ago by 26 percent, an increase lower than we have been
accustomed to in recent quarters. This is primarily a consequence of
adverse exchange rates during the quarter and of moderately diminished
demand from several Asian customers experiencing currency problems in
their home countries. (This current Asian situation illustrates the
value to a company of having global market reach. We know that the
world economy is simply not uniform and homogeneous. Differing factors
will influence regional markets in often unpredictable ways and at
unpredictable times. Without the leveling influence of significant
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diversity in market scope, a company is inevitably susceptible to these
vagaries from time to time. And even with a broad market scope, some
susceptibility will always exist. This is an uncertain world!)
One other item of significance should be noted here. In February,
Tellabs announced the pending acquisition of Coherent Communications
Systems Corporation. Coherent possesses considerable know-how and an
enviable presence, especially in markets outside North America, in the
area of echo cancellers, a product area of long-standing interest to
Tellabs. We are delighted at the prospect of welcoming Dan McGinnis and
the folks at Coherent to the Tellabs family. We are currently in the
process of securing the necessary stockholder and government approvals
for the transaction. We hope to consummate the merger during the second
quarter.
As we look forward to the rest of 1998 and to the future, we find
ourselves increasingly involved in strategic analysis and planning.
Planning and analysis are fine, but implementation is the crucial issue
and a key for Tellabs. This industry continues to grow, though not
necessarily evenly around the globe, and to play an increasingly
prominent role in the daily lives of most businesses and individuals.
Both factors are likely to persist. Industry consolidation, so visible
of late in the financial services industry, will likely continue to
characterize our environment as well in the months ahead.
Telecommunications is an industry of scale, like it or not, and this
reality has a tendency to drive industry dynamics. So does technology.
Much has been written of late about innovation and new communication
services based upon emerging technologies, most related to optical
networking. Tellabs intends to stay abreast of the trends and
technologies affecting telecommunications. This company has, we
believe, a significant role to play in the future of this very exciting
industry. We'll keep you informed along the way.
Sincerely,
/s/ Michael J. Birck
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Michael J. Birck
Chief Executive Officer
First Quarter Earnings Release (website link to this information which
is attached hereto as Exhibit 19.2)
Results of Operations
Condensed Consolidated Balance Sheet
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Common Stock Market Data
Tellabs' common stock is listed on The Nasdaq Stock Market under
the symbol TLAB and appears in most daily newspaper stock tables
as Telabs. At February 16, 1998, there were approximately 3,725
stockholders of record. Tellabs is a component of the Nasdaq-100
Index and the Standard & Poor's 500 Index.
10-K Report
Stockholders may obtain without charge a copy of the Tellabs 1997
Form 10-K as filed with the Securities and Exchange Commission upon
request to:
Secretary
Tellabs, Inc.
4951 Indiana Avenue
Lisle, Illinois 60532 U.S.A.
Edgar Archives
For Tellabs investor relations contact:
Tom Scottino
1.630.378.7504
Tom_Scottino@pcmail.tellabs.com
Except for historical information, the matters discussed or
incorporated by reference in this letter are forward-looking
statements that involve risks and uncertainties associated with
competition, market growth, customer acceptance and timely
availability of products and features, as well as other risks
that may be detailed from time to time in the company's filings
with the Securities and Exchange Commission. Tellabs' actual
future results could differ materially from those discussed
here. The company undertakes no obligation to revise or update these
forward-looking statements to reflect events or circumstances or to
reflect the occurrence of unanticipated events.
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