2. Tellabs, Inc 4/1/02 Al Goldstein

3. Economic Overview Economic Recovery is expected in 2002 –Strength of recovery is uncertain –Stock markets have surged tremendously since October –Prices have grown faster than earnings Conditions likely to favor companies who quickly rebound with strong profitability (difficult for technology sector)

4. Business Overview Tellabs, Inc. designs, manufactures, markets and services optical networking, next-generation switching and broadband access solutions The Company also provides professional services that support its solutions

5. Vital Stats Price = $10.45 Sales (ttm) = $2.2 billion NI (ttm) = -182 million Profit Margin (ttm) = -8% EPS (ttm) = -$0.45 P/E = NA Current Ratio = 6 Market Cap = $4.3 billion 5 Yr Expected Earnings Growth = 16%

6. Original Proposal Buy 400 shares @ 57.125 on March 10, 2000 Justification –Global solutions provider to telecom service providers (strong growth industry) –Surpassed 2000 sales goal of $2 billion –Named one of S&P’s best performing stocks by Business Week/Investors Business Daily

7. Recent Events Company hurt tremendously by the suffering telecom industry Balance sheets is still very strong –$700 million in cash and virtually no debt Changing industry dynamics has limited future growth and visibility Customers are still not spending and the recovery is uncertain

8. Base Case Valuation

9. Ideal Case Valuation

10. Downside Case Valuation

11. Valuation Base Case = $5.8 –Assumes return to profitability in 2002 ($0.19/share), strong growth in 2003 (183%), then 16% Ideal Case = $6.6 –Assumes ($0.21/share) in 2002, 200% growth in 2003, then 20% Downside Case = $5.3 –Assumes ($0.17/share) in 2002, 174% growth in 2003, then 10%

12. Base Case Sensitivity

13. Recommendation SELL current holding Justification –Limited long term visibility –Changing industry dynamics (lower growth/more competition) –Valuation