**Exhibit 99.1**
**FORWARD-LOOKING STATEMENTS AND RISKS AND FUTURE FACTORS IMPACTING TELLABS**
Except for historical information, the matters discussed or incorporated by reference in Part I ofthis report may include forward-looking statements made pursuant to the safe harbor provisions ofSection 21E of the Securities Exchange Act of 1934, as amended. These statements reflectmanagement’s expectations, estimates and assumptions, based on the information available at thetime 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,” “intend,”“likely,” “will,” “should,” “could” and similar expressions are intended to identifyforward-looking statements. Forward-looking statements are not guarantees of future performanceand involve risks, uncertainties and other factors that may cause our actual performance orachievements to be materially different from any future results, performance or achievementsexpressed or implied by those statements. Important factors that could cause our actual results todiffer materially from those in forward-looking statements include, but are not limited to:economic changes impacting the telecommunications industry; financial condition oftelecommunication service providers and equipment vendors, including any impact of bankruptcies;the impact of customer and vendor consolidation; new product acceptance; product demand andindustry capacity; competitive products and pricing; competitive pressures from new entrants to thetelecommunications industry; manufacturing efficiencies; research and new product development;protection and access to intellectual property, patents and technology; ability to attract andretain highly qualified personnel; availability of components and critical manufacturing equipmentand capacity; foreign economic conditions, including currency rate fluctuations; the regulatory andtrade environment; availability and terms of future acquisitions; uncertainties relating tosynergies, charges, and expenses associated with business combinations and other transactions; andother risks and future factors that may be detailed from time to time in the Company’s filings withthe SEC. Our actual future results could differ materially from those predicted in suchforward-looking statements. In light of the foregoing risks, uncertainties and other factors,investors should not place undue reliance on the forward-looking statements in determining whetherto buy, sell or hold any of our securities. We undertake no obligation to publicly update orrevise any forward-looking statements to reflect changed assumptions, the occurrence of anticipatedor unanticipated events or changes to future results over time. The foregoing discussion should beread in conjunction with our financial statements and related notes and management’s discussion andanalysis included in our SEC filings from time to time.
***Our operating results will fluctuate, which may cause volatility in our stock price.***
Our operating results have varied significantly from quarter to quarter, and our operating resultscan be expected to continue to fluctuate, due to a variety of factors, many of which are beyond ourcontrol. These factors include, but are not limited to:
•  changing conditions in the telecommunications market and in the U.S. and global economy ingeneral;
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 •  the volume and timing of orders from and shipments to customers;  •  the timing of, and our ability to obtain, new customer contracts;  •  the timing of, and our ability to recognize revenue for, product and service sales;  •  the potential deferral of customer acceptance of new products compared to our legacyproducts;  •  the market acceptance of new and enhanced versions of our products and services;  •  variations in the mix of products and services we sell, which currently includes, oneelement of our fiber to the premise (“FTTP”) system which we currently sell to Verizon at anegative gross profit margin until we are able to reduce unit costs;  •  our utilization of production capacity and employees, and our ability to manufacture andship products efficiently;  •  the availability and cost of key components;  •  introductions or announcements of new products by competitors;  •  changes in accounting rules, such as expensing employee stock option grants;  •  our ability to integrate and operate acquired businesses and technologies; and  •  seasonality, which has often caused revenues to differ from quarter to quarter.
Our recent operating results may not be a good predictor of our results in future periods. Ourexpense levels are based in part on expectations of future revenues. If revenue levels in aparticular period are lower than expected, our operating results will be adversely affected. Thefailure to meet the expectations of the investment community may cause our stock price to decline,possibly substantially. A significant stock price decline could result in litigation, which couldbe costly, lengthy and divert management’s attention and resources from business operations.
***The market for communications equipment products and services is rapidly changing.***
The market for communications network equipment, software and integration services is rapidlychanging. Our success will depend in part on our ability to develop successfully and introduce newproducts that are accepted in markets in which we will operate. We will not be able to predict withcertainty technological trends or new products in the market. In addition, we will not be able topredict whether our products and services will meet with market acceptance or be profitable. We maynot be able to compete successfully, and competitive pressures may adversely affect our business,financial condition, operating results or prospects.
***Demand for our products may decrease if we are unable to anticipate and adapt rapidly to changingtechnology and customer requirements.***
The communications industry is characterized by rapid technological advancement. Companies in theindustry face evolving industry standards, changing market conditions, and frequent new product andservice introductions and enhancements. The introduction of new products using new technologies orthe adoption of new industry standards can make existing products or
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products under development obsolete or unmarketable. In order to grow and remain competitive, wewill need to adapt to these rapidly changing technologies, to enhance our existing solutions and tointroduce new solutions to address our customers’ changing demands.
In addition, new product developments often require long-term forecasting of market trends,development and implementation of new technologies and processes, and a substantial capitalcommitment. We have invested, and anticipate continuing to invest, substantial resources for thedevelopment of new products. These investments often must be made before knowing whether theresulting new product will meet with market acceptance or result in revenue. For example, we willcontinue to incur costs and expenses in preparation for the deployment of our FTTP systems, whichmay precede the generation of revenues from FTTP systems.
We may experience difficulties that could delay or prevent the successful design, development,introduction or marketing of new product solutions. These new solutions and enhancements must meetthe requirements of current and prospective customers and must achieve significant marketacceptance. In addition, some of our customer agreements, particularly those with large customers,may contain provisions for payments that are tied to key milestones related to the availability ofnew product features. For example, our agreement with Verizon to provide FTTP systems has severalprovisions requiring compensation payments to Verizon for failure to meet key milestones or provideproduct features by specified dates. We could experience an offset to revenues and reduced netincome in future quarters due to penalties imposed under customer agreements as a result offailures to comply with contractual terms. In fact, we have paid penalties toVerizon in the pastfor missing agreed upon milestones. If we fail to anticipate or respond on a cost-effective andtimely basis to technological developments, changes in industry standards or customer requirements,or if we have any significant delays in product development or introduction, our business,financial condition, operating results or prospects could be adversely affected.
***Our new products will be early in their life cycles and will face challenges for market acceptance.***
We have made and will continue to make significant investments in new products. These new productsare early in their life cycle and as such are subject to uncertain market demand and may faceobstacles in manufacturing and deployment and competitive response. Customers may not invest theadditional capital required for initial system deployment. Additionally, as customers in thesemarkets complete infrastructure deployments, they may require greater levels of service, supportand financing than we provided in the past. There can be no assurance that we can provide products,services, support and financing to effectively compete for these market opportunities.
***A limited number of our customers will comprise a large portion of our revenues and any decrease inrevenues from these customers could have an adverse effect on our business, financial condition,operating results and prospects.***
A large portion of our revenue is dependent on sales to a limited number of customers. The largestsingle customer group is independent local exchange carriers, which includes BellSouth, QwestCommunications, SBC and Verizon. There can be no assurance that large existing
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customers will continue to purchase products from us at current levels, if at all. In the eventthat a significant existing customer merges with another company, there can be no assurance that itwill continue to purchase our products. The loss of one or more large existing customers or adecrease in the level of purchases from these customers could have a material adverse effect on ourbusiness, financial condition, operating results and prospects.
***Our revenues depend on the capital spending programs and financial capabilities of our customersand ultimately on the demand for new telecommunications services from end users.***
Our customers will be telecommunications carriers and, in the U.S., include, without limitation,incumbent local exchange carriers, independent operating companies and regional Bell operatingcompanies, or RBOCs. Our ability to generate revenues will depend upon the capital spendingpatterns and financial capabilities of these customers, continued customer demand for our productsand services, and end user demand for advanced telecommunications services. The telecommunicationsindustry has recently been affected by financial problems and reduced capital spending by carriers.These conditions have adversely affected our operating results in prior fiscal years and, if theseconditions persist or worsen, could cause a slowdown in the combined company’s sales. Further,there can be no assurance that carriers, foreign governments or other customers will pursueinfrastructure upgrades that will necessitate the implementation of advanced product solutions suchas those offered by us. Infrastructure improvements may be delayed or prevented by a variety offactors including cost, regulatory obstacles, mergers, the lack of consumer demand for advancedtelecommunications services and alternative approaches to service delivery. Reductions in capitalexpenditures by companies in the telecommunications industry could seriously harm our revenues, netincome and cash flows.
***We operate in a highly competitive industry.***
Our products and services offered will continue to face competitive pressures. Our success incompeting with other manufacturers of communications equipment products and services will dependprimarily on our ability to integrate acquired company’s businesses effectively with ours, and onour engineering, manufacturing and marketing skills, the price, quality and reliability of ourproducts, our delivery and service capabilities and our control of operating expenses andmanagement of assets. We may also face more intense competition in certain markets as a reaction toour larger presence. Pricing pressures could increase from current and future competitors andcustomers. Many current competitors have, and future competitors may also have, more engineering,manufacturing, marketing, financial and personnel resources available to them, may have betteraccess to such resources and may be better able to attract and retain highly qualified personnelresources. Competition may also be affected by consolidation among communications equipmentproviders as well as entrants into the communications equipment market. As a result, otherproviders may be able to respond more quickly to new or emerging technologies and changes incustomer requirements. In addition, technological change, the increasing addition of Internet,data, video, voice and other services to networks, the possibility of regulatory changes andindustry consolidation are likely to continue to cause rapid evolution in the competitiveenvironment. The full scope and nature of these changes are difficult to
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predict. Increased competition could lead to price cuts, reduced gross margins and loss of marketshare, which may adversely affect our business, operating results and financial condition.
***Conditions in international markets could affect our operations.***
Due to our international sales and our international operations and research and developmentorganizations, we will be subject to the risks of conducting business internationally. These risksinclude:
 •  local economic and market conditions;  •  political and economic instability;  •  unexpected changes in legislative or regulatory requirements;  •  fluctuations in currency exchange rates;  •  tariffs and other barriers and restrictions, including established relationships betweengovernment-controlled carriers and local equipment vendors;  •  longer payment cycles;  •  difficulties in enforcing intellectual property and contract rights;  •  greater difficulty in accounts receivable collection;  •  potentially adverse taxes, including any U.S. taxes imposed upon our actual or deemedrepatriation of earnings of foreign subsidiaries;  •  potentially lower margins and less certainty of support for customer relationships whereforeign sales are made through local distributors; and  •  the burdens of complying with a variety of foreign laws and telecommunications standards.
We are also subject to general geopolitical risks, such as political and economic instability andchanges in diplomatic and trade relationships. We maintain business operations and have sales inmany international markets. Economic conditions in many of these markets represent significantrisks. We cannot predict whether sales and business operations in these markets will be adverselyaffected by these conditions after the merger. Instability in foreign markets, particularly inAsia, Latin America and the Middle East, could have a negative impact on our business, financialcondition and operating results. In addition to the effect of international economic instability onforeign sales, domestic sales to U.S. customers having significant foreign operations could beadversely impacted by these economic conditions, which may adversely affect our business, financialcondition and operating results in the future.
***We may encounter difficulties obtaining necessary raw materials and supplies.***
Our ability to produce and service our products and meet customer demands will be dependent uponour ability to obtain timely deliveries of important raw materials and supplies. The availabilityof these raw materials and supplies is subject to market forces beyond our control. From time totime there may not be sufficient quantities of raw materials and supplies in the marketplace tomeet the customer demand for our products. In addition, the costs to obtain these
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raw materials and supplies are subject to price fluctuations. Many companies utilize the same rawmaterials and supplies in the production of their products as we use in our products. Companieswith more resources than us may have a competitive advantage in obtaining raw materials andsupplies due to greater buying power. In addition, we currently purchase certain key componentsfrom sole or limited-source vendors, and most of our component purchases are on a purchase orderbasis without guaranteed supply arrangements. If supply is disrupted, we may be unable to identifyan alternative source in a timely manner, at favorable prices or of acceptable quality. Thesecircumstances could limit our ability to meet scheduled deliveries to customers and increase ourexpenses. Reduced supply or higher prices for raw materials and supplies may adversely affect ourbusiness, operating results and financial condition.
***We depend on contract manufacturers and third-party service providers.***
We have purchase agreements with contract manufacturers which require the manufacturers to purchasecomponent parts to be used in manufacturing our products and authorize them to buy components inaccordance with agreed-upon lead times. As customers increasingly demand shorter deliverytimeframes, the difficulty of accurately forecasting component needs creates additional risk.Failing to estimate requirements accurately can lead to monetary penalties, excess or obsoleteinventory or disruptions in manufacturing of our products. In addition, the contract manufacturersmay not allocate sufficient resources to the timely completion of our orders in accordance with ourquality standards. Qualifying a new contract manufacturer is costly and time consuming and couldresult in significant interruptions in the supply of products to our customers.
We rely on a small number of contract manufacturers to perform the majority of the manufacturingoperations for our products. The qualification of these manufacturers is an expensive andtime-consuming process, and these contract manufacturers build products for other companies,including our competitors. We are constantly reviewing their contract manufacturing capability toensure that our production requirements are met in terms of cost, capacity and quality.Periodically, we may decide to transfer the manufacturing of a product from one contractmanufacturer to another, to better meet our production needs. It is possible that we may noteffectively manage this transition or the new contract manufacturer may not perform as well asexpected and, as a result, we may not be able to fill orders in a timely manner which could harmour business. These limitations and the failure to timely deliver products may adversely affect ourbusiness, operating results and financial condition.
We rely on the use of third-party customer service providers to deliver, install and turn-upproducts offered to customers. We depend on such third-party agents to perform key on-site servicesfor our customers. We cannot control the availability of such resources in the markets served orthe quality of the services provided by such third parties. Scarcity of resources, pricefluctuations or quality or delivery issues may adversely affect our business, operating results andfinancial condition.
***We may be unable to sell customer-specific inventory, which could result in lower gross profitmargins and net income.***
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Some customers’ order specifications require us to design and build systems and purchase parts thatare unique to a customer. In many cases, we forecast and purchase components in advance andallocate resources to design and manufacture the systems. If customers’ requirements change or ifthey delay or cancel orders, we may be unable to cost-effectively rework system configurations orreturn parts to inventory as available-for-sale. Writedowns and accruals for unrealizable inventorywill negatively impact our gross profit margins and net income.
***Intellectual property rights may not be adequate to protect our business.***
Our future success depends in part upon our proprietary technology. Although we have attempted toprotect our proprietary technology through various mechanisms, including patents, copyrights,trademarks, contractual obligations and trade secrets, third parties nevertheless may attempt touse our technology without authorization. Policing the unauthorized use of products andtechnologies is difficult, particularly in certain foreign countries, whose laws may not protectintellectual property rights to the same extent as the laws of the U.S. or other countries.Litigation may be necessary to enforce our intellectual property rights, which could be costly anddisruptive while not guaranteeing a successful result. In addition, competitors may be able todevelop competitive technology independently without violating our proprietary rights. Anyinability to protect or enforce proprietary rights and information could result in loss ofcompetitive advantage, loss of customer orders and decreased revenues.
***We may be subject to intellectual property infringement claims that are costly and time consumingto defend and could limit our ability to use some technologies in the future.***
As the competition in the communications equipment industry increases and the functionality of theproducts in this industry converges, companies in the communications equipment industry areincreasingly becoming the target of infringement claims and other intellectual property disputes.We are likely to remain subject to claims based upon third-party patents or other proprietaryrights, including claims that may originate from competitors. Any such third parties may choose tolitigate their claims, or we may pursue litigation to determine the scope and validity of suchthird parties’ rights. We may be unsuccessful in any such litigation. We may be unable to secure,on commercially reasonable terms, any licenses that we may seek to secure. Third-party claims,whether with or without merit, potentially can result in:
 •  costly litigation;  •  diverting management’s time, attention and resources;  •  delaying or halting product shipments;  •  requiring us to pay damages;  •  requiring us to enter into royalty-bearing licensing arrangements or to obtain substitutetechnology of lower quality or higher cost; or  •  otherwise imposing obligations or restrictions that could adversely affect our business,financial condition and operating results.
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***Product quality or performance problems could impact our business.***
The development and production of new products with high technology content often involves problemswith software, components and manufacturing methods. If significant reliability, quality or networkmonitoring problems develop, including those due to defects in software or faulty components, anumber of negative effects on our business could result, including:
 •  costs associated with fixing software or hardware defects;  •  high service and warranty expenses;  •  payment of liquidated damages for performance failures;  •  high inventory obsolescence expense;  •  high levels of product returns;  •  delays or interruptions in product turn-up;  •  delays in collecting accounts receivable;  •  reduced orders from existing customers; and  •  declining interest from potential customers.
***We may not realize expected benefits from any restructuring initiatives.***
In response to industry and market conditions, we have restructured businesses and reduced ourworkforce. In light of the rapidly changing market for communications equipment, we may have torestructure in the future to achieve certain cost savings and to strategically realign ourresources. We cannot predict whether we will realize expected synergies and improved operatingperformance as a result of any restructuring and streamlining of operations. We also cannot predictwhether any restructuring and streamlining of operations will adversely affect our ability toretain key employees, which, in turn, would adversely affect our operating results. Further, in theevent the market fluctuates up or down, we may not have the appropriate level of resources andpersonnel to appropriately react to the change.
***We may be unable to identify or complete strategic acquisitions, investments and dispositions.***
Our long-term growth strategy includes the continued acquisition of, or investment by us in,complementary businesses, products, services or technologies. We cannot assure that we will be ableto identify suitable acquisitions or investment candidates. Even if we identify suitablecandidates, we cannot assure that we will be able to make acquisitions or investments oncommercially acceptable terms, if at all. If we acquire a company, we may have difficultyassimilating its businesses, products, services, technologies and personnel into our operations.These difficulties could disrupt our ongoing business, distract our management and workforce,increase our expenses and adversely affect our operating results. In addition, we may incur debt orbe required to issue equity securities to pay for future acquisitions or investments. The issuanceof any equity securities could be dilutive to our stockholders. We may also need to make furtherinvestments to support the acquired company and may have difficulty identifying and acquiring theappropriate resources. We may also decide to dispose of or otherwise exit businesses which mayresult in the recording of accrued liabilities for special one-time charges,
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such as workforce reduction costs, closure of excess facilities and excess inventory write-offs.Furthermore, estimates with respect to the useful life and ultimate recoverability of our carryingbasis of assets, including goodwill and purchased intangible assets, could change as a result ofsuch disposition.
***We are subject to numerous and changing industry regulations and standards.***
Our products must comply with a significant number of communications industry technologicalregulations and standards, which vary between U.S. and international markets, and must interoperatewith other products. Testing to ensure compliance with technological standards and interoperabilityrequires significant investments of time and money. If we fail to ensure compliance with evolvingstandards and regulations in a timely manner or fail to maintain interoperability with equipmentfrom other companies, we could experience customer contract penalties or delayed or lost customerorders, decreased revenues and reduced net income that may adversely affect our business, financialcondition and operating results. To remain competitive, we must also maintain compliance withindustry certifications such as ISO, but we assure you that we will be able to do so.
***We operate in an environment subject to changing governmental regulations.***
The communications equipment industry is subject to governmental regulation in the U.S. and othercountries. Our business is dependent upon the continued growth of the telecommunications industryin the U.S. and internationally. Federal and state regulatory agencies regulate most of ourdomestic customers, and foreign customers are also subject to regulation. In particular, there maybe future changes in U.S. telecommunications regulations that could slow the expansion of theservice providers’ network infrastructures and adversely affect our business, operating results andfinancial condition. Future changes in tariffs by regulatory agencies or application of tariffrequirements to currently untariffed services could adversely affect the sales of our products forcertain classes of customers. Moreover, uncertainty regarding future legislation and governmentalpolicies combined with emerging competition may also affect the demand for our products.Competition could intensify as a result of future regulatory changes or new regulations in the U.S.or internationally, which could adversely affect our business, operating results and financialcondition.
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