Avanex Files Complaint Vs. 3S

Avanex Corp., a Fremont, Calif., developer of products for fiber optic networks, announced today it has filed an arbitration complaint in New York against 3S Photonics, of Marcoussis, France, alleging various breaches by 3S Photonics of its obligations to Avanex, including that prematurely terminating its exclusive distribution agreement with Avanex.

Avanex, which makes dense wavelength division multiplexing (DWDM) systems for companies and telecommunications carriers, said that as a consequence of 3S Photonics' reported termination of the agreement, its reveue for the second fiscal quarter of 2008 will be in the $51 to $53 million range, compared to $54.7 million in the previous quarter and $55.6 million in the second quarter of fiscal 2007, and that it will fall below the low end of its projection for the quarter of $56 to $58 million. Avanex said it does not expect to receive future distribution revenue associated with 3S Photonics, which will reduce its revenue for the third fiscal quarter, resulting in flat to slightly lower revenues for the third quarter compared to the second.The company said it believes gross margins for the second fiscal quarter will generally be consistent with the prior quarter.

Avanex sold its Marcoussis-based subsidiary Avanex France SA to its director, Didier Sauvage, and to Global Research Co., held by Alexandre Krivine, in April 2007. The subsidiary, formerly Alcatel Optronics, was renamed 3S Photonics, which makes optical modules and components for telecom networks using GaAs and InP technologies at its optoelectronics chip manufacturing plant in Nozay. Avanex paid the purchasers nearly $17.3 million in anticipated operating capital, including current liabilities for previous restructuring activities. It maintains a 10 percent interest in the sold businesses as well as privileged commercial partnerships. It also retained the optical interface activity previously carried out in France.

Avanex said it will make a presentation Jan. 8 at 4:30 p.m. during the 10th annual Needham & Company LLC Growth Stock Conference, to be held Jan. 7-11 at the Palace Hotel in New York. It said it plans to release its second fiscal quarter results and to discuss its business outlook in a conference call in late January or early February.

Avanex also has facilities in Horseheads, N.Y.; Melbourne, Fla.; Shanghai; Villebon Sur Yvette, France; San Donato, Italy; and Bangkok.

For more information, visit: www.avanex.com