Avici Systems Reports Fourth Quarter and Full Year 2006 Results.

NORTH BILLERICA, Mass. -- Avici Systems Inc. (NASDAQ: AVCI), today reported results for its fourth quarter and year ended December 31, 2006.

Gross revenue for the fourth quarter and year ended December 31, 2006 was $15.9 million and $82.8 million, respectively, compared to $6.1 million and $37.2 million, respectively, for the three and twelve-month periods ended December 31, 2005. Revenue, net of common stock warrant discount, for the three and twelve-months ended December 31, 2006 was $15.9 million and $82.2 million respectively, compared to $5.6 million and $35.1 million for the three and twelve-months ended December 31, 2005.

GAAP net income for the fourth quarter ended December 31, 2006 was $3.0 million, or $0.21 per share, compared to a GAAP net loss of $8.6 million, or $0.67 per share, in the prior year's fourth quarter. GAAP net income in the 2006 period includes $0.5 million of special charges associated with the first quarter restructuring and $0.5 million of non-cash equity based charges recognized upon the adoption of Financial Accounting Standards Board Opinion 123R, which now requires that that the fair values of stock options be expensed in the Company's GAAP financial statements. GAAP net loss in the 2005 period includes $0.5 million for a non-cash equity based charge relating to the common stock warrant discount.

GAAP net income for the year ended December 31, 2006 was $8.3 million, or $0.60 per share, compared to a GAAP net loss of $24.7 million, or $1.91 per share, for the year ended December 31, 2005. GAAP net income for the year ended December 31, 2006 includes $10.7 million of special charges associated with the Company's first quarter decision to restructure its business and re-align its cost structure, $0.8 million of non-cash equity based charges recognized under Financial Accounting Standards Board Opinion 123R, $0.5 million relating to common stock warrant discount and credits of $0.2 million from the utilization of certain inventory previously written off. Special charges include $5.4 million of costs associated with the Company's workforce reduction, $3.1 million related to inventory and inventory related charges, $1.6 million related to the write-off of certain contract distribution rights deemed impaired and $0.6 million related to certain other costs associated with the Company's decision to restructure its business and realign its cost structure. GAAP net loss for the year ended December 31, 2005 includes $2.1 million for common stock warrant discount offset by a $1.8 million gain in connection with a settlement of a claim in bankruptcy and $0.3 million of inventory credits.

Non-GAAP net income (GAAP net income or loss excluding charges for restructuring, common stock warrant discount, certain stock based compensation, inventory and settlement credits) for the three months ended December 31, 2006 was $4.0 million, or $0.28 per share compared to non-GAAP net loss of $8.1 million, or $0.63 per share in the fourth quarter of 2005. Non-GAAP net income for the year ended December 31, 2006 was $20.1 million, or $1.47 per share, compared to non-GAAP net loss of $24.7 million or $1.91 per share for the prior year ended December 31, 2005.

Cash, cash equivalents, short and long-term marketable securities and restricted cash totaled $69.6 million at December 31, 2006.

"I am pleased to report another solid quarter and the completion of a year characterized by strong financial performance," said Bill Leighton, Chief Executive Officer. "As we move ahead in 2007, we will continue to stay focused on maximizing our near term financial returns while prudently investing in our future."

Avici will discuss these quarterly results as well as future business and financial expectations in an investor conference call tomorrow, February 15, 2007 at 8:30 AM EST. The conference telephone number is [phone]. A replay of the conference call will be available after 11:15 AM. Replay information will be available at [phone] (USA) access code: 862023. Replay of this call is also available on Avici's Web site, www.avici.com, along with a copy of this release.

Avici is a trademark of Avici Systems Inc.

This release contains information about Avici's future expectations, plans, and prospects, including Avici's expectations for annual gross revenues that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Statements made with regard to interim results are not necessarily indicative of results that may be expected for future interim periods or for the full year. When used in this press release, the word "will", "expected" and other similar expressions are intended to identify such forward looking statements. Such risks and uncertainties include, but are not limited to, the impact of restructuring and realignment, the amount and timing of the occurrence of related charges, risks associated with focusing on a core set of features and functionalities, market acceptance of Avici products, services and enhancements, dependence on our major customer, customer purchasing patterns and commitments, development of the market place, product development and enhancement, intensity of competition of other vendors, technological changes, reliance on distribution partners, risks associated with international expansion, and other risks set forth in Avici's filings with the Securities and Exchange Commission. Avici does not undertake any duty to update forward-looking statements.

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