AFOP Alliance Fiber Optic Products, Inc.

Alliance Fiber Optic Products, Inc. (Nasdaq: 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 and year ended December 31, 2009.

Revenues for the fourth quarter of 2009 totaled $7,517,000, an 8% increase from revenues of $6,951,000 reported in the previous quarter, and are lower than the revenues of $8,201,000 reported in the fourth quarter of 2008. The Company recorded net income for the fourth quarter of 2009 of $428,000, or $0.01 per share based on 42.2 million shares outstanding, compared to $271,000, or $0.01 per share based on 42.0 million shares outstanding, for the third quarter of 2009. This compares to net income for the fourth quarter of 2008 $820,000, or $0.02 per share based on 41.8 million shares outstanding.

Revenues for fiscal year 2009 were $29,834,000, compared with the revenues of $38,754,000 in fiscal year 2008. The Company recorded a net profit for fiscal year 2009 of $ 1,433,000 or $0.03 per share based on 42.0 million shares outstanding. This compared with a net profit of $4,066,000 or $0.10 per share for the previous year. On an annual operating income basis, the Company generated $751,000 in fiscal year 2009.

Included in expenses for the quarter ended December 31, 2009 was $33,000 of stock-based compensation charges under SFAS 123(R), compared to $30,000 of stock-based compensation charges for the quarter ended December 31, 2008. Included in expenses for the year ended December 31, 2009 was $112,000 of stock-based compensation charges under SFAS 123(R), compared to $161,000 of stock-based compensation charges for the year ended December 31, 2008.

Peter Chang, President and Chief Executive Officer, commented, “We persevered through a challenging 2009 and ended with sequential growth in the fourth quarter. Despite our year over year revenue decline, we were pleased that we are able to manage each quarter in 2009 with positive operating profits and positive net profits through our continued progress in technology and manufacturing excellence.”

“Our balance sheet was strong in 2009. At the end of 2009, inventory improved from the previous year and most importantly, our cash and short-term investments, together with our ARS Right, increased to $42.2 million.”

“We are proud of our achievements in a difficult year, and we enter this next decade with confidence as we are financially sound, are experiencing increasing interest in our expanding product portfolio, and are growing our base of customers throughout the world. We expect that revenues for the coming quarter will continue the recent sequential growth pattern. Additionally, with our continued focus on operational efficiencies, we expect to generate profits from operations in the coming quarters of 2010, 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 28, 2010 to discuss AFOP’s fourth quarter and fiscal year 2009 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 341735. AFOP will also provide a live webcast of its fourth quarter and fiscal year 2009 conference call at AFOP’s website www.afop.com. An audio replay will be available until February 11, 2010. The dial in number for the replay is 877-660-6853 or 201-612-7415. The replay passcodes (account # 286; conference ID#: 341735) 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 expectations regarding future revenue levels, our ability to generate profits from operations and the time periods thereof, our beliefs regarding business conditions, our customer base, our product portfolio, our ability to continue to focus on our operational efficiencies or our successes in doing so, 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, 2009. 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, 2009 2008 ASSETS Current assets: Cash and short-term investments $ 40,492 $ 23,954 Other current asset - ARS Right 1,779 - Accounts receivable, net 4,952 4,708 Inventories 4,984 5,614 Other current assets   515   379 Total current assets 52,722 34,655   Long-term investments - 13,718 Other asset - ARS Right - 2,582 Property and equipment, net 4,434 4,653 Other assets   233   190 Total assets $ 57,389 $ 55,798     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,701 $ 3,572 Accrued expenses and other liabilities   3,936   3,374 Total current liabilities 7,637 6,946   Long-term liabilities   813   891 Total liabilities 8,450 7,837   Stockholders' equity   48,939   47,961 Total liabilities and stockholders' equity $ 57,389 $ 55,798 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, 2009 2009 2008 2009 2008   Revenues $ 7,517 $ 6,951 $ 8,201 $ 29,834 $ 38,754   Cost of revenues   5,151   4,686   5,662   20,504   26,589 Gross profit   2,366   2,265   2,539   9,330   12,165   Operating expenses: Research and development 760 721 645 2,972 3,322 Sales and marketing 535 530 485 2,276 2,406 General and administrative   817   899   812   3,331   3,487 Total operating expenses 2,112 2,150 1,942 8,579 9,215   Income from operations 254 115 597 751 2,950 Interest and other income, net   196   176   319   766   1,315 Net income before tax $ 450 $ 291 $ 916 $ 1,517 $ 4,265 Income tax   22   20   96   84   199 Net income $ 428 $ 271 $ 820 $ 1,433 $ 4,066   Net income per share Basic $ 0.01 $ 0.01 $ 0.02 $ 0.03 $ 0.10 Diluted $ 0.01 $ 0.01 $ 0.02 $ 0.03 $ 0.10   Weighted average shares outstanding Basic 42,213 42,035 41,796 42,026 41,601 Diluted 42,876 42,607 41,827 42,279 41,657   Included in costs and expenses above: Stock based compensation charges Cost of revenue $ 12 $ 12 $ 15 $ 49 $ 74 Research and development 5 6 6 22 32 Sales and marketing 3 1 4 10 22 General and administrative   13   10   5   31   33 Total $ 33 $ 29 $ 30 $ 112 $ 161