AFOP Reports Improved 2nd Quarter 2009 Sequential Results and 13th Consecutive Profitable Quarter

Revenues for the second quarter of 2009 totaled $7,723,000, a 1% increase from revenues of $7,643,000 recorded in the first quarter of 2009 and 25% decrease compared with revenues of $10,323,000 for the second quarter of 2008. The Company recorded net income for the second quarter of 2009 of $432,000. This compares to net income for the first quarter of 2009 of $302,000 and $1,081,000 for the second quarter of 2008.

Included in expenses for the quarter ended June 30, 2009 was $22,000 of stock-based compensation charges under FAS 123(R). Included in expenses for the quarter ended June 30, 2008 and the quarter ended March 31, 2009 were $46,000 and $28,000 of stock-based compensation charges under SFAS 123(R), respectively.

Peter Chang, President and Chief Executive Officer, commented, "Despite the difficult worldwide economic situation, we managed to grow our revenue slightly in the second quarter. With almost the same revenue level as Q1, we improved our gross margin and reduced our overall operating expenses, which resulted in a significantly higher operating profit of $292,000 in the 2nd quarter, compared with an operating profit of $90,000 the 1st quarter. This is our thirteenth consecutive profitable quarter."

"During the quarter, we also strengthened our balance sheet. Compared with last quarter, our inventory level was reduced, we reclassified our long-term investments and ARS rights to current and increased our cash and investments, including our ARS rights, by $1,061,000 to $40,763,000. In addition, we began to receive some cash redemptions on our auction rate securities."

"Regarding the third quarter of 2009, we expect that revenues will grow slightly and that the Company will achieve another consecutive profitable quarter. In the meantime, we intend to keep investing in new products, working together with our customers to secure new growth opportunities and position AFOP for when the economy begins to recover." concluded Mr. Chang.

Conference Call

Management will host a conference call at 1:30 p.m. Pacific Time on July 22, 2009 to discuss AFOP's second quarter 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 327575. AFOP will also provide a live webcast of its second quarter 2009 conference call at AFOP's website: www.afop.com. An audio replay will be available until August 5, 2009. The dial in for the replay is 877-660-6853. The replay pass-codes (account # 286; conference ID#: 327575) 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, and our expectations regarding second quarter 2009 results, including our expectations regarding our second quarter 2009 revenues and profitability, and the basis for our expectations, 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, 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, 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)
                                                               Jun. 30,      Dec. 31,
                                                               2009          2008
ASSETS                                                         (Unaudited)
Current assets:
                   Cash and short-term investments             $     38,970  $    23,954
                   Other current asset - ARS Right                   1,793        -
                   Accounts receivable                               5,062        4,708
                   Inventories                                       4,816        5,614
                   Other current assets                              594          379
                   Total current assets                              51,235       34,655
Long-term investments                                                -            13,718
Other asset - ARS Right                                              -            2,582
Property and equipment, net                                          4,382        4,653
Other assets                                                         189          190
                   Total assets                                $     55,806  $    55,798
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
                   Accounts payable                            $     3,005   $    3,572
                   Accrued expenses                                  3,128        3,374
                   Total current liabilities                         6,133        6,946
Long-term liabilities
                   Other long-term liabilities                       830          891
                   Total long term liabilities                       6,963        7,837
Stockholders' equity                                                 48,843       47,961
                   Total liabilities and stockholders' equity  $     55,806  $    55,798

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,
                                               2009         2009         2008         2009         2008
Revenues                                       $    7,723   $    7,643   $    10,323  $    15,366  $    19,724
Cost of revenues                                    5,322        5,345        7,069        10,667       13,524
                   Gross profit                     2,401        2,298        3,254        4,699        6,200
Operating expenses:
                   Research and development         762          729          895          1,491        1,793
                   Sales and marketing              577          634          645          1,211        1,313
                   General and administrative       770          845          893          1,615        1,787
                   Total operating expenses         2,109        2,208        2,433        4,317        4,893
Income from operations                              292          90           821          382          1,307
Interest and other income, net                      172          222          281          394          677
Net income before tax                          $    464     $    312     $    1,102   $    776     $    1,984
Income tax                                          32           10           21           42           83
Net income                                     $    432     $    302     $    1,081   $    734     $    1,901
Net income per share:
                   Basic                       $    0.01    $    0.01    $    0.03    $    0.02    $    0.05
                   Diluted                     $    0.01    $    0.01    $    0.03    $    0.02    $    0.04
Shares used in per share calculation:
                   Basic                            41,979       41,872       41,574       41,926       41,483
                   Diluted                          42,115       41,897       42,674       41,969       42,659
Included in costs and expenses above:
Stock based compensation charges
                   Cost of revenue             $    11      $    14      $    20      $    25      $    42
                   Research and development         5            6            9            11           19
                   Sales and marketing              2            4            6            6            13
                   General and administrative       4            4            11           8            23
                   Total                       $    22      $    28      $    46      $    50      $    97

SOURCE: Alliance Fiber Optic Products, Inc.

Alliance Fiber Optic Products, Inc. 
Anita Ho, 408-736-6900 x168 
Acting Chief Financial Officer