Avanex Files Arbitration Complaint Against 3S Photonics

Avanex Corporation (NASDAQ:AVNX), a pioneer of intelligent
photonic solutions that enable next-generation optical networks, today
reported that it filed an arbitration complaint in New York against 3S
Photonics, of Marcoussis, France. The arbitration complaint alleges
various breaches by 3S Photonics of its obligations to Avanex,
including that 3S Photonics prematurely terminated its exclusive
distribution agreement with Avanex.

As a result of 3S Photonics´ termination of the distribution
agreement, Avanex expects that revenue for the second fiscal quarter
of 2008, ending December 31, 2007, will be in the range of USD 51 -
USD 53 million, compared to USD 54.7 million in the prior quarter and
USD 55.6 million in the second quarter of fiscal 2007 and will fall
below the low end of its earlier announced guidance for the quarter of
USD 56 - USD 58 million. Avanex does not expect to receive future
distribution revenue associated with 3S Photonics, which will reduce
Avanex´s revenue for the third fiscal quarter, resulting in flat to
slightly lower revenues for the third fiscal quarter compared to the
second fiscal quarter. Avanex believes gross margins for the second
fiscal quarter will generally be consistent with the prior quarter.

Avanex will present at the Needham Conference in New York January
8th, 2008, at 4:30 pm EST. Avanex plans to release its second fiscal
quarter results and hold a conference call to discuss its business
outlook in late January or early February 2008.

About Avanex Corporation

Avanex Corporation is a leading global provider of Intelligent
Photonic Solutions(TM) to meet the needs of fiber optic communications
networks for greater capacity, longer distance transmissions, improved
connectivity, higher speeds and lower costs. These solutions enable or
enhance optical wavelength multiplexing, dispersion compensation,
switching and routing, transmission, amplification, and include
network-managed subsystems. Avanex Corporation was incorporated in
1997 and is headquartered in Fremont, Calif. Avanex Corporation also
maintains facilities in Horseheads, N.Y.; Melbourne, Fla.; Shanghai;
Villebon Sur Yvette, France; San Donato, Italy; and Bangkok. To learn
more about Avanex Corporation, visit our web site at: www.avanex.com.

Forward-looking Statements

This press release contains forward-looking statements including
statements regarding expected second quarter and third quarter of
fiscal 2008 outlook and operating results, market demand and growth
trends for our products and our strategies. Actual results could
differ materially from those projected in or contemplated by the
forward-looking statements. Factors that could cause actual results to
differ include the company´s ability to close business as expected
this quarter in general and as a result of this press release,
adjustments made in connection with closing the quarter and releasing
financial statements, general economic conditions, the pace of
spending in the telecommunications industry and in particular the
optical networks industry, market demand and price of our products,
the company´s ability to sufficiently anticipate market needs and
develop products and enhancements that achieve market acceptance,
problems related to realizing the benefits of the divestiture in
France, the company´s ability to effect its restructuring goals,
unanticipated costs and expenses or the inability to identify expenses
which can be eliminated, any slowdown or deferral of orders for
products or the application of accounting or tax principles in an
unanticipated manner.

Finally, please refer to the risk factors contained in the
company´s SEC filings including the company´s Annual Report on Form
10-K filed with the SEC on Sept. 7, 2007, Quarterly Report on Form
10-Q filed with the SEC on Nov. 2, 2007 and subsequent filings with
the SEC.

Avanex assumes no obligation and does not intend to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.