Capella Photonics Raises $7M as it Prepares for Customer Shipments; BCE -- Bell Canada Enterprises -- Capital Joins Board of Directors.

Business Editors/High-Tech Writers

SAN JOSE, Calif.--(BUSINESS WIRE)--April 9, 2003

Capella Photonics Inc., a leader in dynamically reconfigurable optical subsystems, announced today that it completed its Series B financing of $7 million as it prepares for initial shipments of its metro and long haul products expected during the second half of the year. Indications of strong customer demand for Capella's technology was a key factor in helping secure the funding. Major investors in the Series B financing include Bay Partners, Vanguard Ventures, and management, with participation from BCE Capital and various private investors. In addition to participating in the round, BCE Capital has joined the Capella board of directors.

"The number of customer endorsements we have received in the past few months is extremely encouraging. We are clearly meeting the key requirements of our customers for reconfigurable subsystem solutions and offer a compelling value set in terms of price, features, and foot print," said Joseph Davis, President and CEO, of Capella Photonics. "We are very pleased to have the continued support of our strong investor syndicate."

Founded in December 2000, Capella Photonics has developed an innovative optical subsystem for use in metro and long haul applications. The module's high level of functional integration results in a very cost effective solution with a small footprint. Capella's products help service providers reduce network operating costs by greatly simplifying the wavelength management process through the use of reconfigurable wavelength technology. This allows service providers to reduce the cost of planning, engineering, and deploying today's optical networks by offering an alternative to fixed DWDM architectures. In addition to operational savings, inventory reductions are realized by eliminating the need for wavelength-specific optical components.

"By consistently meeting their aggressive milestones, this team has accomplished a great deal in a little over two years. We strongly believe Capella is positioned to lead the market in dynamically reconfigurable optical subsystems," said Larry Schwerin, General Partner, Vanguard Ventures.

"Capella has assembled a very strong technical and market driven team that has identified a real service provider problem in terms of configuration and management of optical networks and has developed a highly innovative solution to this problem," said David McCarthy, Managing Director, BCE Capital.

"I believe it's critical for a company, especially a start-up, to clearly understand its customer's current and future requirements. Capella has been very successful at this and has developed a solution that will scale and evolve to meet the increasing demands of its customer base," said Dino Vendetti, General Partner, Bay Partners.

About Capella Photonics

Located in San Jose, California, Capella Photonics was founded in December 2000 on the vision of Dr. Joseph Davis, an industry leader and innovator. The concept was based on adapting innovative technology to eliminate the complexity of configuring and managing optical networks. A key part of this approach is the incorporation of proprietary technology that has been proven in other fields. Capella products enable system architects to design optical platforms that offer dynamic reconfigurability, greatly simplifying the engineering and provisioning of optical networks.

About Bay Partners

Bay Partners is a venture capital firm active in early-stage fundamental technology investing, funding over 200 companies since 1976. The firm's most important differentiator is its depth and breadth of operational expertise, spanning technology, sales, marketing, business development, and financial, legal, and general management. Recent Bay Partners portfolio success stories include Exodus Communications (NASDAQ:EXDS), Informatica (NASDAQ:INFA), Digital Island (NASDAQ:ISLD), Brocade Communications (NASDAQ:BRCD), and SonicWALL (NASDAQ:SNWL).

About Vanguard Ventures

Founded in 1981, Vanguard Ventures is a leading venture capital firm specializing in early stage technology investments. Each Vanguard partner has extensive and successful backgrounds as technologists, operating executives, CEOs of public and private companies, entrepreneurs and venture capital investors. The firm has a portfolio of over 100 companies, including industry leaders such as Advanced Fibre Communications (NASDAQ:AFCI), Cobalt Networks (acquired by Sun Microsystems), Ciena (NASDAQ:CIEN), Endotherapeutics, Luminous Networks, Network Appliance (NASDAQ:NTAP), Novalux, Sylantro, and zipRealty. In aggregate, Vanguard companies have created over $70 billion in market value and returned approximately $1 billion to investors.

About BCE Capital

BCE Capital is the venture capital investment arm of BCE Inc. (Bell Canada Enterprises), Canada's largest telecommunications company. BCE provides 25 million residential and business customer connections including local and long distance, wireless, internet access, data and satellite television services. BCE Capital has been investing since 1989 in private telecommunications technology companies in Canada and the US, through its offices in Toronto and Ottawa.