PETACH TIKVA, Israel -- ECI Telecom Ltd. (NASDAQ: ECIL - News) reported today that its net income for the second quarter of 2005 reached $15.6 million, or $0.13 per share on a fully diluted basis. Revenues for the quarter reached $153 million, a 26% increase from $121 million in the second quarter of 2004 and compared with $145 million in the first quarter of 2005.

Results for the quarter include a previously announced $10.4 million gain on the sale of a receivable from Brazilian carrier GVT, as well as a $3 million provision for an impairment of a loan granted by the company. The quarter's results also include for the first time the impact of Laurel Networks, from the time it was acquired on June 3. As part of the acquisition ECI incurred a $0.9 million charge for in-process R&D and in addition Laurel incurred a loss for the period of $2.3 million.

Excluding the above mentioned items as well as the results of Laurel, ECI's net profit for the quarter totaled $11.4 million, or $0.10 per share, compared with net loss of $3.5 million, or $0.03 per share, for the second quarter of 2004 and net income of $10.4 million, or $0.09 per share, in the first quarter of 2005.

Revenues for the Broadband Access Division, at $63 million for the quarter, were up 24% from a year ago and unchanged from last quarter. Operating income for the Division reached $6.4 million, compared to $5.3 million a year ago and $8.5 million in the first quarter of 2005, as a result of lower gross margins.

Revenues for the Optical Networks Division increased 34% from a year ago and reached $82 million for the quarter, compared to $77 million in the first quarter of 2005. The Division continued to improve its profitability, reaching operating income of $8.9 million for the quarter, compared with a $1.1 million operating income a year ago and $4.9 million operating income in the first quarter.

Following the $88 million all-cash acquisition of Laurel, ECI's cash, including short and long term deposits and marketable securities, now totals $214 million, or $1.82 per share.

Commenting on the results, Doron Inbar, President and CEO said, "We are pleased to report yet another quarter of strong growth and solid profits, as ECI continues to demonstrate leadership in its markets, which remain among the fastest growing sectors in telecom.

"ECI continues to be a leading provider of advanced DSL solutions which allow our customers to provide triple play (data, video and voice) services. Triple play is now a primary driver for sales in Broadband Access markets. During the quarter, we began to supply one of our major European customers with solutions enabling it to offer its subscribers access to hundreds of broadcast TV channels over DSL.

"Our Optical Networks Division continues to experience increased demand from the flourishing cellular market. Our Multi-Service Provisioning Platform (MSPP) remains a preferred solution for the deployment of cellular backhaul in countries such as Russia, Ukraine, India and throughout Europe, with the improving penetration of 3G service serving as another strong driver in this business. In addition, with the significant rise in broadband deployments, demand is also being driven by the carriers' need for broadband aggregation in the metro portion of the network.

"The telecom market is expected to undergo a significant change in the next few years, as carriers begin to replace their current network architecture with an IP-based design. We believe that the Laurel acquisition firmly positions ECI in the IP world, adding its innovative multi-service edge routers to our product portfolio, and providing major technological building blocks on which future ECI products will be developed. We believe that these products will enable us to deliver customized solutions to support enhanced networks during the years to come," concluded Inbar.

Guidance

On a pro forma basis, excluding the results of Laurel Networks, ECI now continues to expect sequential quarterly growth in both revenues and profits through the end of 2005. Based on present market conditions, ECI also now expects growth in its business to continue into 2006. As previously noted by ECI, Laurel Networks is expected to have a dilutive effect on ECI`s results until the second half of 2006.

ECI Telecom Ltd.