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GuruFocus Financial Strength Rank measures how strong a company’s financial situation is. It is based on these factors

1. The debt burden that the company has as measured by its Interest coverage (current year).
2. Debt to revenue ratio. The lower, the better
3. Altman Z-score.

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

Financial Strength : 6/10

GuruFocus Profitability Rank ranks how profitable a company is and how likely the company’s business will stay that way. It is based on these factors:

1. Operating Margin
2. Trend of the Operating Margin (5-year average). The company with an uptrend profit margin has a higher rank.
••3. Consistency of the profitability
4. Piotroski F-Score
5. Predictability Rank•

The maximum rank is 10. A rank of 7 or higher means a higher profitability and may stay that way. A rank of 3 or lower indicates that the company has had trouble to make a profit.

Profitability Rank is not directly related to the Financial Strength Rank. But if a company is consistently profitable, its financial strength will be stronger.

Profitability & Growth : 3/10

» TLAB's 10-Y Financials


Revenue & Net Income
Cash & Debt
Oprt. Cash Flow & Free Cash Flow

» Details

Guru Trades

Q2 2013

TLAB Guru Trades in Q2 2013

John Rogers 130,318 sh (New)
Joel Greenblatt 1,199,806 sh (+9.81%)
Third Avenue Management 36,512,677 sh (+3.17%)
Martin Whitman 23,590,610 sh (+8.97%)
Chuck Royce 1,441,355 sh (-67.05%)
» More
Q3 2013

TLAB Guru Trades in Q3 2013

Steven Cohen 107,794 sh (New)
John Rogers 289,318 sh (+122.01%)
Martin Whitman 24,934,737 sh (+5.70%)
Third Avenue Management 36,512,677 sh (unchged)
Joel Greenblatt Sold Out
Chuck Royce 741,355 sh (-48.57%)
» More
Q4 2013

TLAB Guru Trades in Q4 2013

Martin Whitman 24,934,737 sh (unchged)
Steven Cohen Sold Out
Chuck Royce Sold Out
Third Avenue Management Sold Out
John Rogers Sold Out
» More

TLAB Guru Trades in 2014

Martin Whitman Sold Out
» More
» Details

Insider Trades

Latest Guru Trades with TLAB

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Guru Investment Theses on Tellabs, Inc.

Third Avenue Management Comments on Tellabs - Dec 19, 2013

Unfortunately, though, there is a "dark side" to resource conversion activities—the dreaded "take-under", where a company is acquired for less than its value. While managements and investment bankers will often use a premium to market price to justify a transaction value, we look instead at the offer price versus intrinsic value. Tellabs' (TLAB) announcement in October to sell itself to Marlin Equity Partners, a private equity firm, is a take-under, in our opinion. Under the terms of the transaction, Tellabs agreed to a cash tender offer of $2.45 per share, which excluding the $551 million of cash on Tellabs' balance sheet, was only 0.37x revenues and attributed no value to the company's intellectual property and real estate. Third Avenue filed a Form 13D in November 2012,where we sought to reserve the right to meet with management, the Board and other shareholders in order to enhance shareholder value. Over that time, we were successful in nominating two members to the Board, and the company paid a special dividend and took steps to reduce costs. While the purchase price is disappointing, it still represents a 17% premium to the price of the stock when we filed our 13D (adjusted for dividends received), highlighting the importance of buying at a discount to NAV to provide a margin of safety. However, we acknowledge a less than optimal result over the life of this investment. The telecom equipment industry in which Tellabs participates is fraught with issues—from competition, technology leapfrogging and the need for high R&D investments, to a highly concentrated customer base and resultant pricing pressure. Despite its super-strong balance sheet, its operating and acquisitions track record was checkered.From Third Avenue Management's fourth quarter 2013 commentary.
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Third Avenue Management Comments on Tellabs - Jul 02, 2013

The Fund added to its position in Tellabs (TLAB) Common during the quarter,reinvesting a small portion of the cash received from the substantial dividend the company paid at the end of 2012. As discussed in the October 31, 2012 shareholder letter,Third Avenue filed a Form 13D in November 2012 to reserve the right to meet with management, the Board and other shareholders in an attempt to enhance shareholder value. This filing followed disappointing third quarter financial results and guidance. Third Avenue is usually a passive and supportive long-term investor, but, in this case, we determined that being more active was appropriate and likely to lead to a better out come for our investors. Since our 13D filing, there have been several positive developments, including the following:

• Board. In December, the company added Mikel Williams and Dennis Strigl to the board. Mr. Williams, who was nominated by activist shareholder Dialectic Capital Management, was previously the CEO of DDi Corp, a producer of printed circuit boards,from2005 until itssalein 2012.Mr. Strigl had a long and distinguished career at Verizon (Tellabs' largest customer), serving as both Chief Operating Officer and CEO of Verizon Wireless. Third Avenue interviewed both candidates prior to their appointment. On May 1, 2013 Alex Machinsky was elected to theBoard atthecompany's annualmeeting. Mr. Machinsky, a seasoned founder and executive of telecom and internet companies and the holder of more than 50 technology patents, was nominated by Third Avenue. Tellabs has now added five new directors since the beginning of 2012, including two nomineesfromThird Avenue and two from Dialectic.

• Capital structure. Tellabs paid a $1 per share ($368 million) dividend before yearend and announced the resumption of a $225 million share repurchase plan. Even after the dividend and resumption of the share repurchase plan, the company has a strong financial position with $572 million in cash and short-term investments and no debt.

• Restructuring. In January 2013,Tellabs announced a 300 person headcount reduction (12% of the workforce), and the discontinuance of the 9200, a largecapacity edgerouter. Management appears to be making significant progress reducing costs.

Although the revenue outlook remains quite challenged, the company's recent actions have resulted in a much leaner organization and improved cash flow. The shares continue to be attractively priced at only a modest premium to the company's $572 million of cash ($1.60 per share).We are pleased with the recent changes to the Board and believe the company still has several options for generating improved shareholder value.

From Third Avenue Management's semi-annual 2013 commentary.

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Dividend & Buy Back

Dividend Yield 0.82
TLAB's Dividend Yield is ranked lower than
79% of the 413 Companies
in the Global Communication Equipment industry.

( Industry Median: 1.94 vs. TLAB: 0.82 )
Ranked among companies with meaningful Dividend Yield only.
TLAB' s 10-Year Dividend Yield Range
Min: 0  Med: 0.00 Max: 0
Current: 0.82
Yield on cost (5-Year) 0.82
TLAB's Yield on cost (5-Year) is ranked lower than
80% of the 424 Companies
in the Global Communication Equipment industry.

( Industry Median: 2.07 vs. TLAB: 0.82 )
Ranked among companies with meaningful Yield on cost (5-Year) only.
TLAB' s 10-Year Yield on cost (5-Year) Range
Min: 0  Med: 0.00 Max: 0
Current: 0.82

Valuation & Return


Business Description

Industry: Communication Equipment » Communication Equipment
Compare:PTFRY, QCOM, CSCO, ERIC, NOK » details
Tellabs, Inc. was incorporated in 1975 as an Illinois corporation. The Company designs, develops and supports telecommunications networking products. It generate revenue mainly through the sale of these products to communications service providers as both stand-alone network elements and as elements of solutions integrated under a common network management system. It also generates revenue by providing services to its customers. It operates in four business segments: Optical, Data, Access and Services. Optical segment includes solutions that enable service providers to manage network bandwidth by adding capacity when and where needed. Service providers use these solutions to support metro networks, mobile services, business services for enterprises, and triple-play voice, video and data services for residential consumers. Data segment products include next-generation packet-switched products that enable wireless and wireline carriers to deliver mobile voice and Internet services and wireline business services to their customers. Access segment products enable service providers to deliver bundled voice, video and high-speed Internet/data services over the 'last mile' of copper or fiber networks. Access products also enable optical local area networking (LAN) using gigabit passive optical network (GPON) technology. Services segment delivers deployment, training, support and professional services to Tellabs' customers. The Company competes with telecommunications and data networking infrastructure vendors. These vendors include large systems integrators and smaller companies whose products and services compete directly or indirectly with its offerings.

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