Tellabs announces $600 million share repurchase in wake of CEO departure

Tellabs (NASDAQ: TLAB) announced an increase of $600 million for the company’s common stock repurchase program, in addition to a remaining $176 million under a repurchase program authorized in July 2006. Together, the authorizations cover about 22% of Tellabs shares outstanding.

Since 2005, Tellabs has repurchased 50.9 million shares at a cost of $513.9 million (about 12% of shares outstanding).  Tellabs plans to use about half of its nearly $1.4 billion in cash, cash equivalents and marketable securities for the program.

In addition, the company announced that Krish A. Prabhu, Tellabs president, chief executive officer and member of the Board, has informed the board of his decision to resign from these positions by March 1, 2008.

Tellabs advances telecommunications networks to meet the evolving needs of users.

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PAYOUT YIELD ANALYSIS

At $8 per share, the $776 million repurchase authorization will buy back 97 million shares or 22% of the 439 million shares outstanding.

The company has almost $4 per share of cash on the balance sheet, so the $776 million repurchase is easily within reach, the only question is the timing.

The company’s repurchase activity has been inconsistent.  Tellabs repurchased $272 million of stock in 2006 and only $21 million net of options programs in the first 9 months of 2007.

Assuming that the company averages $275 milllion per year going forward, the projected Total Payout will be $0.63 per share.   At an $8 share price, the projected Total Payout Yield would be 7.9%

- Payout Yield Staff

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