Avanex (AVNX) 8-K Avanex Announces Fourth Quarter and Fiscal Year 2007 Financial Results

Exhibit 99.1

www.avanex.com

Avanex Announces Fourth Quarter and Fiscal Year 2007 Financial Results

FREMONT, Calif. – Sept. 4, 2007 – Avanex Corporation (NASDAQ: AVNX), a pioneer of intelligent photonic solutions that enable next-generation optical networks, today reported financial results for its fourth quarter and fiscal year ended June 30, 2007.

Net revenue in the fourth quarter of fiscal year 2007 was $51.1 million compared with net revenue of $45.5 million in the fourth quarter of the previous year and net revenue of $55.1 million in the prior quarter. Fiscal year 2007 net revenue was $212.8 million, a 31 percent increase over net revenue of $162.9 million in the prior fiscal year.

Gross margin in the fourth quarter of fiscal year 2007 was 24 percent, an increase of 20 percentage points over the fourth quarter of the previous year and an increase of 5 percentage points over the prior quarter. Gross margin in fiscal year 2007 was 18 percent, an increase of 13 percentage points over the prior year’s gross margin of 5 percent.

The company reported a net loss of $5.7 million or a net loss of $0.03 per share in the fourth quarter of fiscal year 2007, compared to a net loss of $9.1 million or a net loss of $0.04 per share in the fourth quarter of the prior year and a net loss of $6.7 million or a net loss of $0.03 per share in the prior quarter.

Fiscal year 2007 net loss was $30.6 million, or a net loss of $0.14 per share, a $24.1 million or $0.20 per share improvement from the previous year’s net loss of $54.7 million or a net loss of $0.34 per share.

Non-GAAP net profit in the fourth fiscal quarter of 2007 was $49,000 or $0.00 per share, compared with a non-GAAP net loss of $9.1 million or a non-GAAP net loss of $0.04 per share in the fourth quarter of the prior year and a non-GAAP net loss of $3.0 million or a non-GAAP net loss of $0.01 per share in the prior quarter. Fiscal year 2007 non-GAAP net loss was $13.5 million or a loss of $0.06 per share, compared with the previous year’s non-GAAP net loss of $42.5 million or a loss of $0.26 per share.*

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“We are very pleased with the significant progress we made during fiscal year 2007,” said Jo Major, president, chairman and CEO of Avanex. “We built a solid foundation for our future growth as we grew revenue 31 percent, reduced our net loss by almost half and increased our gross margin by 13 percentage points over the previous year.”

“In the fourth quarter of fiscal year 2007 and for the first time in the company’s history, we generated cash on an operational basis and reached non-GAAP earnings per share break-even. We are encouraged by our new product pipeline and the customer demand we see for the second half of the calendar year. In addition, we are very excited by the addition of the Essex team in the first quarter of fiscal 2008 and the opportunity to increase our product portfolio and presence in the transmission market and continue to reinforce our leadership position in the amplifier, dispersion compensation and wavelength management/ROADM markets.”

Q1 FY 2008 Outlook

The company expects revenue to be between $52 million and $55 million and gross margin to be flat in the first fiscal quarter of 2008, ending Sept. 30, 2007.

Conference Call

Avanex will host a conference call today, Sept. 4, 2007, at 1:30 p.m. Pacific time; 4:30 p.m. Eastern time. Investors are invited to join the conference call by dialing 706-679-8764 and referencing “Avanex”. A live webcast will also be available on the investor relations section of the company’s website at www.avanex.com. An audio replay will be available for one week and can be accessed by dialing 706-645-9291 and entering access ID number 7325551.

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 Corporation was incorporated in 1997 and is headquartered in Fremont, Calif. Avanex Corporation also maintains facilities in Horseheads, N.Y.; Melbourne, Fla.; Shanghai; Villebon Sur Yvette, France; San Donato, Italy; and Bangkok. To learn more about Avanex Corporation, visit our web site at:www.avanex.com.

Forward-looking Statements

This press release contains forward-looking statements including statements regarding expected first quarter of fiscal 2008 outlook and operating results, market demand and growth trends for our products and our strategies. 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 in the telecommunications industry and in particular the optical networks industry, market demand and price of our products, the

company’s ability to sufficiently anticipate market needs and develop products and enhancements that achieve market acceptance, problems or delays in reducing the cost structure of the company, problems or delays in realizing the benefits of the divestiture in France, the company’s ability to effect its restructuring goals, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, any slowdown or deferral of orders for products or the application of accounting or tax principles in an unanticipated manner.

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 May 3, 2007 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.

* Non-GAAP net loss excludes share-based compensation expense, amortization of intangibles, gains (loss) on disposal of property and equipment, and restructuring charges. Fourth quarter fiscal year 2007 non-GAAP net loss also excludes a loss on the sale of a subsidiary and the operating expenses associated with this subsidiary until the closing on April 16, 2007. Fiscal year 2007 non-GAAP net loss also excludes legal, accounting and consulting expenses related to transactions that were not completed. Fiscal year 2006 non-GAAP net loss also excludes an inventory provision related to non-RoHS (Restriction of Hazardous Substances) compliant product, and a loss on debt refinancing.

Details on the items excluded from non-GAAP net profit (loss) and non-GAAP net profit (loss) per share are available in the table entitled, “Reconciliation of GAAP Net Profit (Loss) to Non-GAAP Net Profit (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

(Unaudited)

	June 30, 2007			March 31, 2007			June 30, 2006
Assets
Current assets:
Cash and cash equivalents	$	14,837		$	30,902		$	28,963
Restricted cash and investments		3,620			5,935			6,676
Short-term investments		28,942			30,269			38,696
Accounts receivable, net		33,764			33,425			26,768
Inventories, net		15,188			21,184			18,417
Due from related party		14,381			19,280			10,404
Other current assets		5,716			8,018			15,473
Total current assets		116,448			149,013			145,397
Property and equipment, net		5,900			6,223			5,668
Intangibles, net		559			1,155			3,246
Goodwill		9,408			9,408			9,408
Other assets		2,685			1,593			1,839
Total assets	$	135,000		$	167,392		$	165,558
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	32,549		$	35,452		$	38,276
Accrued compensation		6,091			6,975			6,872
Accrued warranty		873			1,973			1,799
Due to related party		—			3,513			4,475
Other accrued expenses and deferred revenue		10,940			9,747			4,467
Current portion of long-term obligations		9			1,616			823
Current portion of accrued restructuring		2,837			6,257			6,321
Total current liabilities		53,299			65,533			63,033
Long-term liabilities:
Accrued restructuring		8,269			10,954			13,252
Convertible notes		—			—			4,569
Other long-term obligations		1,350			11,259			11,366
Total liabilities		62,918			87,746			92,220
Stockholders’ equity:
Common stock		226			225			204
Additional paid-in capital		775,901			774,476			742,951
Accumulated other comprehensive income		1,064			4,369			4,687
Accumulated deficit		(705,109	)		(699,424	)		(674,504	)
Total stockholders’ equity		72,082			79,646			73,338
Total liabilities and stockholders’ equity	$	135,000		$	167,392		$	165,558

Avanex Corporation

CONSOLIDATED STATEMENTS OF OPERATIONS—GAAP

In thousands, except for per share data

(Unaudited)

	Three Months Ended									Fiscal Year Ended
	June 30, 2007			March 31, 2007			June 30, 2006			June 30, 2007			June 30, 2006
Net revenue:
Third parties	$	35,362		$	38,339		$	35,016		$	151,380		$	119,054
Related parties		15,736			16,804			10,442			61,375			43,890
Total net revenue		51,098			55,143			45,458			212,755			162,944
Cost of revenue:
Cost of revenue except for purchases from related parties		38,971			44,546			43,460			174,059			151,758
Purchases from related parties		28			299			225			491			2,726
Total cost of revenue		38,999			44,845			43,685			174,550			154,484
Gross profit		12,099			10,298			1,773			38,205			8,460
Operating expenses:
Research and development		7,511			6,263			5,703			25,231			23,471
Sales and marketing		3,779			4,043			3,677			15,261			13,236
General and administrative:
Third parties		3,469			4,384			3,666			22,663			15,701
Related parties		—			699			(320	)		615			951
Amortization of intangibles		664			531			912			2,703			5,448
Restructuring		(17	)		1,155			(1,225	)		1,511			1,912
(Gain) loss on disposal of property and equipment		(484	)		5			(1,810	)		(527	)		(5,064	)
(Gain) loss on sale of subsidiary		3,216			—			—			3,216			—
Total operating expenses		18,138			17,080			10,603			70,673			55,655
Loss from operations		(6,039	)		(6,782	)		(8,830	)		(32,468	)		(47,195	)
Interest and other income		(71	)		403			644			2,292			2,787
Interest and other expense		889			(274	)		(873	)		35			(10,284	)
Net loss before income taxes		(5,221	)		(6,653	)		(9,059	)		(30,141	)		(54,692	)
Provision for income taxes		(464	)		—			—			(464	)		—
Net loss	$	(5,685	)	$	(6,653	)	$	(9,059	)	$	(30,605	)	$	(54,692	)
Basic and diluted net loss per common share	$	(0.03	)	$	(0.03	)	$	(0.04	)	$	(0.14	)	$	(0.34	)
Weighted-average number of shares used in computing basic and diluted net loss per common share		225,668			214,034			204,040			212,952			163,242

Avanex Corporation

RECONCILIATION OF GAAP NET PROFIT (LOSS) TO NON-GAAP NET PROFIT (LOSS)

In thousands, except for per share data

(Unaudited)

	Three Months Ended									Fiscal Year Ended
	June 30, 2007			March 31, 2007			June 30, 2006			June 30, 2007			June 30, 2006
Net loss, GAAP	$	(5,685	)	$	(6,653	)	$	(9,059	)	$	(30,605	)	$	(54,692	)
Items reconciling GAAP net loss to non-GAAP net profit (loss):
Related to cost of revenue:
Share-based payments		257			341			283			1,110			422
Obsolete inventory provision related to RoHS product compliance		—			—			—			—			951
Total related to cost of sales		257			341			283			1,110			1,373
Related to operating expenses:
Research and development—share-based payments		572			508			612			2,291			1,321
Sales and marketing—share-based payments		210			245			232			854			451
General and administrative—share-based payments		375			896			996			2,840			2,189
Amortization of intangibles		664			531			912			2,703			5,448
Restructuring:
Share-based payments		—			3			27			13			69
All other		(17	)		1,152			(1,252	)		1,498			1,843
(Gain) loss on disposal of property and equipment		(484	)		5			(1,810	)		(527	)		(5,064	)
(Gain) loss on sale of subsidiary		3,216			—			—			3,216			—
Operating expenses for subsidiary until closing in quarter		941			—			—			941			—
Loss on debt refinancing		—			—			—			—			4,525
Due diligence expenses related to abandoned acquisition activity		—			—			—			2,146			—
Total related to operating expenses		5,477			3,340			(283	)		15,975			10,782
Total related to net loss		5,734			3,681			—			17,085			12,155
Non-GAAP net profit (loss)	$	49		$	(2,972	)	$	(9,059	)	$	(13,520	)	$	(42,537	)
Basic and diluted non-GAAP net profit (loss) per common share	$	0.00		$	(0.01	)	$	(0.04	)	$	(0.06	)	$	(0.26	)
Weighted-average number of shares used in computing basic and diluted non-GAAP net profit (loss) per common share		225,668			214,034			204,040			212,952			163,242