Alliance Fiber Optic Products, Inc. Revises 2Q'01 Outlook; Takes Inventory Charge; Conference Call Today at 2:00 pm Pacific Time.

Business Editors/High Tech Writers

SUNNYVALE, Calif.--(BUSINESS WIRE)--June 28, 2001

Alliance Fiber Optic Products, Inc. (NASDAQ: AFOP), a supplier of fiber optic components and integrated modules for the optical network equipment market, today announced that revenues and earnings for the second quarter ending June 30, 2001 will be lower than previously estimated. The company also announced an inventory write-down and a continuing cost reduction program.

The company currently expects second quarter revenues to be approximately $4.5 to $5.0 million compared with first quarter revenues of $7.4 million. As a result, the company expects a pro forma net loss of between $1.5 and $2.0 million, or approximately $.05 per share. In addition, the company will write down approximately $6 to 6.5 million of inventory. These estimates are subject to further analysis and review. The pro forma loss mentioned above excludes non-cash stock-based compensation charges and the additional inventory charges.

Peter Chang, AFOP's President and Chief Executive Officer commented, "These results reflect the overall market conditions in our industry. Our DWDM product line in particular has not performed as we originally expected. We are therefore lowering our 12-month DWDM revenue estimates, and will write down inventory not needed to satisfy these new estimates. Furthermore, we are continuing to take actions to bring our overall operations more in line with our current revenue levels. These actions include reducing our production capacity in all locations, the consolidation of manufacturing shifts, and our ongoing efforts to reduce discretionary spending. Because of the challenging business environment we are currently facing, we expect quarterly revenues for the remainder of this year to remain at approximately the level of the second quarter."

"Despite our revised outlook, we remain financially strong with approximately $57 million in cash and investments. We are making progress in key product development areas as evidenced by our SpectraMux CWDM product introduced earlier this month, our switchable optical drop/add (SODA) subsystems that will be demonstrated at the NFOEC next month, and three U.S. patents we have been awarded, in particular for our DWDM process." concluded Mr. Chang.

AFOP's second quarter 2001 earnings release date is scheduled for July 26, 2001.

Conference Call

Management will host a conference call today, June 28, at 2:00 p.m. Pacific Time to discuss the revised financial outlook. To participate live, please call [phone] at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is 358636. AFOP will also provide a live webcast of this conference call at AFOP's website www.afop.com. A replay will be available beginning at approximately 5:00 p.m. Pacific Time on June 28, 2001 through 5:00 p.m. Pacific Time on July 5, 2001 on both the AFOP website and by dialing [phone]; confirmation number 358636.

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, 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 AFOP's anticipated revenue levels, anticipated pro forma earnings, the magnitude of inventory write-downs, cost reduction measures, expected cash balances, and the rate of customer orders 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, levels of customer demand, the impact of competitive products and pricing, timely design acceptance by our customers, timely introduction of new technologies, ability to ramp new products into volume production, industry wide shifts in supply and demand for optical components and modules, industry overcapacity, financial stability in domestic and foreign markets, and other risks detailed in SEC reports, including AFOP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. 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.

For additional information contact Alliance Fiber Optic Products, Inc. at 735 North Pastoria Avenue, Sunnyvale, CA 94085; Tel: [phone]. Fax: [phone]. Email: [e-mail]. Website: http://www.afop.com.