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Tellabs lays off staff in outsourcing deal

The telecommunications gear maker lays off workers and announces plans to outsource its manufacturing in North America to Sanmina-SCI.

Telecommunications gear maker Tellabs laid off about 325 employees on Friday, while announcing an outsourcing deal in which Sanmina-SCI will take over manufacturing in North America.

The affected employees were told about the decision Friday morning. The company said it plans to cease its manufacturing Bolingbrook, Ill., operations by the end of the year. The 545,000-square-foot main building that houses its manufacturing plant will be sold, and remaining employees will be moved to the company's headquarters in Naperville, Ill.

The company said it hopes to benefit by reducing the costs of manufacturing and by freeing capital that's now tied up in equipment, inventory and facilities.

"It's essential to advance Tellabs along the path to profitable growth," Michael Birck, Tellabs chairman, said in a statement. He added that Tellabs will continue to work directly with customers on the ordering, configuration and shipping of products.

The company said it expects any benefits from the restructuring to be small in 2003 but to increase in 2004 and beyond, because it will take a substantial amount of time to implement the outsourced manufacturing. Beginning in the third quarter, Tellabs will record between $90 million and $110 million in charges that are connected with the outsourcing, the company said.

In the past two years, Tellabs has reduced its work force and closed a manufacturing site in Ireland.

According to the company's Web site, Tellabs has about 4,000 workers--one-third of which are employed overseas.