Avanex (AVNX) 8-K Avanex Announces Record Revenue and Gross Margin for Q2 2007

Exhibit 99.1

www.avanex.com

Avanex Announces Record Revenue and Gross Margin for Q2 2007

Revenue Increases 54 Percent Year-over-Year

FREMONT, Calif. – Feb. 6, 2007 – Avanex Corporation (NASDAQ: AVNX), a pioneer of intelligent photonic solutions that enable next-generation optical networks, today reported financial results for the second quarter of fiscal 2007 ended Dec. 31, 2006.

Net revenue in the second quarter of fiscal 2007 was a record $55.6 million, a 9 percent increase over the prior quarter revenue of $50.9 million and a 54 percent increase over revenue of $36.1 million in the second quarter of the previous year.

“The second quarter was exceptionally strong and we are very pleased to report the highest revenue and gross margin in the history of Avanex,” said Jo Major, chairman, president and chief executive officer of Avanex. “Our team generated solid revenue growth while significantly improving the financial performance of the company.”

“In the metro and long haul markets we expect flat market demand in the first half of 2007, due to the delay of certain capacity expansion projects and we anticipate the market to return to growth in the second half of the year,” said Major.

The company reported a net loss of $8.6 million or a loss of $0.04 per share in the second quarter of fiscal 2007, compared with a net loss of $9.7 million or a loss of $0.05 per share in the prior quarter and a net loss of $18.5 million or a loss of $0.13 per share in the second quarter of the prior year.

Non-GAAP net loss in the second quarter of fiscal 2007 decreased by 50 percent to $3.5 million or a loss of $0.02 per share, compared with a non-GAAP net loss of $7.1 million or a loss of $0.03 per share in the prior quarter and a non-GAAP net loss of $9.9 million or a loss of $0.07 per share in the second quarter of the prior year. Non-GAAP net loss excludes share-based payments, amortization of intangibles, restructuring charges, and gains (loss) on the disposal of property and equipment. Non-GAAP net loss in the second quarter of fiscal 2006 also excludes a loss on debt refinancing. Non-GAAP net loss in the second quarter of fiscal 2007 also excludes legal, accounting and consulting expenses related to transactions that were not completed.*

Gross margin in the second quarter of fiscal 2007 increased to 19 percent, compared with 10 percent in the previous quarter and 8 percent in the second quarter of fiscal 2006.

Marla Sanchez, senior vice president and chief financial officer said, “We are pleased with the significant improvement in gross margin due to the programs we implemented two quarters ago aimed at reducing inventory charges, improving our supply chain, increasing manufacturing yields and managing our product portfolio. Execution of these programs significantly expanded our gross margin and we expect to realize further improvements in our cost structure.”

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Q3 FY 2007 Outlook

The company expects revenue in the third quarter of fiscal 2007 to be between $54.0 million and $57.0 million and expects gross margin to be between 17 percent and 21 percent.

Conference Call

Avanex will host a conference call today, Feb. 6 at 1:30 p.m. Pacific time; 4:30 p.m. Eastern time. The number for the conference call is 706-679-9682, and the password is “Avanex.” A live webcast of the conference call will be available on the Investors section on the company’s web site at www.avanex.com. An audio replay of the conference call will be available until Feb. 13 at 11:59 p.m. Pacific time. To access the audio replay, please dial 706-645-9291.

About Avanex

Avanex Corporation is a leading global provider of Intelligent Photonic Solutions^(TM) to meet the needs of fiber optic communications networks for greater capacity, longer distance transmissions, improved connectivity, higher speeds and lower costs. These solutions enable or enhance optical wavelength multiplexing, dispersion compensation, switching and routing, transmission, amplification, and include network-managed subsystems. Avanex was incorporated in 1997 and is headquartered in Fremont, Calif. Avanex also maintains facilities in Horseheads, N.Y.; Shanghai; Nozay, France; San Donato, Italy; and Bangkok. To learn more about Avanex, visit our Web site at: www.avanex.com.

Forward-looking Statements

This press release contains forward-looking statements including forward-looking statements regarding expected third quarter of fiscal 2007 outlook and operating results, market trends for the metro and long haul markets and the realization of improvements in our cost structure. Actual results could differ materially from those projected in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include general economic conditions, the pace of spending and timing of economic recovery in the telecommunications industry and in particular the optical networks industry, the company’s inability to sufficiently anticipate market needs and develop products and product enhancements that achieve market acceptance, problems or delays in reducing the cost structure of the company, the company’s inability to effect its restructuring goals or to successfully transfer operations to lower cost regions, any slowdown or deferral of new orders for products, higher than anticipated expenses the company may incur in future quarters or the inability to identify expenses which can be eliminated.

Finally, please refer to the risk factors contained in the company’s SEC filings including the company’s Annual Report on Form 10-K filed with the SEC on Sept. 28, 2006, Quarterly Report filed on Form 10-Q on Nov. 9, 2006 and subsequent filings with the SEC.

Avanex assumes no obligation and does not intend to update any forward-looking statements, whether as a result of new information, future events or otherwise.

* Details on the items excluded from non-GAAP net loss and non-GAAP net loss per share are available in the table entitled, “Reconciliation of GAAP Net Loss to Non-GAAP Net Loss,” following the accompanying financial statements.

Contact Information

Maria Riley

Director of Communications

510-897-4188

maria_riley@avanex.com

Avanex Corporation

CONSOLIDATED BALANCE SHEET

In thousands, except for per share data

(Unaudited)

	December 31, 2006			September 30, 2006			June 30, 2006
Assets
Current assets:
Cash and cash equivalents	$	37,360		$	16,358		$	28,963
Restricted cash and investments		5,891			6,715			6,676
Short-term investments		14,638			38,798			38,696
Accounts receivable, net		34,587			31,608			26,768
Inventories, net		21,893			16,951			18,417
Due from related party		17,972			18,151			10,404
Other current assets		13,477			12,687			15,473
Total current assets		145,818			141,268			145,397
Property and equipment, net		6,064			6,040			5,668
Intangibles, net		1,749			2,335			3,246
Goodwill		9,408			9,408			9,408
Other assets		2,228			1,853			1,839
Total assets	$	165,267		$	160,904		$	165,558
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	47,998		$	40,768		$	38,276
Accrued compensation		7,581			7,088			6,872
Accrued warranty		1,742			1,745			1,799
Due to related party		4,750			3,914			4,475
Other accrued expenses and deferred revenue		9,472			5,802			4,467
Current portion of long-term obligations		976			543			823
Current portion of accrued restructuring		6,359			6,224			6,321
Total current liabilities		78,878			66,084			63,033
Long-term liabilities:
Accrued restructuring		11,122			12,006			13,252
Convertible notes		4,438			4,282			4,569
Other long-term obligations		11,446			11,960			11,366
Total liabilities		105,884			94,332			92,220
Stockholders’ equity:
Common stock		208			207			204
Additional paid-in capital		747,955			745,992			742,951
Accumulated other comprehensive income		3,991			4,591			4,687
Accumulated deficit		(692,771	)		(684,218	)		(674,504	)
Total stockholders’ equity		59,383			66,572			73,338
Total liabilities and stockholders’ equity	$	165,267		$	160,904		$	165,558

Avanex Corporation

CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except for per share data

(Unaudited)

	Three Months Ended
	December 31, 2006			September 30, 2006			December 31, 2005
Net revenue:
Third parties	$	40,325		$	37,354		$	25,475
Related parties		15,298			13,537			10,650
Total net revenue		55,623			50,891			36,125
Cost of revenue:
Cost of revenue except for purchases from related parties		44,968			45,574			32,287
Purchases from related parties		159			5			920
Total cost of revenue		45,127			45,579			33,207
Gross profit		10,496			5,312			2,918
Operating expenses:
Research and development		5,832			5,625			5,452
Sales and marketing		3,891			3,548			2,783
General and administrative:
Third parties		9,148			5,662			3,694
Related parties		(73	)		(11	)		147
Amortization of intangibles		656			852			1,385
Restructuring		436			(63	)		2,942
Gain on disposal of property and equipment		(28	)		(20	)		(775	)
Total operating expenses		19,862			15,593			15,628
Loss from operations		(9,366	)		(10,281	)		(12,710	)
Interest and other income		1,121			839			379
Interest and other expense		(308	)		(272	)		(6,212	)
Net loss	$	(8,553	)	$	(9,714	)	$	(18,543	)
Basic and diluted net loss per common share	$	(0.04	)	$	(0.05	)	$	(0.13	)
Weighted-average number of shares used in computing basic and diluted net loss per common share		206,873			205,389			145,215

Avanex Corporation

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS

In thousands, except for per share data

(Unaudited)

	Three Months Ended
	December 31, 2006			September 30, 2006			December 31, 2005
Net loss, GAAP	$	(8,553	)	$	(9,714	)	$	(18,543	)
Items reconciling GAAP net loss to non-GAAP net loss:
Related to cost of revenue:
Share-based payments		234			278			29
Related to operating expenses:
Research and development - share-based payments		597			614			178
Sales and marketing - share-based payments		191			208			55
General and administrative - share-based payments		788			781			340
Amortization of intangibles		656			852			1,385
Restructuring:
Share-based payments		3			7			16
All other		433			(70	)		2,926
(Gain) loss on disposal of property and equipment		(28	)		(20	)		(775	)
Loss on debt refinancing		—			—			4,525
Due diligence expenses related to abandoned acquisition activity		2,146			—			—
Total related to operating expenses		4,786			2,372			8,650
Total related to net loss		5,020			2,650			8,679
Non-GAAP net loss	$	(3,533	)	$	(7,064	)	$	(9,864	)
Basic and diluted non-GAAP net loss per common share	$	(0.02	)	$	(0.03	)	$	(0.07	)
Weighted-average number of shares used in computing basic and diluted non-GAAP net loss per common share		206,873			205,389			145,215