Fueled by US$30 million in state and local incentives, hot telecom manufacturer Tellabs (www.tellabs.com) is making big expansion noise in Illinois, where its new facility in the Chicago metro will add as many as 2,300 new jobs, company officials say.

Lisle, Ill.-based Tellabs will build its new $75 million center in Naperville. The facility may also serve as the company's new headquarters, Tellabs executives say, although no final decision has been made.

"Tellabs is committed to helping communications service providers build and migrate to next-generation, multi-service networks. To do that, we must expand to meet our customers' growing and evolving needs," Tellabs President and CEO Michael J. Birck said at the formal announcement of the new facility.

Incentives Dovetail with Tellabs' Hot Expansion Pace

Expansion has become a watchword in recent years for Tellabs, which began operations in 1975 in the city of Lisle with only 20 employees.

Tellabs' 4,980 worldwide employees at yearend 1998, for example, marked a 21.9 percent increase from the company's yearend 1997 employment total. And by third quarter 1999, Tellabs' employment had increased to 6,200. Company revenues have been growing even more rapidly. 1998's sales of $1.66 billion marked a 37.9 percent increase over 1997 totals. Obviously eager to keep such a hot company expanding on their home turf, state and local economic development officials put together an incentive package that will be worth up to $30 million over 20 years, according to Brian Reardon, a spokesman with the Illinois Dept. of Commerce and Community Affairs (www.commerce.state.il.us).

The incentive package from the state government and the city of Naperville is comprised of infrastructure and job training grants, EDGE (an acronym for Economic Development Through a Growing Economy) tax credits, municipal sales tax rebates and a "High Impact Business Designation," development officials said.

Several of those incentives fit well with Tellabs' recent history of rapid expansion.

The EDGE tax credits, state officials explained, allow eligible businesses that create new jobs in Illinois to claim a state income tax credit equal to a portion of the incremental income tax that the new positions generate. The High Impact Business Program is also geared toward expansion-minded companies. That incentive provides investment tax credits and tax exemptions for corporate purchases of building materials and manufacturing equipment.

"We're pleased that Tellabs chose to expand its operations in Illinois," said Gov. George H. Ryan (www.state.il.us/gov).

"This expansion is about new high-tech jobs for [the people of Illinois] and underscores our belief that Illinois is not just a great place to do business, but a great place for technology companies like Tellabs to locate and grow."

Despite the $30 million figure attached to the incentive package, economic development officials are expecting a rapid payback on their investment. State Commerce Dept. spokesman Reardon says that Illinois anticipates that the incentives will be paid back within two years by the tax receipts from the Tellabs expansion. The 2,300 new jobs in Naperville will be phased in over five years, Tellabs officials say.

Homegrown Tellabs, which designs, manufactures, markets and services data, switching/routing, voice and video transport, and network-access systems, has a strong Illinois presence. Half of its employees are based in the state. However, the company has rapidly expanded elsewhere as well. For example, non-U.S. facilities now house one-third of Tellabs' worldwide employees. In May, Tellabs appreciably expanded its global reach by acquiring Alcatel's DSC Communications businesses in Europe.

High-Tech Cluster, Educational
Infrastructure Boost Area's Appeal

Another likely location incentive for Tellabs, albeit a non-financial one, was the Chicago area's growing concentration of technology-intensive firms. Schaumburg, home base to the likes of Motorola, has long been a location hotbed. And the area's east-west corridor, stretching roughly from Oak Brook to Aurora along Interstate 85, has been particularly popular with high-tech operations.

Those facility clusters, and the high-end labor pool they represent, were likely a major location lure for Tellabs, given the skill requirements for the new jobs that its new facility will create. The Naperville center will house R&D, sales and marketing, as well as consolidating some of the company's other operations, Tellabs executives say. Birck estimates that roughly half of the new positions in Naperville will be high-tech jobs, including computer programming and engineering.

"With our growing number of high-tech companies that call Naperville home, Tellabs will fit in perfectly, and we welcome them to our family," said Naperville Mayor George Pradel (www.naperville.net). "We develop partnerships with all of our businesses to the benefit of each party."

Another non-financial location benefit that Tellabs liked was the region's educational infrastructure. For its existing Chicago-metro operations, Tellabs already recruits heavily at the University of Illinois, the University of Michigan, Purdue University and the University of Wisconsin, Birck explained.

However, the shortage of high-tech workers in the United States might present difficulties in filling the new high-end positions at the Naperville facility, Tellabs' CEO conceded. "It's a problem already," Birck said, "and it won't be abate [in] two years from now [when the Naperville center is scheduled to open]."

Construction to Begin in Spring 2000,
Completion Scheduled for Summer 2001

Tellabs purchased its 55-acre (22-ha.) site just south of I-85 from Nalco Chemical Co. The company plans to build an 800,000-sq.-ft. (72,000-sq.-m.) facility adjacent to Nalco.

Construction of the new facility is expected to begin in the spring of 2000, with completion anticipated late in the summer of 2001. The new Naperville facility will "probably" serve as the company's new headquarters, said Tellabs spokesman Steve Bauer. Tellabs, however, won't likely locate any manufacturing operations at the Naperville site, keeping Chicago-area manufacturing epicentered at its 500,000-sq.-ft. (45,000-sq.-m.) plant in Bolingbrook.

The new facility in Naperville was the second local-area expansion that Tellabs has recently announced in DuPage County. Together, the two expansions total almost 1 million sq. ft. (90,000 sq. m.). Tellabs broke ground on new office space in the city of Warrenville only a week before the Naperville announcement, The Warrenville facility will span more than 130,000 sq. ft. (11,700 sq. m.) of space.

The high-profile Tellabs expansion in Naperville will also likely up the area's profile on many companies' site selection radar, economic development officials say. Shaye Mandle, president of the Illinois Coalition (www.ilcoalition.org), a public-private organization that promotes the Illinois high-tech sector, says that Tellabs move "will be an indicator for all information technology-related companies."