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

Based on preliminary information, revenue for the second quarter 2008 is expected to be approximately $40 million, lower than previous guidance of $44 to $45 million. Due to the anticipated lower revenue level, gross margins are expected to be between 26% and 29%. Operating expenses are expected to be in line with the previously provided guidance range of between $17 million to $18 million excluding any acquisition-related and impairment charges. The company is currently evaluating whether and to what extent its long-lived and intangible assets are impaired.

Zhone ’ s chief executive officer Mory Ejabat stated, “ The second quarter of 2008 proved to be challenging particularly in our international markets where our largest customer in Latin America requested aggressive price reductions for a multi-million dollar expansion that we had to refuse because it would have been unprofitable at those prices. We will continue focusing on improving gross margins and reducing expenses to achieve profitability. ”

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 second quarter results on Tuesday, July 22, 2008, after the close of regular market trading.

Zhone will conduct a conference call and audio webcast to discuss further details of its second quarter 2008 results at approximately 2:00 p.m. PT / 5:00 p.m. ET on Tuesday, July 22, 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 second quarter 2008 financial estimates; projections of revenue, margins, expenses or other financial items; projected improvement of gross margins; and anticipated reduction of expenses. 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 quarter ended March 31, 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.