AFOP Reports Record Revenue and Record Profit in 2nd Quarter 2008 Results

SUNNYVALE, Calif.--(Business Wire)--
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 second quarter ended June 30,
2008.

Revenue for the second quarter of 2008 totaled $10,323,000, a 19%
increase from revenue of $8,701,000 recorded in the second quarter of
2007 and 10% increase compared with revenue of $9,401,000 for the
first quarter of 2008. The Company recorded net income for the second
quarter of 2008 of $1,081,000, significantly improved over $864,000
for the second quarter of 2007. This compares to net income for the
first quarter of 2008 of $820,000.

Included in expenses for the quarter ended June 30, 2008 was
$46,000 of stock-based compensation charges under FAS 123(R). Included
in expenses for the quarter ended June 30, 2007 and the quarter ended
March 31, 2008 were $103,000 and $51,000 of stock-based compensation
charges under FAS 123(R), respectively.

Peter Chang, President and Chief Executive Officer, commented, "We
are very pleased with the financial performance and progress AFOP made
in the quarter ended June 30, 2008. With continued sequential
quarterly revenue growth, we delivered record quarterly sales and
generated record profits in the quarter. In addition, this is the
nineteenth consecutive quarter with revenue growth over the year ago
quarter."

"During the quarter, our profit margin doubled to close to 8% from
the year ago quarter, while our gross margin improved from the
previous quarter. Our operating profit increased to a record $821,000,
significantly higher than the previous quarter of $486,000 and the
year ago quarter of $375,000. We believe our performance in these
areas reflects the encouraging progress made in execution of our
long-term business and operational strategies."

"Based on input from our customers and current backlog, we expect
that revenues in the third quarter of 2008 will continue to increase
and will be above $10.5 million, which would result in another
quarterly sales record for AFOP. Additionally, we are optimistic about
both revenue growth and profit increasing in the remainder of 2008,
compared with 2007, which could result in another record year for
AFOP," concluded Mr. Chang.

Conference Call

Management will host a conference call at 1:30 p.m. Pacific Time
on July 23, 2008 to discuss AFOP's second quarter 2008 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 289639. AFOP will also provide a live webcast of its second quarter
2008 conference call at AFOP's website: www.afop.com. An audio replay
will be available until July 30, 2008. The dial in for the replay is
877-660-6853. The replay pass-codes (account # 286; conference ID#:
289639) 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 DWDM
components and modules, fixed and variable optical attenuators, and
depolarizers. 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
future market demand, our success in executing our long-term business
and operational strategies, the factors that resulted in our revenue
growth, and the sustainability of those factors in future periods,
future revenue growth, and our expectations regarding 2008 results,
including our expectations regarding our 2008 revenues and profit, 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, order
trends and customer demand, the timing of customer orders, loss of key
customers or orders, ability to ramp new products into volume
production, 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
quarterly report on Form 10-Q for the quarter ended March 31, 2008.
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.

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ALLIANCE FIBER OPTIC PRODUCTS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

Jun. 30 Dec. 31,
2008 2007
-------- --------
ASSETS
Current assets:
Cash and short-term investments $ 21,093 $ 36,480
Accounts receivable 6,660 5,393
Inventories 5,990 5,003
Other current assets 512 481
-------- --------
Total current assets 34,255 47,357

Long-term investments 15,371 -
Property and equipment, net 4,668 4,373
Other assets 249 226
-------- --------
Total assets $ 54,543 $ 51,956
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,387 $ 4,523
Accrued expenses 3,317 3,520
-------- --------
Total current liabilities 8,704 8,043

Long-term liabilities
Other long-term liabilities 1,020 1,006
-------- --------
Total liabilities 9,724 9,049

Stockholders' equity 44,819 42,907

-------- --------
Total liabilities and stockholders' equity $ 54,543 $ 51,956
======== ========
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ALLIANCE FIBER OPTIC PRODUCTS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended Six Months
Ended
------------------------ ---------------
Jun. 30 Mar. 31, Jun. 30 Jun. 30 Jun. 30
2008 2008 2007 2008 2007
------- -------- ------- ------- -------

Revenues $10,323 $ 9,401 $ 8,701 $19,724 $15,402

Cost of revenues 7,069 6,455 5,929 13,524 10,531
------- -------- ------- ------- -------
Gross profit 3,254 2,946 2,772 6,200 4,871

Operating expenses:
Research and development 895 898 848 1,793 1,537
Sales and marketing 645 668 634 1,313 1,203
General and administrative 893 894 915 1,787 1,776
------- -------- ------- ------- -------
Total operating expenses 2,433 2,460 2,397 4,893 4,516

Income from operations 821 486 375 1,307 355
Interest and other income, net 281 396 489 677 898
------- -------- ------- ------- -------
Net income before tax $ 1,102 $ 882 $ 864 $ 1,984 $ 1,253
Income tax 21 62 - 83 -
------- -------- ------- ------- -------
Net income $ 1,081 $ 820 $ 864 $ 1,901 $ 1,253
======= ======== ======= ======= =======

Net income per share:
Basic $ 0.03 $ 0.02 $ 0.02 $ 0.05 $ 0.03
Diluted $ 0.02 $ 0.02 $ 0.02 $ 0.04 $ 0.03

Shares used in per share
calculation:
Basic 41,574 41,392 40,825 41,483 40,706
Diluted 44,432 44,423 45,608 44,341 45,489

Included in costs and expenses
above:
Stock based compensation
charges
Cost of revenue $ 20 $ 22 $ 41 $ 42 $ 92
Research and development 9 10 17 19 37
Sales and marketing 6 7 12 13 24
General and administrative 11 12 33 23 74
------- -------- ------- ------- -------
Total $ 46 $ 51 $ 103 $ 97 $ 227
======= ======== ======= ======= =======
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Alliance Fiber Optic Products, Inc.
Anita Ho, Acting Chief Financial Officer
408-736-6900 ext. 168

Copyright Business Wire 2008