SOURCE: ADVA AG Optical Networking

December 21, 2007 14:57 ET

Ad hoc: ADVA Optical Networking Adjusts Q4 2007 Revenue and Profitability Guidance

MAHWAH, NJ and MARTINSRIED/MUNICH, GERMANY--(Marketwire - December 21, 2007) -


Q4 2007 revenues forecasted to be between EUR 50 million and EUR 55 million, down from previous guidance

IFRS Q4 2007 pro forma operating income forecasted to be between EUR -15.5 million and EUR -12.5 million down from previous guidance

FY 2007 revenues forecasted to be between EUR 248 million and EUR 253 million with pro forma operating margin of -1% to +1%

ADVA Optical Networking today adjusted its Q4 2007 revenue and profitability guidance.

Q4 2007 REVENUE GUIDANCE

Revenues in Q4 2007 are forecasted to range between EUR 50 million and EUR 55 million, down from previous guidance of between EUR 60 million and EUR 65 million. The adjustment became necessary due to overall weaker business with carriers and enterprise customers than originally expected. For FY 2007, the lowered Q4 guidance implies projected revenues of between EUR 248 million and EUR 253 million.

Q4 2007 IFRS PRO FORMA OPERATING INCOME GUIDANCE

IFRS pro forma operating income in Q4 2007 is forecasted to be negative and to range between EUR -15.5 million and EUR -12.5 million (between -31.0% and -22.7% of revenues), down from previous positive guidance of between EUR 2.1 million and EUR 4.6 million (between 3.5% and 7.0% of revenues). IFRS pro forma operating income excludes stock-based compensation and amortization and impairment of goodwill and acquisition-related intangible assets. To the largest extent, the adjustment is driven by the following factors:

--  reduced revenues;
--  lower gross margins, due to a one-off non-cash write-down of
    outdated inventory items amounting to about EUR 5.5 million and an
    unfavorable change in business mix;
--  a one-off impairment of capitalized research and development
    expenses of about EUR 4.0 million, due to a more conservative
    assessment of the revenue potential of select products; and
--  higher operational expenses, due to one-off charges related
    to the H1 2008 closure of ADVA Optical Networking's Swedish
    research and development facility in Kista/Stockholm and non-cash
    reserves for doubtful accounts receivable.
    

For FY 2007, the lowered Q4 guidance implies projected positive pro forma operating margins between -1% and +1% of revenues.

OTHER ITEMS AFFECTING Q4 2007 IFRS PROFITABILITY

Related to the closure of ADVA Optical Networking's Swedish research and development facility, the Company will incur a one-off, non-cash goodwill impairment of EUR 2.5 million in Q4 2007, affecting IFRS actual operating profitability. Further, due to the planned integration of ADVA Optical Networking's two legal entities in the U.S., there will be a one-off non-cash tax charge of about EUR 1.0 million related to the write-down of deferred tax assets. Finally, ADVA Optical Networking notes that for all intangible assets excluding goodwill related to the Company's Swedish research and development facility, year-end impairment testing has not been performed yet.

LIQUIDITY AT YEAR-END 2007

Most of the above-mentioned adjustments are one-off, non-cash charges, and will therefore not impact the sound liquidity situation of ADVA Optical Networking. At year-end 2007, cash and cash equivalents are forecasted to amount to about EUR 40 million, and net liquidity is projected to come in at around EUR 2.5 million.

2008 OUTLOOK

ADVA Optical Networking is restructuring its global organization as seen by the Kista/Stockholm research and development facility closure. The Company will finalize the restructuring plan in due course and will provide further information in Q1 2008. Also, ADVA Optical Networking will communicate the results of further year-end impairment testing and a Q1 2008 revenue and earnings outlook prior to the release of the audited financial statements on March 18, 2007.

PUBLISHED BY:
ADVA AG Optical Networking, Martinsried/Munich and Meiningen,
Germany
ADVA Optical Networking Inc., Mahwah, New Jersey, USA
ADVA Optical Networking Corp., Tokyo, Japan
www.advaoptical.com

FOR PRESS:
Christine Keck
t +1 201 258 8293 (U.S.)
t +44 1904 699 358 (Europe)
t +81 3 6667 5830 (Asia)
public-relations@advaoptical.com

FOR INVESTORS:
Wolfgang Guessgen
t +1 201 258 8300 (U.S.)
t +49 89 89 0665 940 (Europe)
t +81 3 6667 5830 (Asia)
investor-relations@advaoptical.com

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