Opnext Reports Q1

EATONTOWN, N.J. -- Opnext, Inc. (NASDAQ:OPXT - News), a global leader in the design and manufacturing of optical modules and components, today announced preliminary unaudited operating results for the first quarter ended June 30, 2007.

Financial Highlights for the First Quarter Ended June 30, 2007:

* Sales increased $27.4 million, or 67.8%, to $67.8 million from $40.4 million in the quarter ended June 30, 2006 and increased $2.4 million, or 3.7%, from $65.4 million in the preceding quarter ended March 31, 2007, primarily as a result of increased sales of 10Gbps and above products. The Company has now recorded four consecutive quarters of sales growth and has increased sales in seven of the last eight quarterly periods.

* Sales of 10Gbps and above products increased by 88.4% to $55.8 million as compared to the quarter ended June 30, 2006, primarily as a result of continuing strong demand for 300 pin tunable, X2, XENPAK, XFP and 40Gbps products. As compared to the quarter ended March 31, 2007, sales of 10Gbps and above products increased by $2.5 million, or 4.7%, primarily as a result of strong demand for 40Gbps and 10Gbps data communication products.

* Sales of less than 10Gbps products were $7.3 million, while industrial and commercial product sales were $4.7 million for the quarter ended June 30, 2007. Sales to Cisco and Alcatel-Lucent were 35.0% and 23.0% of total sales, respectively.

* Gross margin was 36.0%, as compared to 32.8% in the quarter ended June 30, 2006 and 34.9% in the preceding quarter ended March 31, 2007. The improvements in gross margin were primarily due to the strength of 10Gbps and above product sales, cost reductions, and the reduction in stock-based compensation expense as compared to the quarter ended March 31, 2007, which collectively more than offset price declines.

* Operating income increased to $4.7 million, or 6.9% of sales, from a loss of ($3.1) million in the quarter ended June 30, 2006 and from a loss of ($0.5) million in the preceding quarter ended March 31, 2007.

* Net income was $6.7 million, or $0.10 per diluted share, as compared to a net loss of ($3.5) million, or ($0.07) per diluted share, for the quarter ended June 30, 2006 and net income of $1.5 million, or $0.03 per diluted share, in the preceding quarter ended March 31, 2007. The Company has now recorded four consecutive quarters of profitability.

Market Observations and Guidance:

Commenting on the Company's recent performance, Harry Bosco, President and Chief Executive Officer of Opnext, Inc., said, "We have just completed our fourth consecutive quarter of sales growth and profitability. We are encouraged by the overall acceleration of broadband applications globally and the demand it is creating for high-speed optical networks which has translated into solid demand from our core customer base."

"During the quarter just ended, we completed the expansion of our 40Gbps manufacturing capacity to meet the growing demand from our customers. We also expanded our 10GbE product family to include LX4, LRM and ER X2 modules as well as SR and LRM SFP+ products. Our 10Gbps telecommunication product line has been expanded to include 80km XFP modules and tunable duo-binary transponders for long haul transmission. During the second half of this fiscal year, we expect to further expand our SFP+ and 40Gbps product offerings. All of these enhancements will position us well for future growth."

"For our second quarter ending September 30, 2007, we expect sequential revenue growth with revenue for the quarter in the range of $72 million to $75 million, which equates to between 30.2% and 35.6% growth over last year and between 6.2% and 10.6% growth over the first quarter. This is consistent with our objective to grow at least as fast as the market. Longer term, we continue to expect our gross margin to approach 40% and our operating margin to approach 15%, both excluding the impact of stock-based compensation expense," concluded Mr. Bosco.

Opnext Inc. (Nasdaq: OPXT)