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Comms chips

Ikanos Reports Q3

FREMONT, Calif. -- Ikanos Communications, Inc. (NASDAQ:IKAN), a leading developer and provider of Fiber Fast(TM) broadband solutions, today reported revenue for the third quarter of 2006.

"There was positive momentum this quarter that is setting the stage for growth in 2007. Ikanos' market leadership continues, as demonstrated by record port shipments this quarter and the introduction of our 5th generation chipsets and integrated products that are designed to address the carriers' needs for triple play and IPTV solutions," said Dan Atler, interim CEO of Ikanos Communications. "Unfortunately our near-term financial results are disappointing. We are taking action to address those matters that are under our control. Our advanced products and substantial market position provide us with a significant advantage to benefit from increases in carrier deployments of triple play and IPTV solutions, which are likely to occur by early next year."

Financial Highlights

Revenue in the third quarter of 2006 was $36.7 million, a sequential decrease of 11% from the $41.2 million reported for the second quarter of 2006 and an increase of 47% from the $25.0 million reported for the third quarter of 2005. Ikanos reports net income (loss) and basic and diluted net income (loss) per share in accordance with U.S. generally accepted accounting principles (GAAP) and additionally on a non-GAAP basis.

Non-GAAP net income (loss), where applicable, excludes the income statement effects of stock-based compensation, certain expenses incurred in connection with a common stock offering, and certain expenses resulting from the acquisition of the network processing assets of Analog Devices, Inc. and Doradus, Inc. including amortization of intangible assets, fair value adjustment of the acquired inventory, and in-process research and development charges. Ikanos has provided these measures because management believes these additional non-GAAP measures are useful to investors for performing financial analysis as these additional measures highlight Ikanos' recurring operating results. Ikanos' management uses these non-GAAP measures internally to evaluate its operating performance and to plan for its future. However, non-GAAP measures are not a substitute for GAAP measures. For a reconciliation of GAAP versus non-GAAP financial information, please see the attached schedules.

GAAP net loss for the third quarter of 2006 was $3.6 million, or $0.13 per diluted share, on 27.4 million weighted average shares. This compares with a net loss of $2.2 million, or $0.08 per diluted share, on 27.1 million weighted average shares in the second quarter of fiscal 2006 and with a net income of $3.1 million, or $0.15 per diluted share, on 20.3 million weighted average shares in the third quarter of 2005.

Non-GAAP net income for the third quarter of 2006 was $2.9 million, or $0.10 per diluted share, on 28.9 million weighted average shares. This compares with non-GAAP net income of $3.0 million, or $0.10 per diluted share, in the second quarter of fiscal 2006 and with a non-GAAP net income of $5.2 million, or $0.25 per diluted share in the third quarter of 2005.Revenue for the nine months ended September 30, 2006 was $113.7 million, an increase of 101%, compared with the $56.5 million reported for the nine months ended September 30, 2005.GAAP net loss for the nine months ended September 30, 2006 was $7.3 million, or $0.28 per diluted share, on 26.2 million average shares outstanding. This compares with a net loss of $1.2 million, or $0.44 per diluted share, on 2.8 million average shares outstanding for the nine months ended September 30, 2005.Non-GAAP net income for the nine months ended September 30, 2006 was $10.9 million, or $0.39 per diluted share, compared with non-GAAP net income of $4.7 million, or $0.24 per diluted share, for the nine months ended September 30, 2005. Average shares used in computing non-GAAP net income (loss) per diluted share for the nine months ended September 30, 2006 increased to 28.2 million, compared with 19.5 million for the nine months ended September 30, 2005.

Ikanos Communications Inc. (Nasdaq: IKAN)

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