Aeroflex Incorporated Announces Discontinuance of Its Fiber Optic Modulator Operation.

Business & Technology Editors

PLAINVIEW, N.Y.--(BUSINESS WIRE)--Dec. 23, 2002

Aeroflex Incorporated (Nasdaq Symbol: ARXX), a leading designer, developer and manufacturer of automated testing solutions and microelectronics for the aerospace, defense and broadband communications markets, announced today that it will discontinue its fiber optic lithium niobate modulator operation.

The Company will record a charge of approximately $2.9 million in the current quarter and classify such charge as a loss from discontinued operations. Pursuant to discontinued operations accounting treatment, all prior periods will be restated to reflect the results of this operation as a separate component apart from continuing operations.

Of the estimated $2.9 million second quarter charge, approximately $1.5 million is a cash cost consisting of $900,000 in equipment leases payable over 5 years with the remainder primarily related to payroll costs. The balance of the charge consists primarily of a write-off of owned equipment. With the cessation of operations, the annual savings are expected to be approximately $550,000.

"Given the recent dramatic reductions in pricing for fiber optic modulators and the end markets' move towards multi-function modules which incorporate modulators, it is no longer economically viable for the Company to continue to invest in this area," said Michael Gorin, President. "Our business model has been, and will continue to be, to apply our proprietary technology to higher margin products."

About Aeroflex

Aeroflex Incorporated is a multi-faceted high technology company with a diverse range of core disciplines supporting test, measurement and microelectronic products. We design, develop, manufacture and market products that are used worldwide in support of communication systems, networks and automatic test systems. Aeroflex's capabilities in enabling aerospace, defense and broadband communications are based on a broad range of patented and proprietary technologies. The Company's common stock trades on the Nasdaq National Market System under the symbol ARXX and is included in the S&P SmallCap 600 index. Additional information concerning Aeroflex Incorporated can be found on the Company's Web site: www.aeroflex.com.

All statements other than statements of historical fact included in this press release regarding Aeroflex's financial position, business outlook, business strategy and plans and objectives of its management for future operations are forward-looking statements. When used in this press release, words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to Aeroflex or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of Aeroflex's management, as well as assumptions made by and information currently available to its management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, competitive factors and pricing pressures, the integration of the business of IFR Systems with Aeroflex, the consolidation of certain of our manufacturing facilities according to plan, changes in legal and regulatory requirements, technological change or difficulties, product development risks, commercialization difficulties and general economic conditions. Such statements reflect our current views with respect to the future and are subject to these and other risks, uncertainties and assumptions relating to Aeroflex's financial condition, results of operations, growth strategy and liquidity.