Zhone Technologies Sets Earnings Announcement Date for Third Quarter 2008 and Announces Preliminary Estimates

OAKLAND, Calif.--(BUSINESS WIRE)--Zhone Technologies, Inc. (NASDAQ: ZHNE), a global leader in multi-service access solutions, today announced preliminary estimates for the third quarter of 2008.

Based on preliminary information, revenue for the third quarter 2008 is expected to be approximately $32 million, lower than previous guidance of $36 to $37 million. Due to the anticipated lower revenue level, gross margins are expected to be between 30% and 31%. Proforma operating expenses are expected to be in line with the previously provided guidance range of between $15 million to $16 million excluding approximately $500 thousand of severance and other restructuring charges.

Zhone’s chief executive officer Mory Ejabat stated, “The third quarter of 2008 proved to be more challenging than expected as the global credit contraction affected many of our international customers’ ability to obtain letters of credit to finance their network expansions or to make prepayments. Hopefully the financial markets will improve during the fourth quarter so that these customers can continue building their next generation networks using our advanced technologies.”

These results are preliminary, and therefore, subject to the company’s completion of its customary quarterly closing and review procedures. Zhone is scheduled to release its final third quarter results on Tuesday, October 21, 2008, after the close of regular market trading.

Zhone will conduct a conference call and audio webcast to discuss further details of its third quarter 2008 results at approximately 2:00 p.m. PT / 5:00 p.m. ET on Tuesday, October 21, 2008. This call is open to the public by dialing +1 (800) 901-5213 for U.S. callers and +1 (617) 786-2962 for international callers and then entering passcode 83213297. The audio webcast will be simultaneously available on the Investor Relations section of Zhone's website at http://www.zhone.com/investors/.

A replay of the conference call will be available after the original call by dialing +1 (888) 286-8010 for U.S. callers and +1 (617) 801-6888 for international callers and then entering passcode 66470411. An audio webcast replay will also be available online at http://www.zhone.com/investors/ for approximately one week following the original call.

About Zhone Technologies — Access for a Converging World

Zhone Technologies, Inc. (NASDAQ: ZHNE) is a global leader in multi-service access network solutions, serving more than 700 of the world’s most innovative network operators. The company offers the industry’s broadest fully-integrated portfolio of MSAP, FTTx, EFM and Wi-Fi access technologies, enabling a full suite of services, including residential and business broadband, VoIP, and High-Definition IPTV. Zhone’s converged multi-service access platform helps operators rapidly deploy premium services using copper, fiber, and wireless while improving network agility and reducing costs. www.zhone.com

Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” variations of such words, and similar expressions are intended to identify forward-looking statements. In addition, forward-looking statements include, among others, statements that refer to third quarter 2008 financial estimates; projections of revenue, margins, expenses or other financial items; and improvement of financial markets. Readers are cautioned that actual results could differ materially from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, commercial acceptance of our products; intense competition in the communications equipment market; our ability to execute on our strategy and operating plans; and economic conditions specific to the communications, networking, internet and related industries. In addition, please refer to the risk factors contained in the Company's SEC filings available at www.sec.gov, including without limitation, the Company's annual report on Form 10-K for the year ended December 31, 2007 and Zhone’s quarterly reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Zhone undertakes no obligation to update or revise any forward-looking statements for any reason.

Zhone Investor Relations
Molly Deltoro, +1-510-777-7013
Fax: +1-510-777-7001
investor-relations@zhone.com
or
Zhone Public Relations
Tracy Oliver, +1-510-665-7984
Mobile: +1-925-640-0989
tracy@skycastlemedia.com