Sycamore Networks, Inc. Reports Fourth Quarter and Fiscal Year 2010 Financial Results

Sycamore Networks, Inc. (NASDAQ: SCMR), today reported its results for the fourth quarter and fiscal year ended July 31, 2010. Revenue for the fourth quarter of fiscal 2010 was $22.2 million, compared with $17.2 million for the fourth quarter of fiscal 2009. Revenue for fiscal 2010 was $68.6 million compared to $67.4 million in fiscal 2009.

Net income for the fourth quarter of fiscal 2010, on a generally accepted accounting principles (“GAAP”) basis, was $0.5 million, or $0.02 per diluted share, compared with a GAAP net loss of $34.9 million, or $1.23 per share for the fourth quarter of fiscal 2009. Net loss for fiscal 2010, on a GAAP basis, was $14.8 million, or $0.52 per share, compared with a GAAP net loss of $53.6 million, or $1.89 per share for fiscal 2009.

Non-GAAP net income for the fourth quarter of fiscal 2010 was $1.3 million, or $0.05 per diluted share, compared with non-GAAP net loss of $6.5 million, or $0.23 per share for the fourth quarter of fiscal 2009. Non-GAAP net loss for fiscal 2010 was $4.8 million, or $0.17 per share, compared with non-GAAP net loss of $19.5 million, or $0.69 per share for fiscal 2009. The reconciliation between net loss on a GAAP basis and net 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 are pleased with our fourth quarter operating results. Sycamore achieved revenue growth, continued strong margin performance and was cash positive," said Daniel E. Smith, Sycamore's president and chief executive officer. "These results, combined with our focus on effective cost management, enabled the company to achieve operating profitability, on a non-GAAP basis, in the quarter, while continuing to invest in IQstream™, our recently announced mobile broadband optimization solution."

About Sycamore Networks

Sycamore Networks, Inc. (NASDAQ: SCMR) develops and markets intelligent bandwidth management solutions for fixed line and mobile network operators worldwide. We also develop and market a mobile broadband solution designed to help mobile operators reduce congestion in mobile access networks. Sycamore products enable network operators to lower overall network costs, increase operational efficiencies, and rapidly deploy new revenue-generating services. Sycamore's global customer base includes Tier 1 service providers, government agencies, and utility companies. For more information, please visit www.sycamorenet.com.

Use of Non-GAAP Financial Measures

The Company provides non-GAAP financial data in addition to providing financial results in accordance with generally accepted accounting principles (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 the 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.

We wish to caution you that certain matters discussed in this news release may constitute forward-looking statements regarding future events that involve risks and uncertainties. Risks and uncertainties in the Company’s business include, but are not limited to, reliance on a limited number of customers; industry pricing pressures; the Company’s decision to focus future development efforts on mobile broadband opportunities; the high cost of product development and keeping pace with evolving features and technologies desired by customers; unexpected difficulties in developing and marketing new mobile broadband products and the inability of new products to achieve market acceptance or to function as expected; the consolidation of both suppliers and customers in the telecommunications marketplace; and general economic conditions. Certain additional risks are set forth in more detail in the section entitled "Risk Factors" in the Company's reports filed on Forms 10-Q and 10-K 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.

Sycamore Networks, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

July 31, 2010July 31, 2009
Assets
Current assets:
Cash and cash equivalents $ 104,416 $ 347,696
Short-term investments 450,722 273,387
Accounts receivable, net 14,168 12,860
Inventories 11,175 16,058
Prepaids and other current assets 1,8732,388
Total current assets 582,354 652,389
Property and equipment, net 6,569 13,342
Long-term investments 81,739 305,725
Other assets 358357
Total Assets$671,020$971,813
Liabilities and Stockholders' Equity
Current liabilities:
Deferred revenue $ 10,930 $ 11,003
Other current liabilities 10,45514,034
Total current liabilities 21,385 25,037
Long term deferred revenue 3,918 4,530
Long term liability 1,7141,821
Total liabilities 27,01731,388
Common stock 28 28
Additional paid-in capital 1,759,520 2,040,317
Accumulated deficit (1,116,160 ) (1,101,355 )
Other equity 6151,435
Total stockholders' equity 644,003940,425
Total Liabilities and Stockholders' Equity$671,020$971,813

Sycamore Networks, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except per share data)

Three Months EndedYear Ended

July 31,
2010

July 31,
2009

July 31,
2010

July 31,
2009

Revenue $ 22,232 $ 17,245 $ 68,617 $ 67,357
Cost of revenue 10,17110,19430,95438,469
Gross profit 12,061 7,051 37,663 28,888
Operating expenses:
Research and development 7,469 12,725 31,685 50,134
Sales and marketing 2,869 3,185 10,942 14,551
General and administrative 2,125 2,625 9,098 8,198
Restructuring expense (25 ) 2,783 5,625 3,600
Asset impairment -24,2091,07624,209
Total operating expenses 12,43845,52758,426100,692
Loss from operations (377 ) (38,476 ) (20,763 ) (71,804 )
Interest and other income, net 1,0233,1495,59218,000
Income (loss) before income taxes 646 (35,327 ) (15,171 ) (53,804 )
Income tax expense (benefit) 125(397)(366)(232)
Net income (loss) $521$(34,930)$(14,805)$(53,572)
Net income (loss) per share:
Basic $ 0.02 $ (1.23 ) $ (0.52 ) $ (1.89 )
Diluted $ 0.02 $ (1.23 ) $ (0.52 ) $ (1.89 )
Weighted average shares outstanding:
Basic 28,427 28,380 28,422 28,359
Diluted 28,427 28,380 28,422 28,359

Common share and per share data for all periods presented have been adjusted to give effect to the December 21, 2009 1 for 10 reverse stock split.

Sycamore Networks, Inc.

Unaudited Non-GAAP Consolidated Statements of Operations

(in thousands, except per share data)

Three Months EndedYear Ended

July 31,
2010

July 31,
2009

July 31,
2010

July 31,
2009

Revenue $ 22,232 $ 17,245 $ 68,617 $ 67,357
Cost of revenue 10,0439,98230,38637,489
Gross profit 12,189 7,263 38,231 29,868
Operating expenses:
Research and development 7,206 12,235 30,593 48,127
Sales and marketing 2,626 2,919 10,018 13,362
General and administrative 1,9252,1828,3336,113
Total operating expenses 11,75717,33648,94467,602
Income (loss) from operations 432 (10,073 ) (10,713 ) (37,734 )
Interest and other income, net 1,0233,1495,59218,000
Income (loss) before income taxes 1,455 (6,924 ) (5,121 ) (19,734 )
Income tax expense (benefit) 125(397)(366)(232)
Net income (loss) $1,330$(6,527)$(4,755)$(19,502)
Net income (loss) per share:
Basic $ 0.05 $ (0.23 ) $ (0.17 ) $ (0.69 )
Diluted $ 0.05 $ (0.23 ) $ (0.17 ) $ (0.69 )
Weighted average shares outstanding:
Basic 28,427 28,380 28,422 28,359
Diluted 28,427 28,380 28,422 28,359

Common share and per share data for all periods presented have been adjusted to give effect to the December 21, 2009 1 for 10 reverse stock split.

Sycamore Networks, Inc.

Reconciliation of GAAP to Non-GAAP Net Income

(in thousands, except per share data)

Three Months EndedYear Ended

July 31,
2010

July 31,
2009

July 31,
2010

July 31,
2009

GAAP net income (loss) $521$(34,930)$(14,805)$(53,572)
Stock-based compensation expense:
Cost of revenue 128 142 509 594
Research and development 263 490 1,092 2,007
Sales and marketing 243 266 924 1,189
General and administrative 200239765902
Total stock based compensation expense 834 1,137 3,290 4,692
Asset impairment charge:
Operating expense -- 24,209 1,076 24,209
Amortization of purchased intangible assets -- 204 -- 1,183
Restructuring and other asset impairments:
Operating expense (25 ) 2,783 5,625 3,600
Cost of revenue --7059386
Non-GAAP net income (loss) $1,330$(6,527)$(4,755)$(19,502)

Contacts:

Sycamore Networks, Inc.
Robert Travis, 978-250-3432
Investor Relations
bob.travis@sycamorenet.com
or
Sycamore Networks, Inc.
Scott Larson, 978-250-3433
Press Inquiries
scott.larson@sycamorenet.com
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