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Optical components

AFOP Revenues Rise

SUNNYVALE, Calif. -- Alliance Fiber Optic Products, Inc. (NASDAQ:AFOP - News), an innovative supplier of fiber optic components, subsystems and integrated modules for the optical network equipment market, today reported its financial results for the third quarter ended September 30, 2006. The Company's GAAP results reflect the adoption of SFAS 123R regarding the expensing of stock-based compensation.

Revenues for the third quarter of 2006 totaled $7,573,000, a 44% increase compared with $5,269,000 for the year ago quarter and 21% increase from revenues of $6,252,000 recorded in the second quarter of 2006. Gross margin in the quarter improved to 29% from 21% in the year ago quarter and 26% in the second quarter of 2006. GAAP net profit for the third quarter of 2006 was $358,000, or $0.01 per share, an improvement over a net loss of $(558,000) in the year ago quarter, or $(0.01) per share, and a net income of $19,000 for the second quarter of 2006, or zero per share.

Included in expenses for the quarter ended September 30, 2006 was $83,000 of stock-based compensation charges under SFAS 123R. Included in expenses for the quarter ended June 30, 2006 was $32,000 of stock-based compensation charges under SFAS 123R. There were no deferred stock-based compensation charges for either the quarter ended September 30, or June 30, 2005, respectively.

Peter Chang, President and Chief Executive Officer, commented, "Besides repeated double digit revenue growth and continuous gross margin improvement, the third quarter of 2006 marked another important milestone in AFOP's quarterly financial results -- AFOP achieved both positive operating margin and positive operating cash flow in Q3, 2006, after returning to positive earnings per share in the previous quarter."

"Our performance reflects increasing demand from key customers, gaining business from newer customers, and continuous improvement of our technical capability and operational efficiency. Our balance sheet remains strong with cash and cash equivalents increasing from the previous quarter to about $30 million."

"Based on input from our customers and current backlog, we expect that revenues in the fourth quarter of 2006 will continue growing. Additionally, with continued focus on operational efficiencies, we believe that earnings in the coming quarter will improve over the previous quarter, and the Company will return to profitability on annual basis in 2006 as well," concluded Mr. Chang.

Alliance Fiber Optic Products Inc. (Nasdaq: AFOP)

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