If you inspect the resulting HTML markup with a browser tool, you will see that the cause of the problem is the following style in kendo.common.css:
.k-block > .k-header
k-header is used for the TabStrip wrapper <div>, in addition to k-widget and k-tabstrip. You can override the style in an external stylesheet, using an appropriate selector, or apply an inline height:auto style directly to the TabStrip <div>.
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