Avanex announces revenues of $30.3 million

April 24, 2001 $19.8 Million Year-to-Year Revenue Growth

Avanex Corporation, pioneer of photonic processors that accelerate the deployment of the next generation optical networks, today reported third quarter results for its fiscal year 2001, which ended March 31, 2001.

Avanex Chairman and Chief Executive Officer Walter Alessandrini said, "It's clear that the telecommunications retrenchment has affected everyone in this industry. We have addressed this by restructuring our operations. Our strategy has been to maximize our flexibility while increasing our technology advantage and lowering our imbedded costs. We therefore continue to invest strongly in research and development, application engineering and product marketing so that we can take full advantage of the upswing in the industry when it takes place."

The Avanex Chairman pointed out that March quarter revenues increased $19.8 million compared to the same quarter of last year. "We successfully added several new customers and increased our product offerings during this past quarter. Our March quarter revenue from next generation products, which include PowerMux™ and PowerExchanger™, grew significantly, and we expect further success this year for these products," said Alessandrini.

Alessandrini added that the company reduced its workforce by 350 in the March quarter, mostly in manufacturing, "to assure that our production capacity is aligned with our current market expectations."

Financial Results

Avanex's net revenues for the quarter ending March 31, 2001, were $30.3 million, an increase of $19.8 million over the Company's revenues of $10.5 million for the third quarter of fiscal 2000 ended March 31, 2000. The Company reported revenues of $47.9 million in the second fiscal quarter ended December 31, 2000.

Pro forma net loss for the quarter was $1.6 million, or $0.03 per share excluding charges for amortization of deferred stock compensation, excess inventory, amortization of intangibles, and stock accretion. This compared with a pro forma net income of $4.1 million, or $0.06 per share in the second quarter of fiscal 2001 ended December 31, 2000. Pro forma net loss for the prior year's third quarter was $2.9 million, or $0.08 per share.

Net loss for the quarter including charges for amortization of deferred stock compensation, excess inventory, amortization of intangibles, and stock accretion was $36.4 million, or $0.62 per share compared to a net loss of $29.2 million or $0.85 per share for the same period in the prior year. A provision for excess inventory of $21.6 million was recorded due to the substantial and unexpected drop in customer demand the Company experienced. This provision consists of an $11.4 million reserve against current inventory and a $10.2 million accrual for non-cancelable purchase commitments. Net loss was $11.3 million or $0.20 per share loss in the second fiscal quarter ended December 31, 2000.

Net revenues for the nine months ended March 31, 2001, were $113.0 million, compared with $21.4 million for the same period of fiscal 2000. Pro forma net income for the nine months ended March 31, 2001, excluding charges for amortization of deferred stock compensation, excess inventory, amortization of intangibles, in-process research and development charge and stock accretion, was $4.8 million, or $0.07 per share, compared with pro forma net loss of $7.0 million, or $0.45 per share, in the same period of fiscal 2000.

Net loss for the nine months ended March 31, 2001, including the above-mentioned charges, was $73.0 million, or $1.28 per share, compared with $69.0 million, or $4.45 per share, in the same period of fiscal 2000.

As the Company announced earlier this month, management is implementing a cost containment plan in the fourth fiscal quarter and expects to take a restructuring charge of approximately $18 million to $24 million during the fourth quarter. The restructuring charge will include costs related to a reduction in workforce and a provision for excess facilities and assets.

Outlook

The Company updated its revenue and EPS outlook for the fourth fiscal quarter and calendar year 2001. Avanex expects fourth fiscal quarter revenues to be approximately $25 million, and calendar year 2001 revenues to range between $110 million and $115 million. The Company expects EPS for the fourth fiscal quarter to range between a loss per share of two cents and a loss per share of three cents. For the calendar year 2001, Avanex expects EPS to range between a loss per share of eight cents and a loss per share of ten cents, excluding charges for amortization of deferred stock compensation, excess inventory, amortization of intangibles, and the Company's expected fourth quarter restructuring charge.

Conference Call

Avanex will discuss its revised guidance on a conference call scheduled today, April 24, at 4:30 p.m. EDT. The number for the conference call is 888-316-9406. The password is "Photonics."

About Avanex

Avanex designs, manufactures and markets photonic processors for the communications industry. Avanex's photonic processors offer communications service providers and optical systems manufacturers greater levels of performance and miniaturization, reduced complexity and increased cost-effectiveness as compared to current alternatives.

Avanex was incorporated in 1997 and is headquartered in Fremont, Calif. In addition to a development and manufacturing facility in Fremont, the Company also maintains The Photonics Center™ in Richardson, Texas.

To learn more about Avanex, visit its web site at: www.avanex.com.

Forward-looking Statements

This press release contains forward-looking statements including forward-looking statements regarding revenues and earnings the Company expects to report for the fourth quarter of fiscal year 2001 and for calendar year 2001, a charge for restructuring costs in the fourth quarter of 2001, demand for the Company's products, including the Company's newest products and next-generation products, and the Company's ability to achieve anticipated cost reductions. Actual results could differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ include any accounting adjustments made during the close of the Company's quarter, general economic conditions, the pace of spending and timing of economic recovery in the telecommunications industry and in particular the optical networks industry, the Company's inability to sufficiently anticipate market needs and develop products and product enhancements that achieve market acceptance, higher than anticipated expenses the Company may incur in future quarters or the inability to identify expenses which can be eliminated. In addition, please refer to the risk factors contained in the Company's SEC filings including its most recently 10-Q filed with the SEC on February 15, 2001.

Avanex undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Avanex Corporation, 40919 Encyclopedia Circle, Fremont, CA 94538. Tel: 510-897-4162; Fax: 510-897-4189.