Opnext Reports Second Quarter Unaudited Operating Results

Financial Highlights for the Second Quarter Ended September 30, 2008:

-- Sales decreased $4.0million, or 4.8%, to $80.2 million from $84.2million in the quarter ended June, 2008. The decrease primarily resulted from lower 40Gbps and XENPAK sales, partially offset by increased sales of XFP and 300 pin tunable modules. Sales of 10Gbps and above products decreased $3.8 million, or 5.5%, to $65.6 million, while sales of less than 10Gbps products decreased $0.6 million, or 6.3%, to $9.0 million, and industrial and commercial product sales increased by $0.4 million, or 7.7%, to $5.6 million.

-- Sales increased $3.6million, or 4.7%, from $76.6million in the quarter ended September 30, 2007, primarily as a result of increased sales of 300 pin tunable, XFP, SFP, X2, and industrial and commercial products, partially offset by lower sales of 300 pin fixed wavelength, 40Gbps and XENPAK modules.

-- Sales to Cisco and Alcatel-Lucent represented 38.6% and 14.6% of total sales, respectively, as compared to 44.3% and 10.2% for the quarter ended June 30, 2008, and 40.9% and 23.0% for the quarter ended September 30, 2007. Revenue diversification improved as sales to the balance of the current top ten customers grew 3.4% sequentially and represented 31.0% of total revenue for the quarter ended September 30, 2008.

-- Gross margin was 30.5% as compared to 32.2% for the quarter ended June 30, 2008, and 35.2% for the quarter ended September 30, 2007. The sequential decrease in gross margin percentage resulted primarily from the negative effects of unfavorable product mix and lower sales volumes which exceeded the benefits from foreign currency exchange fluctuations and related hedging programs. Gross margin percentage declined from the prior year primarily as a result of unfavorable product mix and the negative effects from foreign currency exchange fluctuations and related hedging programs.

-- Operating expenses decreased approximately $0.5 million, or 1.9%, to $24.4 million from $24.9 million in the quarter ended June 30, 2008, as lower SG&A spending and performance-based compensation expense more than offset increased R&D spending for materials related to prototype builds. Operating expenses increased $1.7 million, or 7.7%, from $22.6 million in the quarter ended September 30, 2007, primarily as a result of foreign currency exchange fluctuations and litigation expenses.

-- Operating income was $0.1 million, or 0.1% of sales, as compared to $2.2 million, or 2.6% of sales, for the quarter ended June 30, 2008, and operating income of $4.3million, or 5.6% of sales, for the quarter ended September 30, 2007. Non-GAAP operating income, which excludes stock-based compensation and litigation expenses, was $2.2 million, or 2.7% of sales, as compared to $3.6 million, or 4.3% of sales, for the quarter ended June 30, 2008, and $5.3million, or 6.9% of sales, for the quarter ended September 30, 2007.

-- Net income was $1.2 million, or $0.02 per diluted share, as compared to $2.6million, or $0.04 per diluted share, for the quarter ended June 30, 2008, and $5.8 million, or $0.09 per diluted share, for the quarter ended September 30, 2007. Non-GAAP net income, which excludes stock-based compensation and litigation expenses, was $3.3 million, or $0.05 per diluted share, as compared to $4.0million, or $0.06 per diluted share, for the quarter ended June 30, 2008, and $6.8 million, or $0.11 per diluted share, for the quarter ended September 30, 2007. Earnings per share for the current quarter includes a $0.02 sequential benefit from foreign currency exchange fluctuations and related hedging programs. As compared to the quarter ended September 30, 2007, earnings per share includes a $0.05 negative effect from foreign currency exchange fluctuations and related hedging programs.

-- Cash generated from operations was $2.6 million and $2.7 million for the three- and six-month periods ended September 30, 2008. Cash and cash equivalents decreased by $9.5 million to $212.2 million at September 30, 2008, as compared to $221.7 million at March 31, 2008, primarily as a result of $5.6 million of short-term loan payments, $3.6 million of payments on capital lease obligations, $1.4 million of costs incurred in connection with the StrataLight Communications acquisition and $1.3 million of additional capital investments. During the six-month period ended September 30, 2008, $7.8 million of additional capital lease obligations were incurred to further expand production capacity.

Market Observations and Guidance:

Commenting on the Company's recent performance, Opnext, Inc. President and Chief Executive Officer Harry Bosco said, "In the September quarter, the market generally remained strong, although we began to see some pockets of weakness near the end of the quarter in certain product areas and with certain customers, which we believe was in reaction to the financial turmoil and tight credit markets. Looking ahead, we believe that industry fundamentals remain intact and that network demand will continue to drive optical sales even in a slowing capital expenditure environment. However, based on discussions with some of our largest customers, we believe that some softness could continue for the next couple quarters."

"In the meantime, we will continue to improve our execution and readiness in the high-growth areas of the business, such as tunables and XFP modules, as well as 40G, which is experiencing a temporary lull in demand consistent with the initial deployment of networks utilizing new technology. Also, we are proceeding toward closing the StrataLight Communications acquisition and we are looking forward to combining our efforts to provide a broad portfolio of 40G and 100G modules and subsystems."

"We continue to believe we are well-positioned in the highest growth market segments and that our broad customer base and product portfolio will help us weather a difficult macro-environment. However, the mixed signals in this past quarter, coupled with a tempered customer view, have caused us to take a cautious view of next quarter's guidance. With that in mind, we expect revenues to be in the range of $72 to $78 million for our third fiscal quarter ending December 31, 2008, excluding any potential impact from the pending StrataLight Communications acquisition," concluded Mr. Bosco.

Forward-looking Statements:

Statements made in this press release include forward looking statements, including, but not limited to, those related to future revenues, growth of revenues, market position, acceptance of certain Opnext products, the general market outlook, the outlook for the industry and a pending acquisition. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Among other things:

-- projected sales for the quarter ending December 31, 2008, as well as the general outlook for the future are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management's control; and

-- the market in which Opnext operates is volatile, implementation of operating strategies may not achieve the desired impact relative to changing market conditions and the success of these strategies will depend on the effective implementation of our strategies while minimizing organizational disruption.

In addition to the factors set forth elsewhere in this release, other factors that could cause results to differ from current expectations include: the impact of rapidly changing technologies; the impact of competition on product development and pricing; the ability of Opnext to source critical parts and to react to changes in general industry and market conditions, including regulatory developments; expenses associated with litigation; rights to intellectual property, market trends and the adoption of industry standards; the ability of Opnext to consummate the previously announced acquisition of StrataLight Communications; and consolidations within or affecting the optical modules and components industry. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business. Additional information regarding these and other factors can be found in Opnext's reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K filed on June 16, 2008, as amended. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements, publicly or otherwise, whether as a result of new information, future events or otherwise, except to comply with applicable federal and state securities laws.

Conference Call:

Opnext management will conduct a conference call at 9:00 a.m. ET, today, Tuesday, November 4, 2008, to discuss these results in detail. You may participate in this conference call by dialing 877-853-4940 (United States) or 706-645-9149 (International) prior to the start of the call and providing the Opnext, Inc. name and Conference ID# 69949993. A replay of the conference call can be accessed starting approximately two hours after the call through Tuesday, November 11, 2008, by dialing 800-642-1687 (United States) or 706-645-9291 (International) and using the Conference ID# 69949993. A live webcast of the call will be accessible on the Investor Relations section of the Company website at http://www.opnext.com. A replay of the webcast will be available following the conclusion of the call on the webcast archive page of the Investor Relations section.

(OPXT-G)

About Opnext:

From the latest communications networks to new security systems, and from major advances in medical systems to high-demand consumer electronics, Opnext (NASDAQ: OPXT | Quote | Chart | News | PowerRating) laser technologies add the spark of innovation to a world of new applications. The Company's industry expertise, future-focused thinking and commitment to research and development combine in bringing to market solutions that are ready for the next generation of laser-based products. Formed out of Hitachi, Opnext has built on more than 30 years experience of advanced technology to establish its broad portfolio of solutions and solid reputation for excellence in service. For additional information, visit www.opnext.com.

Opnext, Inc. Condensed Consolidated Balance Sheets (In thousands) September 30, 2008 March 31, 2008 Assets (unaudited) Current assets: Cash and cash equivalents $ 212,178 $ 221,686 Trade receivables, net 63,809 55,443 Inventories, net 82,404 90,297 Prepaid expenses and other current assets 6,636 3,639 Total current assets 365,027 371,065 Property, plant, and equipment, net 55,596 55,488 Goodwill 5,698 5,698 Other assets 206 208 Total assets $ 426,527 $ 432,459 Liabilities and shareholders' equity Current liabilities: Trade payables $ 40,627 $ 45,531 Accrued expenses 13,595 14,184 Short-term debt 13,194 20,060 Capital lease obligations 9,468 7,414 Total current liabilities 76,884 87,189 Capital lease obligations 19,349 18,843 Other long-term liabilities 3,550 3,349 Total liabilities 99,783 109,381 Total shareholders' equity 326,744 323,078 Total liabilities and shareholders' equity $ 426,527 $ 432,459

Opnext, Inc. Unaudited Condensed Consolidated Statements of Income (In thousands, except per share data) Three months ended September 30, Six months ended September 30, 2008 2007 2008 2007 Sales $ 80,159 $ 76,579 $ 164,396 $ 144,406 Cost of sales 55,708 49,631 112,814 93,685 Gross margin 24,451 26,948 51,582 50,721 Research and development expenses 11,197 10,375 21,471 18,887 Selling, general and administrative expenses 13,190 12,311 27,860 23,556 Other operating (income) expenses 6 (37 ) (9 ) (37 ) Operating income (1) 58 4,299 2,260 8,315 Interest income, net 1,030 2,465 1,972 4,837 Other income, (expense), net 100 (835 ) (435 ) (1,223 ) Income before income taxes 1,188 5,929 3,797 11,929 Income tax expense - (86 ) - (86 ) Net income $ 1,188 $ 5,843 $ 3,797 $ 11,843 Net income per share: Basic $ 0.02 $ 0.09 $ 0.06 $ 0.18 Diluted $ 0.02 $ 0.09 $ 0.06 $ 0.18 Weighted average number of shares used in computing net income per share: Basic 64,620 64,576 64,621 64,563 Diluted 64,769 64,627 64,774 64,612

Note (1) -- Operating income includes stock-based compensation expenses of $1,475 thousand and $985 thousand in the three-month periods and $2,577 thousand and $1,067 thousand in the six-month periods ended September 30, 2008 and 2007, respectively. Operating income also includes litigation expenses of $666 thousand for the three-month period, and $992 thousand for the six-month period, ended September 30, 2008.

Opnext, Inc. Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) Six Months Ended September 30, 2008 2007 Cash flows from operating activities Net income $ 3,797 $ 11,843 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,988 5,368 Compensation expense 2,577 1,067 Loss/(gain) on disposal of property, plant and equipment 18 (37 ) Changes in assets and liabilities (9,673 ) (10,954 ) Net cash provided by operating activities 2,707 7,287 Cash flows from investing activities Capital expenditures (1,303 ) (3,093 ) In-process acquisition of business (1,382 ) - Net cash used in investing activities (2,685 ) (3,093 ) Cash flows from financing activities Payments on capital lease obligations (3,639 ) (2,320 ) Payments on short-term debt (5,605 ) - Exercise of stock options 6 11 Net cash used in financing activities (9,238 ) (2,309 ) Effect of foreign exchange rates on cash and cash equivalents (292 ) 681 (Decrease) increase in cash and cash equivalents (9,508 ) 2,566 Cash and cash equivalents at beginning of period 221,686 199,786 Cash and cash equivalents at end of period $ 212,178 $ 202,352 Non-cash financing activities Capital lease obligations incurred $ (7,757 ) $ (4,929 ) Stock appreciation rights amendment - 2,432

Opnext, Inc. Unaudited Supplemental Earnings Reconciliation (In thousands, except per share data) Use of Non-GAAP Financial Measures: The Company adopted SFAS 123R effective April 1, 2006, and records compensation expense related to its stock-based awards. Depending upon the size, timing and the terms of the awards, the related compensation expense may vary significantly. During the quarter ending June 30, 2008, the Company began to incur costs associated with a class action claim and a patent infringement claim. Management excludes stock-based compensation and litigation related costs for the purpose of assessing its internal operating performance. Accordingly, the Company provides non-GAAP gross margin, operating expense, operating profit (loss), net income (loss) and net income (loss) per share financial measures as supplemental information, in addition to the GAAP presentation, to its investors in an effort to provide greater transparency and insight into management's analysis. The Company expects to continue providing similar information in the future which reconciles the differences between GAAP and non-GAAP financial measures.

Three Months Ended September 30, 2008 Non-GAAP Adjustments Non-GAAP Litigation Stock-Based GAAP Non-GAAP GAAP Expenses Compensation Expense Sales $ 80,159 $ - $ - $ 80,159 100.0% 100.0% Gross margin 24,568 - (117) 24,451 30.6% 30.5% Operating expenses 22,369 (666) (1,358) 24,393 27.9% 30.4% Operating income 2,199 (666) (1,475) 58 2.7% 0.1% Net income $ 3,329 $ (666) $ (1,475) $ 1,188 4.2% 1.5% Net income per share: Basic $ 0.05 $ 0.02 Diluted $ 0.05 $ 0.02 Shares Basic 64,620 64,620 Diluted 64,769 64,769 Three Months Ended June 30, 2008 Non-GAAP Adjustments Non-GAAP Litigation Stock-Based GAAP Non-GAAP GAAP Expenses Compensation Expense Sales $ 84,237 $ - $ - $ 84,237 100.0% 100.0% Gross margin 27,179 - (48) 27,131 32.3% 32.2% Operating expenses 23,549 (326) (1,054) 24,929 28.0% 29.6% Operating income 3,630 (326) (1,102) 2,202 4.3% 2.6% Net income $ 4,037 $ (326) $ (1,102) $ 2,609 4.8% 3.1% Net income per share: Basic $ 0.06 $ 0.04 Diluted $ 0.06 $ 0.04 Shares Basic 64,623 64,623 Diluted 64,666 64,666

Three Months Ended September 30, 2007 Non-GAAP Stock-Based GAAP Non-GAAP GAAP Compensation Expense Sales $ 76,579 $ - $ 76,579 100.0% 100.0% Gross margin 27,033 (85) 26,948 35.3% 35.2% Operating expenses 21,749 (900) 22,649 28.4% 29.6% Operating income 5,284 (985) 4,299 6.9% 5.6% Net income $ 6,828 $ (985) $ 5,843 8.9% 7.6% Net income per share: Basic $ 0.11 $ 0.09 Diluted $ 0.11 $ 0.09 Shares Basic 64,576 64,576 Diluted 64,627 64,627

Six Months Ended September 30, 2008 Non-GAAP Adjustments Non-GAAP Litigation Expenses Stock-Based GAAP Non-GAAP GAAP Compensation Expense Sales $ 164,396 $ - $ - $ 164,396 100.0% 100.0% Gross margin 51,747 - (165) 51,582 31.5% 31.4% Operating expenses 45,918 (992) (2,412) 49,322 27.9% 30.0% Operating income 5,829 (992) (2,577) 2,260 3.5% 1.4% Net income $ 7,366 $ (992) $ (2,577) $ 3,797 4.5% 2.3.% Net income per share: Basic $ 0.11 $ 0.06 Diluted $ 0.11 $ 0.06 Shares Basic 64,621 64,621 Diluted 64,774 64,774

Six Months Ended September 30, 2007 Non-GAAP Stock-Based GAAP Non-GAAP GAAP Compensation Expense Sales $ 144,406 $ - $ 144,406 100.0% 100.0% Gross margin 50,806 (85) 50,721 35.2% 35.1% Operating expenses 41,424 (982) 42,406 28.7% 29.4% Operating income 9,382 (1,067) 8,315 6.5% 5.8% Net income $ 12,910 $ (1,067) $ 11,843 8.9% 8.2% Net income per share: Basic $ 0.18 $ 0.18 Diluted $ 0.18 $ 0.18 Shares Basic 64,563 64,563 Diluted 64,612 64,612

SOURCE: Opnext, Inc.

Opnext, Inc. Doug Dean, 732-544-3212 Investor Relations ddean@opnext.com