Sycamore Networks (SCMR) 8-K Sycamore Networks, Inc. Reports Third Quarter Fiscal Year 2006

Exhibit 99.1

CONTACT:
Press Inquiries	Investor Inquiries
Scott Larson	Terry Adams
Public Relations	Investor Relations
Sycamore Networks, Inc.	Sycamore Networks, Inc.
978-250-3433	978-250-3460
scott.larson@sycamorenet.com	investor.info@sycamorenet.com

SYCAMORE NETWORKS, INC. REPORTS THIRD QUARTER FISCAL YEAR 2006

FINANCIAL RESULTS

CHELMSFORD, Mass., May 23, 2006 – Sycamore Networks, Inc. (NASDAQ: SCMR), a leader in optical networking, today reported its third quarter results for the period ended April 29, 2006.

Revenue for the third quarter of fiscal 2006 was $22.9 million, compared with $17.8 million for the third quarter of fiscal 2005.

Net income for the third quarter of fiscal 2006, on a generally accepted accounting principles (GAAP) basis, was $10.5 million, or $0.04 per fully diluted share, compared with a net loss of $12.0 million, or $(0.04) per fully diluted share for the third quarter of fiscal 2005. Non-GAAP net income for the third quarter of fiscal 2006, was $12.3 million, or $0.04 per fully diluted share, compared with a non-GAAP net loss of $0.5 million, or $(0.00) per fully diluted share for the third quarter of fiscal 2005. The reconciliation between net income (loss) on a GAAP basis and net income (loss) on a non-GAAP basis is provided in a table immediately following the Unaudited non-GAAP Consolidated Statements of Operations included with this release.

Revenue for the first nine months of fiscal 2006 was $71.1 million, compared with $46.9 million for the first nine months of fiscal 2005.

Net income for the first nine months of fiscal 2006, on a GAAP basis, was $22.4 million or $0.08 per fully diluted share, compared with a net loss of $25.2 million, or $(0.09) per fully diluted share for the first nine months of fiscal 2005. Non-GAAP net income for the first nine months of fiscal 2006, was $27.7 million, or $0.10 per fully diluted share, compared with a non-GAAP net loss of $12.7 million, or $(0.05) per fully diluted share for the first nine months of fiscal 2005. The reconciliation between net income (loss) on a GAAP basis and net income (loss) on a non-GAAP basis is provided in a table immediately following the Unaudited non-GAAP Consolidated Statements of Operations included with this release.

“We were very pleased with our third quarter results,” said Daniel E. Smith, Sycamore’s president and chief executive officer. “During the quarter we grew our revenue sequentially and year-over-year, improved our margin performance, and reduced operating expenses. As a result, we reported operating profitability and another quarter of positive cash generation. We continue to execute on our business strategy and our continued progress, we believe, underscores the unique value our intelligent networking solutions deliver to our customers.”

The Company also announced today that on May 19, 2006, the staff of the Securities and Exchange Commission (the “SEC”) informed the Company that the SEC has commenced a formal investigation related to certain stock options granted by the Company during calendar years 1999 through 2001 that were erroneously accounted for under GAAP. The Company had previously instituted and completed an independent investigation into this matter and subsequently restated financial results for fiscal years 2000 through 2004 and for the first two quarters of fiscal 2005. The Company has and will continue to cooperate fully with the SEC regarding this matter.

About Sycamore Networks

Sycamore Networks, Inc. (NASDAQ: SCMR) is a leading provider of intelligent optical switching products for telecommunications service providers worldwide. The Company’s products form the reliable foundation for some of the world’s most respected and innovative communications networks. Sycamore’s fully integrated edge-to-core optical switching solutions enable network operators to efficiently and cost-effectively provision and manage optical network capacity to support a wide range of voice, video and data services. For more information, please visitwww.sycamorenet.com.

We wish to caution you that certain matters discussed in this news release constitute forward-looking statements that involve risks and uncertainties. Readers are cautioned that actual results or events could differ materially from those stated or implied in forward-looking statements. These risks and uncertainties include, but are not limited to, the formal investigation commenced by the SEC with respect to certain stock options granted by the Company and any other investigations related thereto, additional actions and findings that may result from the Company’s restatement of previously issued financial statements, the Company’s inability to obtain the regulatory approvals in a timely manner or satisfy other closing conditions to consummate the Allen Organ merger transaction, the expected synergies of the merger may not be achieved and the Company may be unsuccessful in integrating the two businesses, the Company’s reliance on a limited number of customers, the significant cost structure required to support the Company’s strategy, variation of the Company’s quarterly results and competition in the telecommunications industry. Certain additional risks are set forth in more detail in the section entitled Factors that May Affect Future Results in the Company’s most recently filed Form 10-Q, Form 10-K and the other reports filed by the Company from time to time with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

Use of Non-GAAP Financial Measures

The Company provides non-GAAP financial data in addition to providing financial results in accordance with GAAP. These measures are not in accordance with, or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. The Company believes that the items excluded from non-GAAP results have one or more of the following characteristics: their magnitude and timing is largely outside of the Company’s control; they are unrelated to the ongoing operation of the business in the ordinary course; they are unusual, and the Company does not expect them to occur in the ordinary course of business; or they are non-operational, non-cash expenses involving stock option grants.

The non-GAAP financial data is provided to enhance the reader’s overall understanding of the Company’s current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expense and income items that the Company believes are not indicative of the Company’s core operating results. In addition, since the Company has historically reported non-GAAP results to the investment community, the Company believes the inclusion of non-GAAP numbers provides consistency in its financial reporting. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting in future periods. The non-GAAP financial data should be considered in addition to, not as a substitute for or a more appropriate indicator of, operating results, cash flows, or other measures of financial performance prepared in accordance with GAAP.

Sycamore Networks, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

	April 29, 2006			July 31, 2005
Assets
Current assets:
Cash and cash equivalents	$	372,649		$	508,281
Short-term investments		518,861			446,258
Accounts receivable, net		23,175			8,384
Inventories		4,899			5,445
Prepaids and other current assets		4,145			3,812
Total current assets		923,729			972,180
Property and equipment, net		8,109			8,437
Long-term investments		79,313			496
Other assets		835			950
Total Assets	$	1,011,986		$	982,063
Liabilities and Stockholders’ Equity
Current liabilities:
Deferred revenue	$	7,201		$	8,700
Other current liabilities		21,933			23,779
Restructuring liabilities		3,001			8,455
Total current liabilities		32,135			40,934
Long term deferred revenue		2,483			1,584
Total liabilities		34,618			42,518
Common stock		279			276
Additional paid-in capital		1,793,997			1,780,243
Accumulated deficit		(816,152	)		(838,533	)
Other equity		(756	)		(2,441	)
Total stockholders’ equity		977,368			939,545
Total Liabilities and Stockholders’ Equity	$	1,011,986		$	982,063

Sycamore Networks, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended					Nine Months Ended
	April 29, 2006		April 30, 2005			April 29, 2006			April 30, 2005
Revenue	$	22,944	$	17,848		$	71,077		$	46,955
Cost of revenue		9,405		8,881			33,398			26,025
Gross profit		13,539		8,967			37,679			20,930
Operating expenses:
Research and development		7,975		10,867			24,201			34,272
Sales and marketing		2,951		2,658			8,482			8,893
General and administrative		2,294		2,056			7,893			6,494
Litigation settlement		—		—			750			—
Reserve for contingencies		—		10,282			—			10,282
Restructuring charges and related asset impairments		—		679			—			679
Total operating expenses		13,220		26,542			41,326			60,620
Income (loss) from operations		319		(17,575	)		(3,647	)		(39,690	)
Interest and other income, net		10,564		5,595			26,720			14,465
Income (loss) before income taxes		10,883		(11,980	)		23,073			(25,225	)
Income tax expense		362		—			692			—
Net income (loss)	$	10,521	$	(11,980	)	$	22,381		$	(25,225	)
Net income (loss) per share:
Basic	$	0.04	$	(0.04	)	$	0.08		$	(0.09	)
Diluted	$	0.04	$	(0.04	)	$	0.08		$	(0.09	)
Weighted average shares outstanding:
Basic		278,560		275,325			277,423			274,773
Diluted		282,491		275,325			280,886			274,773

Sycamore Networks, Inc.

Unaudited Non-GAAP Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended					Nine Months Ended
	April 29, 2006		April 30, 2005			April 29, 2006		April 30, 2005
Revenue	$	22,944	$	17,848		$	71,077	$	46,955
Cost of revenue		9,224		8,600			32,562		25,542
Gross profit		13,720		9,248			38,515		21,413
Operating expenses:
Research and development		7,150		10,676			22,240		33,565
Sales and marketing		2,534		2,630			7,572		8,785
General and administrative		1,835		2,013			6,855		6,193
Total operating expenses		11,519		15,319			36,667		48,543
Income (loss) from operations		2,201		(6,071	)		1,848		(27,130	)
Interest and other income, net		10,564		5,595			26,720		14,465
Income (loss) before income taxes		12,765		(476	)		28,568		(12,665	)
Income tax expense		425		—			857		—
Net income (loss)	$	12,340	$	(476	)	$	27,711	$	(12,665	)
Net income (loss) per share:
Basic	$	0.04	$	(0.00	)	$	0.10	$	(0.05	)
Diluted	$	0.04	$	(0.00	)	$	0.10	$	(0.05	)
Weighted average shares outstanding:
Basic		278,560		275,325			277,423		274,773
Diluted		282,491		275,325			280,886		274,773

Sycamore Networks, Inc.

Reconciliation of GAAP to non-GAAP Net Income

(in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	April 29, 2006			April 30, 2005			April 29, 2006			April 30, 2005
GAAP net income (loss)	$	10,521		$	(11,980	)	$	22,381		$	(25,225	)
Stock-based compensation expense:
Cost of revenue		181			77			836			279
Research and development		825			191			1,961			707
Sales and marketing		417			28			910			108
General and administrative		459			43			1,038			301
Total stock based compensation expense		1,882			339			4,745			1,395
Litigation settlement		—			—			750			—
Reserve for contingencies		—			10,282			—			10,282
Restructuring charges and related asset impairments		—			883			—			883
Tax effect		(63	)		—			(165	)		—
Non-GAAP net income (loss)	$	12,340		$	(476	)	$	27,711		$	(12,665	)