14th November 2006

Avanex Net Revenues Hit Record

Avanex Corporation reported financial results for the first quarter of fiscal 2007 ended Sept. 30, 2006. Net revenue in the first quarter of fiscal 2007 was a record $50.9 m, a 12% increase over the prior quarter revenue of $45.5 m and a 23% increase over revenue of $41.2 m in the first quarter of the previous year. The company reported a net loss of $9.8 m in the first quarter of fiscal 2007, compared with a net loss of $9.1 m in the prior quarter and a net loss of $16.9 m in the first quarter of the prior year.

Gross margin in the first quarter of fiscal 2007 was 9%, an increase of five percentage points over the prior quarter gross margin. It marks the company's third consecutive quarter of double-digit revenue growth, said its CEO. During the quarter, it saw strong growth from new products including an amplifier with integrated optical monitoring capability developed for next-generation deployments that provide the network backbone for the delivery of high-bandwidth triple play services.

Financial results for the first quarter of fiscal 2007 are subject to review of the accounting for cost reductions from the company's contract manufacturer, which may affect cost of goods sold.

"I am very pleased with our performance this quarter as it marks the company's third consecutive quarter of double-digit revenue growth," said Jo Major, chairman and chief executive officer of Avanex.

"During the quarter, we saw strong growth from new products we announced including our amplifier with integrated optical monitoring capability developed for next-generation deployments that provide the network backbone for the delivery of high-bandwidth triple play services. Also during the quarter, our supply chain initiatives started to take hold, helping reduce our overall product cost. Our operational metrics including yield, on-time shipments and return rates continued to recover following last year's manufacturing transition," said Major.

The company expects revenue in the second quarter of fiscal 2007 to be $52-55 m and expects gross margin to improve.

Web: www.avanex.com