PETACH TIKVA, Israel -- ECI Telecom Ltd. (NASDAQ: ECIL - News) reported today that its revenues for the fourth quarter of 2004 reached $140 million, a 36% increase from $103 million in the fourth quarter of 2003 and $128 million in the third quarter of 2004. Net profit for the quarter reached $8.9 million, or $0.08 per share on a fully diluted basis, compared with a net loss of $13.6 million, or $0.13 per share, for the fourth quarter of 2003 and net profit of $6 million, or $0.05 per share, in the third quarter of 2004. This quarter represents the sixth consecutive quarter of increased revenues for the company.

Revenues for the Broadband Access Division increased to $60 million in the quarter, up 28% from a year ago and a 10% rise from last quarter. Operating income for the Division reached $9.7 million, compared to $3.9 million in the fourth quarter of 2003 and $6.4 million in the third quarter of 2004.

Revenues for the Optical Networks Division jumped 48% from a year ago and reached $72 million for the quarter, compared to $49 million in the fourth quarter of 2003 and $69 million in the third quarter. The Division continued to improve its profitability, reaching an operating profit of $2.8 million for the quarter, compared with an $8.7 million loss in the fourth quarter of 2003 and an operating profit of $2.2 million in the third quarter.

Commenting on the results, Doron Inbar, President and CEO said, "We are very pleased with our 2004 results. We had said at the beginning of the year that 2004 would be our year of return to profitability. We have now delivered on that promise: after four years of losses, ECI is now reporting profitability for the entire year. Not only have we reached this target, but we believe that we are now firmly on a path of sustained growth in both revenues and profits, which we believe we can carry into 2005. Bookings in both of our core divisions continued to rise in the fourth quarter and backlog at year-end reached its highest level in recent years. We believe that our core focal areas, Broadband Access and Metro Optical Networks, particularly in Europe and in Emerging Markets, continue to represent strong growth opportunities.

"Our Broadband Access Division, reporting its twelfth consecutive quarter of operating profitability, continues to demonstrate solid growth as carriers begin to offer advanced services, including voice, data and video - "triple play" - to their customers. In addition to maintaining its strong foothold with leading European carriers such as France Telecom and Deutsche Telecom in the ADSL market, ECI has now taken an early leadership position in the emerging European Fiber to the Premises (FTTP) market. After going live with our FTTP trial at BT during the quarter, our strategic distribution relationship with Nortel produced another significant win, with Nortel/ECI being chosen by a Danish utility to deploy the first commercial FTTP-PON network in Europe. As we announced last week, one million of our installed Hi-FOCuS(TM) broadband lines will be used by carriers to deliver video over copper lines, allowing these carriers to deliver new revenue-generating services. We plan to continue to be a leading player in this emerging market during 2005.

"Our Optical Networks Division completed a remarkable turnaround, growing 43% for the year and returning to profitability. Strong demand for our XDM platform remains unabated in our focus markets. We are seeing strong order intake from a large and diversified customer base. Emerging markets in Asia, particularly India, as well as Russia, Ukraine and other European countries, continue to deploy XDM as part of implementing new networks and as backhaul for cellular networks. We announced major new wins with Bharti in India and with Kyivstar in the Ukraine as well as Hunan Telecom in China, as we continue to solidify our position in the MSPP (Multi Service Provision Platform) market," concluded Inbar.

Guidance

Reaffirming our forecast from the previous quarter, ECI expects continued steady sequential quarterly growth in both revenues and profits well into the year.

Veraz Networks (VoIP)

Sales to Veraz Networks totaled $6.7 million in the fourth quarter of 2004, as compared with $6.4 million in the fourth quarter of 2003 and $4.5 million in the third quarter of 2004. ECI manufactures and sells products to Veraz for resale to its customers and holds 43% of privately held Veraz Networks. Veraz recently announced that Bezeq International, the Israeli long distance telecommunications service provider, has selected Veraz's comprehensive VoIP solution to replace its legacy switching network.

Results for the Year 2004

For the year 2004, revenues reached $497 million, a 27% increase from $393 million in 2003. Operating income for the year was $14.4 million, compared to an operating loss of $32.2 million for 2003. Net income for the year was $10.2 million, or $0.09 per share, compared to a net loss of $71 million, or $0.66 per share, for the previous year.

ECI Telecom Ltd.