AFOP Alliance Fiber Optic Products, Inc.

Alliance Fiber Optic Products, Inc. (Nasdaq CM: AFOP), an innovative supplier of fiber optic components, subsystems and integrated modules for the optical network equipment market, today reported its financial results for the fourth quarter ended December 31, 2007. Revenues for the fourth quarter of 2007 totaled $9,214,000, which represents a 19% increase over revenues of $7,746,000 reported in the fourth quarter of 2006, and are slightly higher than the revenues of $9,170,000 reported in the previous quarter. The Company recorded net income for the fourth quarter of 2007 of $1,045,000, or $0.03 per share based on 41.2 million shares outstanding, significantly improved over $653,000, or $0.02 per share based on 40.4 million shares outstanding for the fourth quarter of 2006. This compares to net income for the third quarter of 2007 of $1,065,000. Revenues for fiscal year 2007 totaled $33,786,000, which represents a 26% increase over revenues of $26,792,000 reported in the previous year. The Company recorded a net profit for fiscal year 2007 of $3,363,000 or $0.08 per share based on 40.9 million shares outstanding. This represents a 412% improvement compared with a net profit of $657,000 for the previous year. On an annual operating profit basis, the Company improved significantly from a loss of $1,000,000 in fiscal year 2006 to a profit of $1,605,000 in fiscal year 2007. Included in expenses for the quarter ended December 31, 2007 was $80,000 of stock-based compensation charges under SFAS 123(R). Included in expenses for the quarter ended December 31, 2006 was $106,000 of stock-based compensation charges under SFAS 123(R). Included in expenses for the year ended December 31, 2007 was $398,000 of stock-based compensation charges under SFAS 123(R). Included in expenses for the year ended December 31, 2006 was $298,000 of stock-based compensation charges under SFAS 123(R). �The fourth quarter capped a year of consistent improvement and significant milestones for AFOP,� commented Peter Chang, President and Chief Executive Officer. �Revenues grew double digits again in the fourth quarter over the year ago quarter and resulted in a new record for quarterly and annual sales. This is the seventeenth consecutive quarter with revenue growth over the year ago quarter. Operating profits and net profits continued to improve significantly from the year ago quarter. As a result, we generated both record operating profits and record net profits in 2007. More importantly, our balance sheet grew stronger in 2007, with our cash and cash equivalents and short-term investments at the end of 2007 increasing by $5.3 million to $36.5 million from a year ago.� �In 2007, we made solid progress with customers, product technology and in operations. As these factors continue to improve, we remain encouraged about the opportunities we see in the year ahead. We expect that revenues for the coming quarter will grow sequentially and be in the range of $9.2 million to $9.7 million, and that 2008 will be another record year for AFOP. Additionally, with continued focus on operational efficiencies, we expect to generate higher operating profits in 2008 while continuing to invest in growth opportunities for our business,� concluded Mr. Chang. Conference Call Management will host a conference call at 1:30 p.m. Pacific Time on January 30,�2008 to discuss AFOP�s fourth quarter�and�fiscal year�2007 financial results. To participate in AFOP�s conference call, please call 877-407-9210 at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is�269807. AFOP will also provide a live webcast of its�fourth�quarter and fiscal year�2007 conference call at AFOP�s website www.afop.com. An audio replay will be available until�February 6, 2008. The dial in�number for the replay is 877-660-6853�or 201-612-7415. The replay passcodes (account # 286; conference ID#:�269807) are both required for the replay. About AFOP Founded in 1995, Alliance Fiber Optic Products, Inc. designs, manufactures and markets a broad range of high performance fiber optic components and integrated modules. AFOP's products are used by leading and emerging communications equipment manufacturers to deliver optical networking systems to the long-haul, enterprise, metropolitan and last mile access segments of the communications network. AFOP offers a broad product line of passive optical components including interconnect systems, couplers and splitters, thin film�CWDM and DWDM components and modules, optical attenuators, and�micro-optics devices. AFOP is headquartered in Sunnyvale, California, with manufacturing and product development capabilities in the United States, Taiwan and China. AFOP's website is located at http://www.afop.com. Except for the historical information contained herein, the matters set forth in this press release, including statements as to our ability to continue to maintain positive earnings, our ability to increase profitability in future periods, our ability to increase revenues in future periods and the extent of any revenue increase, our belief that business conditions are improving; our beliefs regarding our future opportunities, our ability to continue to focus on our operating efficiency or our successes in doing so, our expectation regarding our ability to generate higher operating profits in 2008, and our ability to continue to invest in growth opportunities, are forward looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to general economic conditions and trends, the impact of competitive products and pricing, timely introduction of new technologies, timely design acceptance by our customers, the acceptance of new products and technologies by our customers, customer demand for our products, the timing of customer orders, loss of key customers, ability to ramp new products into volume production, the costs associated with running our operations, industry-wide shifts in supply and demand for optical components and modules, industry overcapacity, failure of cost control initiatives, financial stability in foreign markets, and other risks detailed from time to time in our SEC reports, including AFOP's Form 10-Q for the quarter ended September 30, 2007. These forward-looking statements speak only as of the date hereof. AFOP disclaims any intention or obligation to update or revise any forward-looking statements. ALLIANCE FIBER OPTIC PRODUCTS, INC. Condensed Consolidated Balance Sheets (in thousands) (Unaudited) � � Dec. 31, Dec. 31, � 2007 � 2006 ASSETS Current assets: Cash and short-term investments $ 36,480 $ 31,178 Accounts receivable, net 5,393 4,009 Inventories 5,003 4,465 Other current assets � 481 � 601 Total current assets 47,357 40,253 � Property and equipment, net 4,373 4,264 � Other assets 226 176 � � Total assets $ 51,956 $ 44,693 � � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,523 $ 2,950 Accrued expenses and other liabilities � 3,519 � 2,909 Total current liabilities 8,042 5,859 � Long-term liabilities � 1,007 � 930 Total liabilities 9,049 6,789 � Stockholders' equity 42,907 37,904 � � Total liabilities and stockholders' equity $ 51,956 $ 44,693 ALLIANCE FIBER OPTIC PRODUCTS, INC. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) � � � � � Three Months Ended Twelve Months Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, � 2007 � 2007 � 2006 � 2007 � 2006 � � Revenues $ 9,214 $ 9,170 $ 7,746 $ 33,786 $ 26,792 � Cost of revenues � 6,336 � 6,291 � 5,473 � 23,158 � 19,380 � Gross profit � 2,878 � 2,879 � 2,273 � 10,628 � 7,412 � � Operating expenses: Research and development 804 876 798 3,217 3,080 Sales and marketing 590 556 571 2,349 2,255 General and administrative � 864 � 817 � 805 � 3,457 � 3,077 � Total operating expenses 2,258 2,249 2,174 9,023 8,412 � Income (loss) from operations 620 630 99 1,605 (1,000 ) Interest and other income, net 425 435 554 1,758 1,657 � � � � � Net income $ 1,045 $ 1,065 $ 653 $ 3,363 $ 657 � � Net income per share Basic $ 0.03 $ 0.03 $ 0.02 $ 0.08 $ 0.02 Diluted $ 0.02 $ 0.02 $ 0.01 $ 0.08 $ 0.01 � Weighted average shares outstanding Basic 41,187 40,980 40,400 40,897 40,118 Diluted 45,010 44,929 45,196 44,720 44,914 � Included in costs and expenses above: Stock based compensation charges Cost of revenue $ 28 $ 29 $ 44 $ 149 $ 109 Research and development 13 13 19 63 57 Sales and marketing 9 9 10 42 32 General and administrative � 30 � 40 � 33 � 144 � 100 � Total $ 80 $ 91 $ 106 $ 398 $ 298 �