ADVA Optical Networking Reports Q2 2008 Financial Results Slightly Above Revised Guidance

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Q2 2008 revenues at EUR 52.7 million. Q2 2008 IFRS pro forma operating income of EUR -0.1 million (-0.1% of revenues), including restructuring charges of EUR 1.3 million. Q3 2008 revenues expected to range between EUR 50 million and EUR 58 million with IFRS pro forma operating income between -4% and +4% of revenues, including minor restructuring charges of up to EUR 0.2 million.

ADVA Optical Networking today announced Q2 2008 financial results for the quarter ended June 30, 2008, and prepared in accordance with International Financial Reporting Standards (IFRS).

Revenues in Q2 2008 totaled EUR 52.7 million after EUR 67.5 million in Q2 2007 and EUR 54.0 million in Q1 2008. This was slightly above the revised guidance provided on June 30, 2008 of between EUR 50 million and EUR 52 million. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, came in at negative EUR 0.1 million in Q2 2008 or -0.1% of revenues and was at the upper end of guidance of between -3% and 0%. This compares to Q2 2007 IFRS pro forma operating income of positive EUR 5.2 million or 7.7% of revenues. The Q2 2008 result included charges of EUR 1.3 million related to a previously announced restructuring initiative.

Excluding these restructuring charges, pro forma operating income was at +2.3% of revenues. Year-on-year, the pro forma operating income reduction was primarily driven by weaker revenues. This effect was partially offset by a higher pro forma gross margin of 43.7% in Q2 2008, after 41.5% in Q2 2007 and higher income from capitalization of development expenses. Net of depreciation for already capitalized development projects, these expenses amounted to EUR 3.0 million in Q2 2008 after EUR 1.9 million in Q2 2007.

The IFRS operating loss in Q2 2008 was EUR 2.6 million, after an operating income of EUR 1.9 million in Q2 2007. The key driver for this development is the above-mentioned decline of pro forma operating income. The decline in part is offset by lower scheduled amortization of intangible assets from acquisitions and lower stock compensation expenses. These items amounted to EUR 2.0 million and EUR 0.6 million in Q2 2008 after EUR 2.4 million and EUR 0.9 million in Q2 2007, respectively.

The IFRS net loss in Q2 2008 amounted to EUR 2.7 million, after a net income of EUR 0.3 million in Q2 2007. The net loss was largely driven by negative operating income. In part, this effect was offset by a tax benefit of EUR 0.3 million in Q2 2008 related to deferred tax adjustments on tax losses carried forward and temporary differences between tax and IFRS accounting. In contrast, based on positive income before taxes, there was a tax expense of EUR 0.9 million in Q2 2007. Basic and diluted IFRS net earnings per share were EUR -0.06 each in Q2 2008 after EUR 0.01 each in Q2 2007.

"As projected in our Jun 30, 2008 press release, revenues in Q2 2008 came in below our original expectations of EUR 55 million to EUR 59 million. Adjusted guidance of EUR 50 million to EUR 52 million was marginally exceeded. Due to variations in regional revenue distribution and in product and customer mix, we experienced higher gross margins than originally anticipated. We also benefited from higher net capitalization of development expenses. These effects drove our Q2 2008 pro forma operating income before restructuring charges to come in at 2.3% of revenues, slightly above our revised guidance of between -1% and +2% of revenues. In addition, we saw ongoing positive operating cash flow in Q2 2008, and our quarter-end net liquidity remained positive," commented Jaswir Singh, chief financial officer of ADVA Optical Networking.

In conjunction with the release of its Q2 2008 IFRS financial results today, August 5, 2008, ADVA Optical Networking will host a conference call for analysts and investors at 3:00 p.m. CEDT/9:00 a.m. EDT. Participating in the call will be ADVA Optical Networking's chief executive officer, Brian Protiva, and chief financial officer, Jaswir Singh. Interested parties may dial in at +49 69 4035 9611 or +1 866 306 3455, and listen live via webcast on ADVA Optical Networking's website, located on the 'financial results' page in the investor relations section of ADVA Optical Networking's website at

Q3 2008 OUTLOOK:
ADVA Optical Networking expects Q3 2008 revenues to range between EUR 50 million and EUR 58 million. Further, we anticipate pro forma operating income of between -4% and +4% of revenues in Q3 2008, including final restructuring charges of up to EUR 0.2 million. In December 2007, ADVA Optical Networking made the decision to restructure the Company to adjust its cost base to a temporarily challenging market environment. The restructuring initiative was implemented immediately, leading to an overall reduction of 7% of employees and a one-off restructuring charge of up to EUR 2.5 million through Q3 2008. EUR 2.3 million of this charge has been included in the pro forma operating income for H1 2008. ADVA Optical Networking will publish its Q3 2008 financial results on November 6, 2008.

"Despite a volatile macro-economic environment, we anticipate growth for ADVA Optical Networking over the coming quarters. This projection is supported by a stronger pipeline and a Q2 2008 book-to-bill ratio above one. We maintain our strong focus on serving key accounts and on increasing our direct touch with customers served via indirect distribution channels. Additionally, since the beginning of the year, ADVA Optical Networking has won select enterprise and carrier business in all regions. In order to fulfill the ongoing strong global bandwidth demand, we are convinced that over time, telecommunication companies will continue to invest in ramping up their infrastructure. We continue to be a well-positioned innovation leader. With our restructuring initiative implemented in H1 2008 we have reset our cost base, allowing us to capitalize on future growth opportunities. We are able to flexibly adjust our operations capacity and we have ramped investment in lower-cost engineering sites in China and Poland. These are key prerequisites for renewed profitability," stated Brian Protiva, chief executive officer of ADVA Optical Networking.

ADVA Optical Networking (FSE: ADV) is at the forefront of providing Optical+Ethernet solutions that advance next-generation networks for data, storage, voice and video services. Our company's strength comes from passionate and dedicated employees, all sharing a common vision: a fast, customized response to customers' ever-changing needs. Our innovative FSP products and strong customer focus provide carriers and enterprises the ability to scale their networks and deliver intelligent, competitive new services. ADVA Optical Networking's solutions have been deployed at more than 200 carriers and 10,000 enterprises around the world. For further information about ADVA Optical Networking:

The economic projections and forward-looking statements contained in this document relate to future facts. Such projections and forward-looking statements are subject to risks which cannot be foreseen and which are beyond the control of ADVA Optical Networking. ADVA Optical Networking is therefore not in a position to make any representation as to the accuracy of economic projections and forward-looking statements or their impact on the financial situation of ADVA Optical Networking or the market in the shares of ADVA Optical Networking.

ADVA Optical Networking provides consolidated pro forma financial results in this press release solely as supplemental financial information to help investors and the financial community make meaningful comparisons of ADVA Optical Networking's operating results from one financial period to another. ADVA Optical Networking believes that these pro forma consolidated financial results are helpful because they exclude non-cash charges related to the stock option programs and amortization and impairment of goodwill and acquisition-related intangible assets, which are not reflective of the company's operating results for the period presented. This pro forma information is not prepared in accordance with IFRS and should not be considered a substitute for historical information presented in accordance with IFRS.

ADVA AG Optical Networking, Martinsried/Munich and Meiningen, Germany
ADVA Optical Networking North America, Inc., Norcross, Georgia, USA
ADVA Optical Networking (Shenzhen) Ltd., Shenzhen, China

Christine Keck
t +1 201 258 8293 (U.S.)    
t +44 1904 699 358 (Europe)
t +86 755 8621 7400 (Asia)
public-relations @

Wolfgang Guessgen
t +1 201 258 8302 (U.S.)
t +49 89 89 0665 940 (Europe)
t +86 755 8621 7400 (Asia)
investor-relations @


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