UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

# FORM 10-K

(Mark One)

# [X]   ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

# For the fiscal year
ended January 2, 2004

# [ ]   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: 0-9692

TELLABS, INC.

(Exact name of
registrant as specified in its charter)

|Delaware                        | 36-3831568                          
|------------------------------- | ------------------------------------
|(State or other jurisdiction of | (I.R.S. Employer Identification No.)
|incorporation or organization)  |                                     
|                                |                                     

|One Tellabs Center, 1415 West Diehl Road, Naperville, Illinois | 60563     
|-------------------------------------------------------------- | ----------
|(Address of principal executive offices)                       | (Zip Code)
|                                                               |           

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

Securities registered
pursuant to Section 12(b) of the Act: None

Securities
registered pursuant to Section 12(g) of the Act:Common stock, $0.01 par value
(Title of Class)

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 if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes [X]  No [ ]

On February 23, 2004, 415,364,767
common shares of Tellabs, Inc., were outstanding, and the aggregate market value (based
upon the closing sale price of the Nasdaq National Market System) of such shares held by
nonaffiliates was approximately $2,664,839,000.

Documents incorporated by reference:
Portions of the registrants Annual Report to Stockholders for the fiscal year ended
January 2, 2004, are incorporated by reference into Parts I and II, and portions of the
registrants Proxy Statement dated March 19, 2004, are incorporated by reference into
Part III.

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# PART I

# ITEM I. BUSINESS

Tellabs, Inc. and its subsidiaries
design and market communications equipment to telecommunications service providers
worldwide. We also provide installation and professional services that support our product
offerings. Industry and technical terms used in this Form 10-K are described in the
Glossary, which appears at the end of this Item I.

Tellabs, Inc. was incorporated in
1975 as an Illinois corporation and was subsequently converted to a Delaware corporation
in 1992. We have purchased several companies during our history. Most recently, in 2003,
we acquired Vivace Networks, Inc., a leading developer of flexible, high performance
multi-service routers and in 2002, we acquired Ocular Networks, Inc., a developer of
optical solutions for the metropolitan optical networking market.

Our products include solutions for
next-generation optical networking, managed access, carrier-class data, voice-quality
enhancement and cable telephony. For financial reporting purposes, the carrier-class data,
voice-quality enhancement and cable telephony products are combined and referred to
collectively as Other Products.

Our products are sold in the domestic
and international marketplaces (under both the Tellabs name and trademarks and under
private labels) through our field sales force and selected distributors. Our customer base
includes incumbent local exchange carriers (ILECs), independent telephone companies
(ITCs), interexchange carriers (IXCs), local telephone administrations (PTTs-post
telephone and telegraph administrations), other local exchange carriers (LECs), original
equipment manufacturers (OEMs), cellular and other wireless service companies, cable
operators, alternate service providers, competitive local exchange carriers (CLECs),
Internet service providers and system integrators.

Following years of unprecedented
growth in our industry, the demand for telecommunications equipment unexpectedly began to
decline precipitously in early 2001 as a result of industry overcapacity, an unfavorable
regulatory environment, and excessive debt loads among many carriers. As a consequence, we
experienced a 71% revenue decline over the period 2001 through 2003, and we incurred a net
loss in each of those years. As market conditions deteriorated, we responded with a series
of restructuring plans designed to match our manufacturing capacity and expenses with
demand in order to restore profitability and renew growth. We closed manufacturing
facilities in Ireland and Texas in 2001 and additional facilities in Ireland and New York
in 2002. We reduced our workforce by 61%, from 8,900 during 2001 to 3,500 at the end of
2003. We exited a significant portion of the office space that we leased and owned in the
United States, and we consolidated the majority of our U.S.-based workforce into our
headquarters facility in Naperville, Illinois. We also reviewed our product portfolio and
cut-back or stopped development efforts on some products due in part to customers
reluctance to deploy new technology.

Further, in the second-half of 2003,
we committed to outsource the majority of our remaining manufacturing activities.
Manufacturing operations located in Bolingbrook, Illinois, were outsourced to Sanmina-SCI
Corporation, an independent electronics manufacturing service (EMS), and manufacturing
operations located in Espoo, Finland, were transferred to Elcoteq Network Corporation, a
Finland-based EMS. We expect to benefit from outsourcing through lower component prices
due to the EMSs purchasing power and through lower manufacturing costs due to their
lower labor rates. The manufacturing operations in Illinois ceased at the end of October
2003, and the manufacturing operations in Finland were transferred to Elcoteq on January
1, 2004.

As a result of the restructuring
activities, we recorded restructuring charges for severance costs, facilities shutdown
costs and other obligations. The decline in product demand over the three-year period also
had a significant impact on the value of our inventory, resulting in the need to record
reserves for excess and obsolete inventory and excess purchase commitments. We also
recorded reserves for other impaired and surplus assets in each of the years 2001 through
2003. Those charges were significant in amount, and we encourage readers to refer to Note
3 to our consoidated financial statements in our 2003 Annual Report included herein as Exhibit 13
and is incorporated herein by reference.

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On November 5, 2003, Tellabs Chairman
and CEO Michael Birck announced that an independent subcommittee of Tellabs directors
would conduct a search for a new CEO to lead Tellabs. On February 12, 2004, the Tellabs
board of directors appointed Krish Prabhu as CEO, president and director of Tellabs. Mr.
Prabhu is a seasoned executive whose 24 years of telecommunications experience includes
roles as chief operating officer of Alcatel Telecom and CEO of Alcatel USA. Mr. Birck will
continue to serve as Tellabs Chairman.

# OPTICAL NETWORKING
SYSTEMS

Our optical networking systems are
designed to help service providers reduce operating costs, generate greater revenues and
efficiently manage bandwidth. Our optical networking systems consist of digital
cross-connect, transport switching and optical transport systems.

Optical networking increases the
capacity of the fiber in a network, enabling service providers to carry more of their
customers voice, data and video signals over the same infrastructure. Optical
networking relies on wavelengths and fibers to move massive amounts of voice and data. A
wavelength can carry voice, video or data traffic from an optical carrier (OC)-3 or
synchronous transfer mode (STM)-1 (up to two thousand simultaneous phone conversations or
Internet connections) up to OC-768 or STM-256. A fiber can carry anywhere from one to 160
wavelengths, depending on the type of equipment used to terminate the fiber.

Our optical networking systems
consist of technologically sophisticated digital cross-connect, transport switching and
optical transport systems. These transmission systems are designed to meet or exceed
domestic and international industry standards. Product offerings include the Tellabs®
5000 series of digital-cross connect systems, the Tellabs® 5500NGX (formerly the
Tellabs® 6400) series of transport products, the Tellabs® 6500 transport switch
and the Tellabs® 7100 series of optical transport systems.

A digital cross-connect system is a
high-speed data channel switch, which connects transmission paths based on network needs,
rather than call-by-call. Digital cross-connect systems manage and route network traffic
and combine, consolidate and segregate signals to maximize efficiency. The Tellabs 5000
series of digital cross-connect systems operate under software control and are typically
used to build and control the narrowband and wideband transmission infrastructure of
telecommunication service providers. These products augment the ability of service
providers to provide current, emerging and future wireline and wireless services to
business and residential customers.

Telecommunication managers utilize
the digital cross-connect systems to generate revenue and to reduce cycle time while
minimizing capital and operating expense. Key applications include centralized and remote
testing of transmission facilities, grooming of voice, data, and video signals, automated
provisioning of new services and restoration of failed facilities.

The Tellabs 5000 series of digital
cross-connect systems vary in switching rate and facility interface speed. The
Tellabs® 5300 line of narrowband cross-connect systems is the highest density
narrowband system on the market with the ability to satisfy small cross-connect
application requirements. More than 1,000 Tellabs 5300 systems have been implemented in
wireless/mobile networks. Our flagship Tellabs® 5500 digital cross-connect system is
one of the industrys highest capacity wideband digital cross-connects. The system
efficiently grooms voice and data traffic over a SONET-based network. More than 4,100
Tellabs 5500 systems have been deployed in a variety of networks including local
telephone, long distance, wireless, private and emerging networks across the United
States. With its scalability and carrier-class architecture, the Tellabs 5500 system helps
service providers reduce equipment and maintenance costs while maximizing network
profitability.

The Tellabs 5500NGX product line,
obtained in the acquisition of Ocular Networks, Inc., is also designed for use in the
metropolitan (metro) optical networking market. The Tellabs 5500NGX transport switch
increases network utilization efficiency by integrating cross-connect technology, add-drop
multiplexing (ADM) and highly efficient data switching for Internet protocol (IP) and
Ethernet traffic.

The Tellabs 6500 transport switch is
a broadband transport platform that performs ADM and cross-connections at higher speeds
than the Tellabs 5500 series products. The Tellabs MetroVantage solution extends
this capability to remote locations via metro aggregation/backhaul and virtual
cross-connections. The Tellabs 6500 systems redundant, carrier-class architecture
ensures reliability during operation and service continuity during system expansion.

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The Tellabs® 7100 optical
transport system is designed for use in the metro optical networking market, to enable
service providers to deliver high-speed wavelength services, helping to alleviate the
bandwidth bottlenecks. The system accomplishes this capability by utilizing dense
wavelength-division multiplexing (DWDM) technology to increase the capacity of a network.
DWDM is the process of increasing the amount of traffic a single fiber can carry. The
Tellabs 7100 system utilizes DWDM to increase an individual fibers capacity up to 32
times and enables end-to-end fiber and lightpath management.

The Tellabs® 7120 NGX advanced
transport node is an OC-192 next-generation synchronous optical network (SONET) multiplexer supporting STS-1
cross-connection and Ethernet data transport capabilities. It is ideal for access and
transport in wireless, wireline, or cable operator networks. It has the highest density
and lowest power consumption in the industry, easily scales, and enables delivery of new
Ethernet services over existing SONET infrastructures.

Optical networking system products
accounted for approximately 43%, 44% and 55% of sales for 2003, 2002, and 2001,
respectively.

# NEXT-GENERATION SDH AND
MANAGED ACCESS

Our next-generation synchronous
digital hierarchy (SDH) and managed access systems consist of managed access and transport
systems used to deliver wireless and business services. These products include the
Tellabs® 8100 series and Tellabs® 6300 series of managed access and transport
systems and the Tellabs® 6370 (formerly the Tellabs® 7200) optical transport
system.  These products and systems are designed to accommodate ETSI (European Telecommunications
Standards Institute) interface standards not generally used in North America.

The Tellabs 8100 series of managed
access systems is designed for the connectivity services segment of the overall Europe,
Middle East, Africa, Asia Pacific and Latin America business services market, which
includes business-class Internet connectivity and managed data networks. The Tellabs 8100
managed access system is also a leading mobile transmission system. It is currently
deployed in more than 250 networks around the world, providing intelligent transport for
mobile services and multi-service platforms for a broad range of business services. For
mobile operators moving to 3G service provision, the Tellabs 8100 managed access system
offers a highly effective way to integrate new packet- and cell-based technologies in the
radio access network and a smooth evolution path to IP and asynchronous transfer mode
(ATM) core networking.

The Tellabs 6300 series includes edge
nodes (the Tellabs® 6310 and the Tellabs® 6320 product lines); the Tellabs®
6330 core node; the Tellabs® 6340 switch node, a next-generation multi-service
provisioning platform (MSPP) that meets carriers needs for new high-speed data
solutions; and the Tellabs® 6350 transport switch, a multipurpose platform offering
faster services, including high-capacity 4/4/1 cross-connection suited for various data,
voice and leased line applications, and offers interfaces such as Gigabit Ethernet and
integrated DWDM.

The Tellabs 6370 optical transport
system is an international-oriented DWDM platform, which enables operators to reduce
operational costs and simplify network planning. It provides multi-wavelength optical
add/drop, integrated SDH interfaces, and open transponder interfaces that support Gigabit
Ethernet, ESCON, ATM and IP applications. The system features plug-and-play installation
(SmartStart) which reduces installation time and eases procedures.

Next-generation SDH and managed
access products accounted for approximately 28%, 22% and 18% of sales in 2003, 2002 and
2001, respectively.

# OTHER PRODUCTS

Our Other Products include
carrier-class data solutions, voice-quality enhancement (VQE) and cable telephony
products.

Our acquisition of Vivace Networks
brought two complementary new products to Tellabs that, together with the new data
products being developed in Finland planned for release in 2004, enable us to expand into
the high-growth multi-service router and edge router markets.

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The Tellabs® 8800 series of
intelligent multi-service routers (MSRs) enable carriers to leverage existing
infrastructure to cost-effectively migrate existing Frame Relay and ATM data networks to
new profitable IP and multi-protocol label switching (MPLS) services of the future. The
series includes the Tellabs® 8820 and Tellabs® 8860 MSRs, which enable service
providers to seamlessly evolve their network to profit from new data service opportunities
while simultaneously protecting the profitability of their existing services.

Our voice-quality enhancement systems
consist primarily of the Tellabs® 3000 family of broadband and narrowband echo
cancellers and Tellabs voice-quality enhancement solutions that enable wireless and
wireline providers to improve voice quality in long distance, wireless and private
networks. The Tellabs 3000 series of echo
cancellers operate in a variety of network environments to ensure that a subscribers
phone call is echo-free. The VQE solutions are application-specific software that operate
seamlessly with the Tellabs 3000 family of echo cancellers to optimize voice clarity for
improved customer satisfaction. Tellabs VQE products primarily address the needs of
wireless operators, ILECs, IXCs and PTTs. Over 300 customers in 70 countries rely on
Tellabs echo canceller and VQE solutions.

In the case of wireline customers,
the ability to control the clarity of speech quality is becoming more and more difficult,
because of the deregulation of networks and the move from circuit-based to cell- and
packet-based networks. These networks introduce delays and other issues that are not
present in circuit-based calls, such as inconsistent speech-level control during calls. In
the case of wireless operators, to compete with wireline operators for call revenues, the
clarity of a mobile call must be as good as a wireline call. These changes have resulted
in a move away from pure echo cancellation, to providing echo cancellation as a platform
for voice-quality enhancing software, such as level control and noise reduction. This
development in the market has opened up opportunities, not just to provide solutions to
the wireline and wireless operators worldwide, but also to the manufacturers of
telecommunications products worldwide, who integrate these voice-quality enhancing
solutions into their products. Competition is driving many wireline and wireless customers
to re-evaluate and upgrade their existing infrastructure, based on the voice-enhancing
technology solutions now available. Tellabs VQE solutions include Tellabs Noise Reduction
(TNR), which reduces background noise in mobile calls; Tellabs Level Control (TLC), which
addresses voice level variations by automatically compensating for high or low audio
levels on a cell-by-cell basis; and Tellabs Acoustic Control (TAC), which eliminates
acoustic echo originating from digital mobile handsets and hands-free kits.

The Tellabs® 2300 telephony
distribution system is a multiple services delivery system that enables cable television
providers, alternate access carriers and competitive access providers to build flexible
communication networks that support the integrated delivery of video, voice, data and
information services. The latest domestic upgrade to the Tellabs 2300 telephony
distribution system enables multi-line radio frequency sharing to maximize network
reliability and decrease the probability of a blocked call.

Other Products accounted for
approximately 14%, 20% and 12% of sales in 2003, 2002 and 2001.

# PROFESSIONAL SERVICES

In support of our product portfolio,
we generate revenue from our services and solutions area. Our worldwide service
organization provides customers with high quality technical and administrative product
support focusing on meeting the expanding needs of the global customer base. We support
our customers with a wide range of services, such as network deployment, traffic
management, support services, professional services and training.

Tellabs network deployment
services enable our specialists to be a single point of contact for the customers,
focusing on program management, engineering, material procurement, installation labor and
supervision, and acceptance testing.

Traffic management services include
our network modernization program, software tools and processes designed to support
network upgrades and the transfer of live telecommunications traffic; and our element
provisioning program, which gives service providers the ability to accelerate their
time-to-market up to 50 percent.

Support services offer network
service providers a wide range of options for technical assistance, system maintenance,
system performance improvement and skills enhancement.

Our professional services group
offers a variety of tailored programs to meet all phases of a network life cycle including
operations integration services, highly customizable solutions designed for specific
customer needs that enhance the overall effectiveness of operations; and management
systems integration services, which help network service providers improve their
operations by extending the capability and performance of our network management systems.

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We provide Tellabs product warranties
for periods ranging from one to five years for the repair or replacement of modules and
systems because of defective material or as may otherwise be required under a specific
customer contract. We have a replacement service that is used to provide the customer with
needed module replacements in response to a time-critical service outage.

Our services group offers a variety
of professional and consultative services, including program management, network planning
and enhanced product support. These innovative service offerings are designed to augment
our basic services and provide value-added benefits to our customers.

Professional services accounted for
approximately 15%, 14% and 15% of sales in 2003, 2002 and 2001, respectively.

# COMPETITION

Our products are sold in global
markets and compete to a great extent on the following key factors: responsiveness to
customer needs, product features, customer-oriented planning, relationships with customers,
price, performance, reliability, breadth of product line, technical documentation, prompt delivery
and emerging technology from new entrants.

The optical networking product
systems compete principally with products from Alcatel, Ciena, Fujitsu, Lucent
Technologies, Marconi, NEC, and Nortel Networks.

The major competitors in the
next-generation SDH and managed access system category are Alcatel, Ciena, Cisco, ECI,
Huawei, Lucent, Marconi, NEC, Nortel Networks, Siemens and ZTE.

Competitors for the other products
are ADC, Alcatel, Arris, Cisco, Ditech, Juniper and NMS Communications.

# GLOBAL SALES

The global sales group includes
direct sales personnel and sales support personnel located throughout the United States,
Canada, Latin America, Europe, the Middle East, Africa, and Asia Pacific. The North
America sales organization (United States and Canada) is structured by customer segment
(e.g., ILECs, Wireless) while internationally the sales organizations are structured to
support activities on a regional basis: Latin America, EMEA (Europe, Middle East, Africa)
and Asia Pacific.

Sales are generated through our
direct sales organization and selected distributors. We have arrangements with a number of
distributors of telecommunications equipment, both in North America and internationally,
some of whom maintain inventories of our products to facilitate prompt delivery. These
distributors provide information on our products through their catalogs and through trade
show demonstrations. Our field sales force also assists the distributors with regular
calls to them and their customers. In 2003, sales generated through our direct sales
organizations and selected distributors were as follows:

|              |  |   
|------------- |  | --
|
|North America |  | 88
|International |  | 64
|Consolidated  |  | 79

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# CUSTOMERS

Sales to customers within North
America accounted for approximately 61%, 69%, and 76% of consolidated sales in 2003, 2002
and 2001, respectively. Sales to international customers accounted for approximately 39%,
31%, and 24% of consolidated sales in 2003, 2002 and 2001, respectively. The largest
single customer group is incumbent local exchange carriers (ILECs), which includes
BellSouth, Qwest Communications, SBC and Verizon. Sales to ILECs accounted for
approximately 37%, 36% and 42% of consolidated net sales in 2003, 2002 and 2001,
respectively.

In 2003, sales to Verizon (including
Verizon Wireless) accounted for 21.3% of consolidated net sales. In 2002, sales to Verizon
(including Verizon Wireless) and AT&T (including AT&T Wireless and AT&T
Broadband) accounted for approximately 17.4% and 11.2% of consolidated net sales,
respectively. In 2001, sales to Verizon (including Verizon Wireless) and Sprint
Corporation (including Sprint PCS) accounted for 18.4% and 10.1% of consolidated net
sales, respectively. No other customer in 2003, 2002 or 2001 accounted for more than 10%
of consolidated net sales.

# BACKLOG

At January 2, 2004, and December 27,
2002, total product and service backlogs were approximately $169 million and $130 million,
respectively. All of the January 2, 2004 backlog is expected to be shipped in 2004. We
consider backlog to be an indicator, but not the sole predictor, of future sales.

# RESEARCH AND DEVELOPMENT

Tellabs believes that the enhancement
of existing products and the development of new products are vital to our long-term
success. Research and development expenses were $286.1 million in 2003, $335.2 million in
2002, and $422.7 million in 2001. As of January 2, 2004, research and development
employees totaled 1,430 individuals representing approximately 41% of our total workforce.
We conduct research and development at our laboratories in Naperville, Illinois; Ashburn,
Virginia; San Jose, California; Quebec, Canada; Ballerup, Denmark; Espoo, and Oulu,
Finland. In addition to our internal efforts to develop new technologies, Tellabs also
undertakes research and development-oriented acquisitions and product-oriented alliances
in order to allow us access to technology that is important to the future of our
customers.

# MANUFACTURING

In 2002, we closed our Shannon,
Ireland, and Ronkonkoma, New York, manufacturing facilities. Our manufacturing operations
in North America, located in Bolingbrook, Illinois, were outsourced to Sanmina-SCI
Corporation in the fourth quarter of 2003 and the International manufacturing operations,
located in Espoo, Finland, were transferred to Elcoteq on January 1, 2004.

Hazardous waste material from the
manufacturing process was handled and disposed of in compliance with all Federal, State
and local provisions. The cost of complying with environmental regulations has not had a
material impact on capital expenditures, earnings or our competitive position.

Our products contain components that
are generally available from multiple suppliers, as well as components of proprietary
design that are currently sourced from a single supplier. In some cases, long lead times
would be required to develop alternative sources for proprietary components. If supplies
of components become limited, such as has occurred on occasion in the past, or if a
supplier of a proprietary component was unable to meet Tellabs requirements, the
resulting shortages could result in production delays that would adversely affect our
business.

# EMPLOYEES

At January 2, 2004, we had 3,515
employees. Approximately 1,158 individuals were employed in the sales, sales support and
marketing area, 1,430 in product development, and 927 in administration and other. We
consider our employee relations to be good. We are not a party to any collective
bargaining agreement.

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# INTELLECTUAL PROPERTY

We have various trade and service
marks, both registered and unregistered, in the United States and in numerous foreign
countries (collectively, Marks). All of these Marks are important because they
differentiate our products and services within the industry through brand name
recognition. We are not aware of any factor that would affect our ability to utilize any
of our major Marks.

We currently hold numerous U.S. and
foreign patents. We have also developed certain proprietary hardware designs, software
programs and other works in which we own various intellectual property rights, including
rights under copyright and trade secret laws. We believe that our patents and other
intellectual property rights are important to our business.

Through various licensing
arrangements we grant certain rights to our intellectual property and receive certain
rights to intellectual property of others. We expect to maintain current licensing
arrangements and to secure licensing arrangements in the future, as needed and to the
extent available on reasonable terms and conditions, to support continued development and
marketing of our products. Some of these licensing arrangements require or may require the
payment of royalties, and the amount of these payments may depend upon various factors,
including but not limited to: the structure of royalty payments, offsetting
considerations, if any, and the degree of use of the licensed technology in any of our
products or otherwise.

# BUSINESS SEGMENT AND
GEOGRAPHICAL INFORMATION

We manage our business in one
business segment. Information with respect to our net sales by product group, net sales by
country and net long-lived assets by country for the fiscal years ended January 2, 2004,
December 27, 2002, and December 28, 2001, is set forth in Note 13 to our consolidated
financial statements on page 39 of our 2003 Annual Report included herein as Exhibit 13
and is incorporated herein by reference.

# ACCESS TO SEC REPORTS

We file annual, quarterly and special
reports, proxy statements and other information with the SEC. These filings are available
to the public at the SECs website at www.sec.gov. No information from this
web page is incorporated herein by reference.

Our website is located at
www.tellabs.com. Copies of the our most recent annual stockholder report and proxy
statement are available directly on this website free of charge as soon as reasonably
practicable after such material is electronically filed with or furnished to the SEC. Our
website includes direct links to the SECs website for our annual and quarterly
filings.

Copies of our annual, quarterly and
current reports, proxy statements and certain other information filed with the SEC, as
well as amendments thereto, are available on our website free of charge and will be
provided either electronically or in paper form free of charge upon request.

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# GLOSSARY OF TECHNICAL
TERMS

Access The process and
systems by which users or devices interact with a communications network.

Asynchronous transfer mode (ATM)
High speed transmission technology. A high-bandwidth, low-delay, packet-like
switching and multiplexing technique.

Backbone  The main high
capacity paths within a communications network.

Bandwidth The width or carrying
capacity of a communications channel.

Base station controller In cellular and mobile networks, a device that manages communications equipment and
acts as a small switch.

Broadband A
high-bandwidth fiber optic, coaxial or hybrid line with more capacity than a standard
voice-grade phone line, capable of carrying numerous voice, data and video channels
simultaneously.

Cell site The location
of a transmitter/receiver where radio links are established between a wireless system and
the end-users wireless device.

Connectivity Network
capability that enables different devices to communicate with each other.

Data Network traffic other
than voice.

Dense wavelength division
multiplexing (DWDM) Technology that splits single optical signals on fiber
optic cables into several independent wavelengths, or colors, thus expanding the carrying
capacity of fiber optic networks.

Digital An alternative
to traditional analog communications, digital systems transport information in binary 1s
and 0s format, like computer code, to improve clarity and quality.

Digital cross-connect A
specialized high-speed data channel switch, which connects transmission paths based on
network needs (rather than call by call). Digital cross-connects manage and route network
traffic, and combine, consolidate and segregate signals to maximize efficiency.

Digital leased line A
telephone or data line dedicated to exclusive use by one customer.

End office/Local exchange The
switching facility closest to the end-user.

ESCON A data protocol
used to connect metropolitan area networks and for storage area networks.

Ethernet A data network
standard that connects computers, printers, workstations, terminals and servers within the
same building, campus or metropolitan area.

Ethernet-over-SDH/Ethernet-over-SONET
Industry standards that enable Ethernet data traffic to be mapped to SDH or
SONET networks.

Fiber optic cable High-capacity cable that uses a laser light traveling along a glass fiber to transmit
communications signals.

Frame relay Data-oriented switching interface standard that transmits bursts of data over wide
area networks (WANs).

Gigabit Ethernet A
high-speed, standardized data format used to implement wide-area data networks.

Hub office/Transit exchange Network facility where communications equipment connects circuits for phone calls and
Internet sessions.

Internet The
worlds largest decentralized network of computers and network servers.

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Intranet A private
computer network based on Internet protocols.

Internet protocol (IP) Common
name given to a set of protocols developed to allow cooperating computers to share
information across a network.

Layer 2 The switching
or data link portion of the network.

Mobile Networks that
use radio rather than cables or fiber.

Mobile switching center Facility where wireless traffic is managed and routed to its destination.

Multi-Protocol Label Switching (MPLS)
A packet switching standard that enables multiple traffic types within a data
stream to be given levels of priority, implementing quality of service.

Multi-service The
capability of simultaneously transporting a variety of communications services (e.g., ATM,
Ethernet or IP).

Multi-service Provisioning
Platform (MSPP) A new category of network element that combines the
functionality of multiple network elements such as SONET, digital cross-connect, and ATM
switching in a single chassis. MSPPs provide reliable transport of data and voice across
dissimilar networks.

Multi-service Router (MSR) A high-speed networking platform that supports many different types of
services, including traditional and emerging services.

Network A system of
equipment and connections for the transmission of signals that carry voice, data and/or
video. Networks can be local, such as those maintained by providers of local long
distance, cable, or wireless telephone services, or long-distance, such as those
maintained by providers of connections and transport between local networks.

Next Generation Description for emerging technologies.

Optical Carrier (OC)
Under the SONET hierarchy, the basic signaling rate for wavelength services.

Optical transmission A
technology that transmits signals as light over fiber optic cable.

Post Telephone and Telegraph
Administration (PTT) Often controlled by governments, PTTs provide
telecommunications services in many countries.

SDH (synchronous digital
hierarchy) Transport format for transmitting high-speed digital signals over
fiber optic facilities outside of North America, comparable to SONET.

SONET (synchronous optical
network) Transport format for transmitting high-speed digital signals through
fiber optics in North America, comparable to SDH.

Switch A device that
establishes and routes communications paths.

Synchronous Transfer Mode (STM) A transport level and switching approach that provides users up to 50 million bits per
second, regardless of the number of users.

Transport The process
of moving voice, data or video across communications networks.

Virtual concatenation Technology that combines SONET or SDH channels to transport data more efficiently and
optimize networks.

Virtual Private Network (VPN)
An encrypted connection that enables businesses to securely transmit their own
voice, data and/or video traffic over a public network (e.g., owned by a phone company or
Internet provider) at a lower cost than a dedicated private network.

Voice-over-Internet Protocol
(VoIP) A category of hardware and software that enables people to transmit
voice traffic over the Internet.

10

---

Voice-quality enhancement (VQE)
A technique that isolates and filters out unwanted signals and sounds such as
echo and background noise.

Wide Area Network (WAN)
A large public data or voice network that reaches beyond a metropolitan area.

Wireline Networks that
use cables rather than radio. It is a term associated with a network or terminal that uses
metallic wire conductors and/or optical fibers for telecommunications.

Wireless Networks that use
radio rather than cables.  For example, a network or terminal that uses electromagnetic waves
such as infrared, laser, visible light or acoustic energy, rather than wire conductors, for
telecommunications.

# ITEM 2. PROPERTIES

We own an 850,000-square foot
corporate headquarters and research and development facility on 55 acres of land in
Naperville, Illinois, approximately 35 miles west of Chicago; a 182,000-square foot
facility in Bolingbrook, Illinois, used for operations; 5.2 acres of vacant land in
Ashburn, Virginia, adjoining our existing leased facility; a 222,000-square foot facility
on 28 acres of land in Ballerup, Denmark, which contains administrative and research and
development functions; a 154,000-square foot production and research and development
facility, located on approximately 12 acres of Company-owned land in Espoo, Finland. Also
on this land is a 90,000-square foot operations facility. We also own two office buildings
in Espoo, totaling 89,000 square feet, which contain production, research and development
and administrative functions.

Additionally, we have three locations
that are classified as held for sale as of the end of 2003. These locations
include 50 acres of land in Bolingbrook, Illinois with a 545,000-square foot manufacturing
and research and development facility; a 124,000-square foot manufacturing facility on
approximately 76 acres of land in Round Rock, Texas; and a 45,000-square foot office
facility in Espoo, Finland.

We sold a 135,000-square foot
manufacturing facility in Shannon, Ireland in 2003, and as of the end of 2003, we had an
executed contract for the sale of 19.1 acres of land with three buildings totaling 220,000
square feet in Lisle, Illinois. That sale transaction was completed on February 2, 2004.

Significant facilities leased by us,
all for research and development, include: a 72,000-square foot facility in Ashburn,
Virginia; a 53,000-square foot facility in San Jose, California; a 41,000-square foot
facility in Espoo, Finland; and a 28,000-square foot facility in Oulu, Finland.

In addition to these facilities, we
lease four sales offices in the United States, one sales office in Canada, and one sales
office in Mexico. Internationally, we lease various sales offices in twenty-three
countries outside North America.

We own substantially all of the
equipment used in our business. We believe that our facilities are adequate and that
suitable additional space and equipment will be available to accommodate expansion as
needed.

# ITEM 3. LEGAL PROCEEDINGS

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, and Richard Notebaert (former CEO, Director, and
President 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 revenues 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.

11

---

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.

# ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS

None.

# FORWARD-LOOKING
STATEMENTS

Except for historical information,
the matters discussed or incorporated by reference in Part I of this report may include
forward-looking statements made pursuant to the safe harbor provisions of Section 21E of
the Securities Exchange Act of 1934, as amended. These statements reflect
managements expectations, estimates and assumptions, based on the information
available 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, intend, likely, will,
should, could 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
telecommunication 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; manufacturing
efficiencies; research and new product development; protection 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; availability and terms of future acquisitions; 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. For a further description of such risks and
future factors, see Exhibit 99.3 to Form 10-Q for the quarterly period ended March 28,
2003, filed with the SEC on May 9, 2003. 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 the
forward-looking statements in determining whether to buy, sell or hold any of our
securities. 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 financial statements and related notes and managements
discussion and analysis included in our 2003 Annual Report included herein as Exhibit 13
and incorporated in this report by reference in Part II, Items 7 and 8.

12

---

# PART II

# ITEM 5. MARKET FOR
REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Tellabs common stock is listed
on the Nasdaq National Market under the symbol TLAB. As of February 23, 2004,
there were approximately 6,700 stockholders of record and 415,364,767 outstanding shares.

The section entitled Common
Stock Market Data on page 47 of our 2003 Annual Report included herein as Exhibit 13
is incorporated herein by reference. We have never paid cash dividends and do not
anticipate paying a cash dividend in the foreseeable future.

The section entitled Equity
Compensation Plan Table in our Proxy Statement dated March 19, 2004 is
incorporated herein by reference.

# ITEM 6. SELECTED
FINANCIAL DATA

The 11-Year Summary of Selected
Financial Data on pages 42 and 43 of our 2003 Annual Report included herein as Exhibit 13
is incorporated herein by reference.

# ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Managements Discussion and
Analysis of Financial Condition and Results of Operations on pages 14 through 18 of our
2003 Annual Report included herein as Exhibit 13 are incorporated herein by reference.

# ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Investments in Marketable
Securities

During the normal course of business,
we invest a portion of our cash and cash equivalents in marketable securities. For a more
detailed discussion of our investments for the fiscal years ended January 2, 2004, and
December 27, 2002, please refer to Note 6 on pages 31 and 32 of our 2003 Annual Report
included herein as Exhibit 13 and incorporated herein by reference.

Financial Instruments

We conduct business on a global basis
in several major currencies and are subject to risks associated with fluctuating foreign
exchange rates. For a more detailed discussion of our foreign currency exposure management
policy, please refer to Note 7 on pages 32 and 33 of our 2003 Annual Report included
herein as Exhibit 13 and incorporated herein by reference.

The table that follows presents a
summary of the notional value of forward exchange rate contracts for each currency in
which we have hedged exposure at January 2, 2004, and December 27, 2002. The principal
currencies we currently hedge are the British pound, Canadian dollar, Danish krone, Euro,
Mexican peso and U.S. dollar. The notional values maturing in 2004 and 2003 are the U.S.
dollar values of the agreed-upon amounts in each foreign currency that will be delivered
to a third-party on the agreed-upon date.

13

---

|(Dollars in millions)                                             | Underlying Exposure at 1/2/04 | Notional Value of Forward Contract Maturing in 2004 |     | Weighted Average Contract Rate
|----------------------------------------------------------------- | ----------------------------- | --------------------------------------------------- | --- | ------------------------------
|                                                                 
|Forward contracts at 1/2/04:                                      |                              
|Forward contracts to sell foreign currencies for Euro:            |                              
|United States dollar                                              |                               | $     125                                           | .4  | $      89                     
|Norwegian krone                                                   |                               | 3                                                   | .8  | 2                             
|British pound                                                     |                               | (1                                                  | .7) | 3                             
|Swedish krone                                                     |                               | 0                                                   | .6  | 0                             
|Thai baht                                                         |                               | 0                                                   | .5  | 0                             
|                                                                 
|                                                                  |                               | $      128                                          | .6  | $        96                   
|Forward contracts to buy foreign currencies for Euro:             |                              
|Swedish krone                                                     |                               | $          1                                        | .9  | $          1                  
|                                                                 
|                                                                  |                               | $          1                                        | .9  | $          1                  
|                                                                 
|Forward contracts to sell foreign currencies for Danish krone:    |                              
|United States dollar                                              |                               | $          8                                        | .3  | $          5                  
|                                                                 
|                                                                  |                               | $          8                                        | .3  | $          5                  
|                                                                 
|Forward contracts to sell foreign currencies for British pound:   |                              
|Euro                                                              |                               | $         17                                        | .5  | $         17                  
|                                                                 
|                                                                  |                               | $         17                                        | .5  | $         17                  
|                                                                 
|Forward contracts to buy foreign currencies for British pound:    |                              
|United States dollar                                              |                               | $          0                                        | .6  | $          0                  
|                                                                 
|                                                                  |                               | $          0                                        | .6  | $          0                  
|                                                                 
|Forward contracts to buy foreign currencies for U.S. dollar:      |                              
|Danish krone                                                      |                               | $          0                                        | .9  | $          1                  
|Euro                                                              |                               | (0                                                  | .8) | 1                             
|Singapore dollar                                                  |                               | 1                                                   | .5  | 1                             
|                                                                 
|                                                                  |                               | $          1                                        | .6  | $           3                 
|                                                                 
|Forward contracts to sell foreign currencies for U.S. dollar:     |                              
|British pound                                                     |                               | $          0                                        | .4  | $          0                  
|Canadian dollar                                                   |                               | 35                                                  | .3  | 34                            
|Mexican peso                                                      |                               | 36                                                  | .6  | 24                            
|                                                                 
|                                                                  |                               | $         72                                        | .3  | $         59                  
|                                                                 
|Forward contracts to buy foreign currencies for Brazilian Reis:   |                              
|Euro                                                              |                               | $          0                                        | .4  | $          0                  
|                                                                 
|                                                                  |                               | $          0                                        | .4  | $          0                  
|                                                                 
|Forward contracts to sell foreign currencies for Canadian dollar: |                              
|United States dollar                                              |                               | $         37                                        | .9  | $         36                  
|                                                                 
|                                                                  |                               | $         37                                        | .9  | $         36                  
|                                                                 
|Forward contracts to buy foreign currencies for Thai Baht         |                              
|United States dollar                                              |                               | $          3                                        | .3  | $          3                  
|                                                                 
|                                                                  |                               | $          3                                        | .3  | $          3                  
|                                                                 
|Total contracts outstanding at January 2, 2004:                   |                               | $       272                                         | .4  | $       224                   
|                                                                 

14

---

|(Dollars in millions)                                           | Underlying Exposure at 12/27/02 | Notional Value of Forward Contract Maturing in 2004 |    | Weighted Average Contract Rate
|--------------------------------------------------------------- | ------------------------------- | --------------------------------------------------- | -- | ------------------------------
|                                                               
|Forward contracts at 12/27/02:                                  |                                 |                                                     |    |                               
|Forward contracts to sell foreign currencies for Euro:          |                                
|United States dollar                                            |                                 | $      96                                           | .5 | $      82                     
|Danish krone                                                    |                                 | 2                                                   | .4 | 0                             
|Norwegian krone                                                 |                                 | 3                                                   | .8 | 2                             
|British pound                                                   |                                 | 0                                                   | .9 | 1                             
|Swedish krone                                                   |                                 | 0                                                   | .7 | 0                             
|Thai baht                                                       |                                 | 1                                                   | .3 | 1                             
|                                                               
|                                                                |                                 | $    105                                            | .6 | $     88                      
|Forward contracts to sell foreign currencies for Danish krone:  |                                
|United States dollar                                            |                                 | $       4                                           | .7 | $       5                     
|                                                               
|                                                                |                                 | $       4                                           | .7 | $       5                     
|                                                               
|Forward contracts to sell foreign currencies for British pound: |                                
|Euro                                                            |                                 | $       7                                           | .0 | $       5                     
|                                                               
|                                                                |                                 | $       7                                           | .0 | $       5                     
|                                                               
|Forward contracts to buy foreign currencies for British pound:  |                                
|United States dollar                                            |                                 | $       1                                           | .1 | $       0                     
|                                                               
|                                                                |                                 | $       1                                           | .1 | $       0                     
|                                                               
|Forward contracts to buy foreign currencies for U.S. dollar:    |                                
|Singapore dollar                                                |                                 | $       1                                           | .3 | $       1                     
|Japanese yen                                                    |                                 | 0                                                   | .8 | 0                             
|                                                               
|                                                                |                                 | $       2                                           | .1 | $       1                     
|                                                               
|Forward contracts to sell foreign currencies for U.S. dollar:   |                                
|Canadian dollar                                                 |                                 | $       3                                           | .3 | $       4                     
|Mexican peso                                                    |                                 | 10                                                  | .9 | 8                             
|                                                               
|                                                                |                                 | $      14                                           | .2 | $      12                     
|                                                               
|Total contracts outstanding at December 27, 2002:               |                                 | $     134                                           | .7 | $     114                     
|                                                               

Consistent
with our policy, we entered into the above contracts immediately prior to the respective
year ends. Accordingly, the fair value of such contracts at January 2, 2004, and December
27, 2002, are not material.

# ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements
and Notes and the Report of Independent Auditors on pages 21 through 43 of our 2003 Annual
Report included herein as Exhibit 13 are incorporated herein by reference.

# ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

15

---

# ITEM 9A. CONTROLS AND
PROCEDURES

As of the end of the period covered
by this report our Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) carried out an evaluation under their supervision and with the
participation of our management, of the effectiveness of our disclosure controls and
procedures and internal control over financial reporting. Based on that evaluation, the
CEO and CFO have concluded that our disclosure controls and procedures are effective to
ensure that information we are required to disclose in reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms and there were no significant
changes in our internal control over financial reporting that has materially affected or
is reasonably likely to materially affect such internal control over financial reporting.

16

---

# PART III

# ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT

The information required is
incorporated herein by reference to the sections entitled Election of
Directors, Committees of the Board-Audit and Ethics Committee, and
Section 16(a) Beneficial Ownership Reporting Compliance in our Proxy Statement
dated March 19, 2004 and the sections entitled Officers and Code of
Ethics, Certificate of Incorporation and Bylaws in our 2003 Annual Report included
herein as Exhibit 13 and is incorporated herein by reference.

# ITEM 11. EXECUTIVE
COMPENSATION

The information required is
incorporated herein by reference to the sections entitled Executive
Compensation, Director Compensation, Employment Agreements,
Compensation Committee Interlocks and Insider Participation,
Compensation Committee Report on Executive Compensation and Performance
Graph in our Proxy Statement dated March 19, 2004.

# ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required is
incorporated herein by reference to the sections entitled Security Ownership of
Management and Certain Other Beneficial Owners and Proposal to Approve the
2004 Incentive Compensation Plan in our Proxy Statement dated March 19, 2004.

# ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

The information required is
incorporated herein by reference to the section entitled Transactions with Executive
Officers, Directors and Others in our Proxy Statement dated March 19, 2004.

# ITEM 14. PRINCIPAL
ACCOUNTANTS FEES AND SERVICES

The information required is
incorporated herein by reference to the section entitled Fees to the Companys
Auditors in our Proxy Statement dated March 19, 2004.

# ITEM 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)    
          1. Financial Statements:

The following Consolidated Financial
Statements of Tellabs, Inc., and Subsidiaries, included in the registrants 2003
Annual Report included herein as Exhibit 13, were previously incorporated by reference in
Item 8:

Report of Independent
Auditors

Consolidated Balance Sheets: January
2, 2004, and December 27, 2002

Consolidated Statements of
Operations: Years ended January 2, 2004, December 27, 2002, and December 28, 2001

Consolidated Statements of Stockholders
Equity: Years ended January 2, 2004, December 27, 2002, and December 28, 2001

Consolidated Statements of Cash
Flows: Years ended January 2, 2004, December 27, 2002, and December 28, 2001

Notes to Consolidated
Financial Statements

2.    
          Financial Statement Schedule:

17

---

The following Consolidated Financial
Statement Schedule of Tellabs, Inc., and Subsidiaries is included herein pursuant to Item
15(d):

Report of Independent
Auditors on Financial Statement Schedule

Schedule II. Valuation
and Qualifying Accounts and Reserves

Schedules not included have been
omitted because they are not applicable or the required information is shown in the
consolidated Financial Statements or Notes thereto.

(b)    
          Reports on Form 8-K:

|                  | 
|----------------- | 
|October 3, 2003   | 
|                 
|October 15, 2003  | 
|                 
|November 5, 2003  | 
|                 
|November 14, 2003 | 
|                 
|January 14, 2004  | 
|                 
|January 22, 2004  | 
|                 
|February 12, 2004 | 

(c)    
          Exhibits:

|Exhibit Number |    | Description
|-------------- | -- | -----------
|2              | .1 |            
|2              | .2 |            
|2              | .3 |            
|3              | .1 |            
|3              | .2 |            
|3              | .3 |            
|3              | .4 |            
|10             | .1 |            
|10             | .2 |            
|10             | .3 |            
|10             | .4 |            
|10             | .5 |            
|10             | .6 |            
|10             | .7 |            
|10             | .8 |            
|10             | .9 |            

18

---

|10 | .10 |  | 1989 Stock Option
Plan, as amended and restated 1/                                                                 
|-- | --- |  | -------------------------------------------------------------------------------------------------------------------
|10 | .11 |  | Amendment to Tellabs,
 Inc. 1989 Stock Option Plan (As Amended and Restated June 26, 1992) 11/                     
|10 | .12 |  | Employee
Quality Stock Award Program 2/                                                                            
|10 | .13 |  | 1991 Stock
Option Plan, as amended and restated 1/                                                                 
|10 | .14 |  | Amendment to
Tellabs, Inc. 1991 Stock Option Plan (As Amended and Restated June 26, 1992) 11/                      
|10 | .15 |  | Amendment to the
Coherent Communications Systems Corporation Amended and Restated 1993 Equity Compensation Plan 11/
|10 | .16 |  | 1994 Stock
Option Plan 3/                                                                                          
|10 | .17 |  | Amendment to the
Tellabs, Inc. 1994 Stock Option Plan 11/                                                          
|10 | .18 |  | Amendment to
the Tellabs, Inc. 1997 Stock Option Plan 11/                                                          
|10 | .19 |  | 1998 Stock
Option Plan 7/                                                                                          
|10 | .20 |  | Amendment to
the Tellabs, Inc. 1998 Stock Option Plan 11/                                                          
|10 | .21 |  | NetCore Systems,
Inc. 1997 Stock Option Plan 8/                                                                    
|10 | .22 |  | 1999 Tellabs,
Inc., Stock Bonus Plan 10/                                                                           
|10 | .23 |  | SALIX Technologies,
Inc. 1998 Omnibus Stock Plan and Option Agreement Dated as of December 1, 1997 9/              
|10 | .24 |  | Amendment to
the SALIX Technologies, Inc. Omnibus Stock Plan 11/                                                   
|10 | .25 |  | Employment
Agreement - Chairman of the Board and Chief Executive Officer 18/                                       
|10 | .26 |  | Future
Networks, Inc. Stock Incentive Plan 12/                                                                     
|10 | .27 |  | Amendment
to the Coherent Communications Systems Corporation 1993 Equity Compensation Plan 13/                     
|10 | .28 |  | Tellabs,
Inc. 2001 Stock Option Plan 13/                                                                           
|10 | .29 |  | Form of
Executive Agreement for Corporate Officers 19/                                                             
|10 | .30 |  | Form of
Executive Agreement for Senior Executives 19/                                                              
|10 | .31 |  | Ocular Networks,
Inc. Amended and Restated 2000 Stock Incentive Plan 14/                                           
|10 | .32 |  | Tellabs
Advantage Plan, as amended and restated                                                                    
|10 | .33 |  | First
Amendment to the Tellabs Advantage Plan                                                                      
|10 | .34 |  | Second
Amendment to the Tellabs Advantage Plan                                                                     
|10 | .35 |  | Vivace
Networks, Inc. 1999 Equity Incentive Plan, as amended 19/                                                   
|11 |     |  | Statement
re: Computation of per Share Earnings                                                                    
|13 |     |  | Annual
Report to Stockholders                                                                                      
|21 |     |  | Subsidiaries
of Tellabs, Inc.                                                                                      
|23 |     |  | Consent of
Ernst & Young LLP                                                                                       
|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                                        
|99 | .1  |  | Forward-Looking
Statements and Risks and Future Factors Impacting Tellabs 17/                                      

Exhibits 10.1 through 10.35 are
management contracts or compensatory plans or arrangements required to be filed as an
Exhibit to this Form 10-K pursuant to Item 15(c) hereof.

(d)    
          Schedules: See Item 15(a)2 above.

1/  Incorporated by reference from Tellabs, Inc.  Post-effective Amendment No.  1 on Form S-8 to Form S-4 filed on
or about June 29, 1992 (File No. 33-45788).

2/  Incorporated by reference from Tellabs, Inc.  Form 10-Q Quarterly Report for the quarter ended April 1, 1988 (File No. 0-9692).

3/  Incorporated by reference from Tellabs, Inc. Form 10-K Annual Report for the year ended December 31, 1993 (File No. 0-9692).

4/  Incorporated by reference from Tellabs, Inc. Form 10-Q Quarterly Report for the quarter ended June 30, 1995 (File No. 0-9692).

5/  Incorporated by reference from Tellabs, Inc.  Form 10-K Annual Report for the year ended December 29, 1995 and Form 10-Q
Quarterly Report for the quarter ended September 26, 1997.  The Deferred Income Plan Amendment is incorporated by reference from
Tellabs, Inc. Form 10-K Annual Report for the year ended January 1, 1999 (File No. 0-9692).

6/  Incorporated by reference from Tellabs, Inc. Form 10-Q Quarterly Report for the quarter ended June 27, 1997 (File No 0-9692).

19

---

7/  Incorporated by reference from Tellabs, Inc. Definitive Proxy Statement filed on or about March 16, 1998 (File No. 0-9692).

8/  Incorporated by reference from Tellabs, Inc. Post-Effective Amendment No. 1on Form S-8 to Form S-4, filed on September 17, 1999
(File No. 33-83509).

9/  Incorporated by reference from Tellabs, Inc. Post-Effective Amendment No. 1 on Form S-8 to Form S-4, filed on March 13, 2000
(File No. 33-95135).

10/  Incorporated by reference from Tellabs, Inc. Form 10-K Annual Report for the year ended December 31, 1999 (File No. 0-9692).

11/  Incorporated by reference from Tellabs, Inc. Form 10-Q Quarterly Report for the quarter ended June 30, 2000 (File No. 0-9692).

12/  Incorporated by reference from Tellabs, Inc. Form S-8 filed on March 5, 2001 (File No. 333-56546).

13/  Incorporated by reference from Tellabs, Inc. Form 10-Q Quarterly Report for the quarter ended March 30, 2001 (File No. 0-9692).

14/  Incorporated by reference from Tellabs, Inc. Form S-8 filed on January 25, 2002 (File No. 333-81360).

15/  Incorporate by reference from Tellabs, Inc. Pre-Effective Amendment No. 1 to Form S-4, filed on August 5, 1999 (File No.
33-83509).

16/  Incorporated by reference from Tellabs, Inc. Form 10-Q Quarterly Report for the quarter ended March 29, 2002 (File No. 0-9692).

17/  Incorporated by reference from Tellabs, Inc. Form 10-Q Quarterly Report for the quarter ended June 27, 2003 (File No. 0-9692).

18/  Incorporated by reference from Tellabs, Inc. Form 10-K Annual Report for the year ended December 27, 2002 (File No. 0-9692).

19/  Incorporated by reference from Tellabs, Inc. Form 10-Q Quarterly Report for the quarter ended September 26, 2003 (File No.
0-9692).

20

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# SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) 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                      
|              
|               | By /s Krish A. Prabhu             
|March 12, 2004 | Krish A. Prabhu                   
|Date           | President, Chief Executive Officer
|               | and Director                      
|               | (Principal Executive Officer)     

Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

|                                                | 
|----------------------------------------------- | 
|/s Krish A. Prabhu                              | 
|                                               
|Krish A. Prabhu                                 | 
|President, Chief Executive Officer and Director | 
|(Principal Executive Officer)                   | 
|                                               
|                                               
|/s Timothy J. Wiggins                           | 
|                                               
|Timothy J. Wiggins                              | 
|Executive Vice President and Chief Financial    | 
|Officer                                         | 
|(Principal Financial Officer)                   | 
|                                               
|                                               
|/s James A. Dite                                | 
|                                               
|James A. Dite                                   | 
|Vice President and Controller                   | 
|(Principal Accounting Officer)                  | 
|                                               
|                                               
|/s Michael J. Birck                             | 
|                                               
|Michael J. Birck                                | 
|Chairman and Director                           | 

21

---

|                           | 
|-------------------------- | 
|                          
|                          
|/s Bo Hedfors              | 
|                          
|Bo Hedfors                 | 
|Director                   | 
|                          
|                          
|/s Mellody L. Hobson       | 
|                          
|Mellody L. Hobson          | 
|Director                   | 
|                          
|                          
|/s Frederick A. Krehbiel   | 
|                          
|Frederick A. Krehbiel      | 
|Director                   | 
|                          
|                          
|/s Michael E. Lavin        | 
|                          
|Michael E. Lavin           | 
|Director                   | 
|                          
|                          
|/s Stephanie Pace Marshall | 
|                          
|Stephanie Pace Marshall    | 
|Director                   | 
|                          
|                          
|/s William F. Souders      | 
|                          
|William F. Souders         | 
|Director                   | 
|                          
|                          
|/s Jan H. Suwinski         | 
|                          
|Jan H. Suwinski            | 
|Director                   | 

22

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# REPORT OF INDEPENDENT
AUDITORS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and
Stockholders of Tellabs, Inc.

We have audited the consolidated
financial statements of Tellabs, Inc. and Subsidiaries as of January 2, 2004, and December
27, 2002, and for each of the three years in the period ended January 2, 2004, and have
issued our report thereon dated January 21, 2004. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). This schedule is the responsibility
of the Companys management. Our responsibility is to express an opinion based on our
audits.

In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the information set
forth therein.

# /s Ernst & Young LLP

Chicago, Illinois
January 21, 2004

23

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TELLABS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Three Years Ended January 2, 2004, December 27, 2002, and December 28, 2001

|(In Millions)                      | Balance at beginning of year |       | Additions charged to costs and expenses |     | Deductions (A) |        | Balance at end of year
|---------------------------------- | ---------------------------- | ----- | --------------------------------------- | --- | -------------- | ------ | ----------------------
|                                  
|2003                               |                              |       |                                        
|Allowance for doubtful receivables |                              | $  19 | .0                                      | (B) |                | $   (0 | .7)                   
|2002                               |                              |       |                                        
|Allowance for doubtful receivables |                              | $  57 | .3                                      |     |                | $ (23  | .9)                   
|2001                               |                              |       |                                        
|Allowance for doubtful receivables |                              | $  27 | .6                                      |     |                | $  42  | .0                    

NOTE:

|(A) |  |  uncollectable accounts charged off, net
|--- |  | -----------------------------------------

|(B) |  |  $12.2 million allowance for current receivables (netted against Accounts
                    Receivable) and $6.8 million allowance for long-term receivables (netted against
                    Other Assets)
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) |  |  These amounts represent reserve reversals.
|--- |  | --------------------------------------------

---

Exhibit Index

|   |    
|-- | ---
|10 | .32
|10 | .33
|10 | .34
|11 |    
|13 |    
|21 |    
|23 |    
|31 | .1 
|31 | .2 
|32 | .1 
|32 | .2 

24

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