MRV to Review Historical Option Practices and to Review Accounting for Earnouts and...

MRV to Review Historical Option Practices and to Review Accounting for Earnouts and Profit Sharing in Two European Subsidiaries and Expects to Restate Financial Statements

CHATSWORTH, Calif.--(Business Wire)--
MRV COMMUNICATIONS, INC. (Nasdaq:MRVC) today announced that as a
result of the recent discovery and preliminary analysis by management
of information relating to the company's stock option practices during
the period from 2002 through the first quarter of 2004, the company's
board of directors has established a special committee of independent
directors to review the company's historical stock option practices
and related accounting. The special committee will be assisted by
independent legal counsel and outside accounting experts.

Beginning in the middle of 2006 through early 2007, MRV conducted
an informal and voluntary review of its share-based award practices
and concluded that there was no evidence that grant dates of options
were designed to occur on dates with more favorable exercise prices
(i.e., on dates with lower market prices). However, based on the
information now being reviewed, management has determined that it is
likely that the conclusions reached from the earlier review were
incorrect with respect to certain options granted during the period
from 2002 through the first quarter of 2004. Management has so
informed MRV's board of directors, which, in turn, has established the
special committee to review the company's historical stock option
practices and related accounting and the bases upon which the earlier
conclusions were made.

The information related to the stock option granting practices of
2002 to 2004 was discovered in the course of reviewing transactions
related to two of MRV's European subsidiaries, Turnkey Communications
in Switzerland and EDSLan SpA in Italy. However, the stock option
grants in question are not limited to these two subsidiaries. For
Turnkey, the transaction issues relate to the accounting of earn-out
formulae for certain employees and co-founders and for EDSLan, the
transaction issues relate to the accrual of expenses for profit
sharing arrangements with the former owners of the subsidiary who
continued to manage it after MRV's incremental acquisition of the
equity of EDSLan to date. The review of the special committee is also
expected to encompass a reconsideration and investigation of these
transactions.

The option practices under review occurred during periods prior to
the 2006 adoption of MRV's stock option policy, which is most recently
described in MRV's 2007 Annual Report of Form 10-K, as amended, filed
with the Securities and Exchange Commission ("SEC") on April 29, 2008.
Although the special committee's review has just begun, management's
preliminary analysis is that, pursuant to the requirements of
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) that was in effect during the periods
under review, the actual accounting measurement dates for certain
stock option grants from 2002 to the first quarter of 2004 differed
from the stated dates of grant previously used in accounting for such
grants. The differences in these measurement dates result in non-cash,
stock-based compensation charges that were not recorded in the
Company's financial statements during the applicable periods. The
compensation expense is charged to results of operations over the
vesting period which is generally four years. Accordingly, the grants
during this period would impact the financial statements for the
period from 2002 to 2008. These charges have the effect of increasing
reported losses and decreasing retained earnings from amounts reported
in the Company's historical financial statements.

Based on the analyses of the above issues conducted by management
to date and as a result of the adjustments required from such
analyses, MRV expects to restate its financial statements for the
impacted periods.

MRV's management and members of the board's audit committee have
discussed the matters disclosed in this press release with Ernst &
Young LLP, MRV's independent registered public accounting firm.

Based on the information provided by management, on June 5, 2008
MRV's board, in consultation with management, determined that
financial statements and the related reports of MRV's independent
public accountants, earnings press releases, and similar
communications previously issued by MRV should not be relied upon as a
consequence of the pending restatement of its historical financial
statements.

As the special committee's review is just beginning, the aggregate
amount of additional non-cash stock-based compensation expense has not
been determined, nor has the amount of such expenses or accruals to be
recorded in any specific period or in any future period been
determined. Additional information may become available through the
inquiry of the special committee, which could cause potential
unrecorded compensation expenses and other accruals to change as well
cause as the fiscal years impacted to change from the information upon
which the board's decision of June 5, 2008 on these matters was based.
Further, the special committee's review may lead to the discovery of
additional related or unrelated transactions that require additional
adjustments. The tax consequences that may result from these matters
have not yet been determined and any additional tax liabilities could
also have a material adverse impact on MRV's financial position or
liquidity. Once the special committee's review is complete, the
company will make a final determination as to the amount of unrecorded
stock-based compensation costs and other accruals that should be
recorded in the Company's financial statements and the periods
affected.

MRV has notified the SEC of the voluntary stock option and
accounting review and its current expectations regarding restatement
of its financial statements. The SEC may initiate its own inquiry into
these or other matters. The Company intends to cooperate fully with
the SEC in the event it does make an inquiry into the matters.

MRV is presently uncertain as to the amount of time that will be
required to conduct and complete the review, to assess the impact of
these matters for tax purposes and on its ongoing operations or to
restate its financial statements. Similar reviews or investigations by
other companies into their option practices and accounting have
typically spanned lengthy periods and resulted in failures to file
their quarterly and annual reports required under the Securities and
Exchange Act of 1934 timely, thereby violating the continued listing
requirements of the stock exchanges upon which their securities are
traded, and jeopardizing the continued listing of such companies'
securities on the exchanges. If the special committee's review into
MRV's option practices and related accounting does extend over a
number of months, and, for example, inhibits MRV's ability to file its
Form 10-Q for the quarter ending June 30, 2008 or its future periodic
or annual reports required under the Exchange Act, or if the matters
being announced today and the ongoing uncertainties flowing from this
announcement or future developments depress the bid price of MRV's
shares below the minimum of $1.00 per share for 30 consecutive
business days, MRV would face such consequences with respect to the
continued listing of its shares on the Nasdaq Global Market.

Securities class action and stockholder derivative litigation has
often been brought against companies and their management following
announcements of matters like those being announced by MRV today for
perceived breaches of duties owing to the companies' stockholders.
Accordingly, MRV may be the target of securities, derivative or other
litigation in the future. Such litigation could result in substantial
costs and divert management's attention and resources and contribute
to a delay in the special committee's ability to complete its review.

MRV will account for and report the expenses arising from the
reviews by management and the special committee, related litigation
and other associated activities in the periods incurred and such
amounts are expected to be significant.

At the appropriate time, MRV intends to announce updates and
provide reports on definitive conclusions drawn from the special
committee's review of matters disclosed in this press release and to
comply with its obligations under the Exchange Act to report in
filings with the SEC material events or proceedings that occur in the
future as a consequence. However, MRV will not otherwise comment on
these matters, or respond to questions from stockholders, financial
analysts or others in the investment community or the press, until the
special committee has completed its review.

Forward-Looking and Cautionary Statements

This release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements are statements other than
historical information or statements of current condition and may be
identified by use of terms such as "expects," "anticipates,"
"intends," "potential," "estimates," "believes", "should", "will,"
"would" and similar words.

Forward-looking statements involve known and unknown risks and
uncertainties that could cause actual results to differ materially
from those projected. Forward-looking statements should be considered
in conjunction with the cautionary statements contained in this
release that discuss the reasons why the potential impact on MRV's
financials statements and the affected periods may change and in the
"Risk Factors" section and elsewhere in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2007, in the
Company's other filings with the SEC, and in material incorporated
therein by reference. Forward-looking statements should not be
regarded as representations by MRV that its expectations will in fact
be realized.

All information in this release is as of June 5, 2008 and except
as expressly stated in this release, MRV undertakes no duty to update
any forward-looking statement to conform the statement to actual
results or changes in MRV's expectations.

About MRV Communications, Inc.

MRV Communications, Inc. ("MRV") is a leading provider of network
equipment and services, and optical components. MRV's network
equipment business provides equipment used by commercial customers,
governments and telecommunications service providers, and includes
switches, routers, physical layer products and out-of-band management
products as well as specialized networking products for aerospace,
defense and other applications including voice and cellular
communication. MRV markets and sells its products worldwide through a
variety of channels, including a dedicated direct sales force,
manufacturers' representatives, value-added-resellers, distributors
and systems integrators. MRV also has operations in Europe that
provide network system design, integration and distribution services
that include products manufactured by third-party vendors, as well as
internally developed and manufactured products. The Company's optical
components business, operating under the Source Photonics brand,
includes Source Photonics, Inc. and Fiberxon, Inc., both wholly owned
subsidiaries of MRV. Publicly traded since 1992, MRV is listed on the
NASDAQ Global Market under the symbol MRVC. For more information about
MRV and its products, please call (818) 773-0900 or visit www.mrv.com
and www.sourcephotonics.com.

MRV Communications, Inc.
Investor Relations
818-886-MRVC (6782)
ir@mrv.com
or
The Blueshirt Group for MRV
Maria Riley, 415-217-2631
maria@blueshirtgroup.com

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