887969--10/8/2009--MRV_COMMUNICATIONS

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{customer, product, revenue}

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{financial, litigation, operation}

{product, market, service}

{control, financial, internal}

{property, intellectual, protect}

{cost, operation, labor}

{investment, property, distribution}

{stock, price, operating}

{cost, regulation, environmental}

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{operation, natural, condition}

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Our business could be negatively affected as a result of a proxy fight and other actions of activist stockholders. There are risks related to the investigation of past stock option practices and other accounting issues, and the related restatement of our prior financial results. The matters relating to the independent investigation of our historical stock option granting practices and other accounting matters and the restatement of our financial statements have required, and may continue to require, a significant amount of management time and accounting, financial and legal resources, which could adversely affect our business, financial condition and results of operations. We may suffer adverse tax consequences in connection with our historical stock option practices, which could have a negative impact on our results of operations and financial condition. We have not been in compliance with SEC reporting requirements and have been delisted from the Nasdaq Global Market, and we may continue to face compliance issues. If we are unable to return to or remain in compliance with SEC reporting requirements, there may be a material adverse effect on the Company and our stockholders. We have litigation outstanding related to the acquisition of Fiberxon, Inc. Material weaknesses existed in our internal controls over financial reporting related to our not maintaining effective approval and review controls over non-routine transactions at the entity level and over the recording of transactions and the financial statement close process at our Source Photonics subsidiary. We are exposed to risks associated with worldwide economic conditions and related uncertainties. Our quarterly operating results are subject to significant fluctuations, and you should not rely on them as an indication of our future performance. Our operating results could fluctuate significantly from quarter to quarter and year to year. Competition, especially in the network infrastructure and optical components markets, is ever increasing, which could reduce our revenue and gross margins or cause us to lose market share. Our markets are subject to rapid technological change, and to compete effectively, we must continually introduce new products that achieve market acceptance. Our products are deployed in large and complex systems and may contain defects that are not detected until after our products have been installed, which may cause us to incur significant costs, divert our attention from product development efforts or damage our reputation and cause us to lose customers. Although we were profitable on a consolidated basis in the second quarter of 2008, we have not achieved profitability on a consolidated basis for a full year since 2004 and may not achieve profitability in the future. Our customers may adopt alternate technologies for which we do not produce products or for which our products are not adaptable. If our customers do not qualify our products or if their customers do not qualify their products, our results of operations may suffer. Our customers may elect to in-source production of certain components they traditionally have purchased from us, resulting in decreases in our revenue. We do not have long-term volume purchase contracts with our customers, so our customers may increase, decrease, cancel or delay their buying levels at any time with minimal advance notice to us, which may significantly harm our business. We may suffer losses as a result of entering into fixed price contracts. A few customers account for a substantial portion of our sales, increasing both our dependence on a single revenue source and the risk that our operations will suffer materially if a significant customer stops ordering from us or substantially reduces its business with us. Our ability to utilize our NOLs and certain other tax attributes may be limited. We face risks in reselling the products of other companies. There is a limited number of potential source suppliers for certain components, which makes us susceptible to supply shortages. Our inability to achieve adequate production yields for certain components could result in a loss of sales and customers or higher than expected costs. We rely substantially upon a limited number of contract manufacturing partners, and if these contract manufacturers fail to meet our short- and long-term needs and contractual obligations, our business may be negatively impacted. If we fail to forecast component and material requirements accurately for our manufacturing facilities, we could incur additional costs or experience manufacturing delays. We face increased risks associated with the consolidation of our PRC-based manufacturing operations in a single location in Chengdu, PRC. Our business and future operating results may be adversely affected by events outside of our control. Our insurance coverage for natural disasters is limited. Environmental regulations applicable to our manufacturing operations could limit our ability to expand or subject us to substantial costs. Compliance with current and future environmental regulations may be costly which could impact our future operating results. We may be faced with product liability claims. Our business and future operating results are subject to a wide range of uncertainties arising out of the international nature of our operations and facilities. Labor shortages or strikes in Southern China could adversely affect our gross margins or decrease revenues. Our operating results have been impacted by foreign exchange rates and our activities seeking to hedge against currency exchange and interest rate fluctuations. We face risks inherent in doing business in China. Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences. We could suffer losses from corrupt or fraudulent business practices. If our cash flow deteriorates in the future, our liquidity and ability to operate our business could be adversely affected. We may not be able to obtain capital when desired on favorable terms, if at all. If we fail to protect our intellectual property, we may not be able to compete. We could in the future become subject to litigation regarding intellectual property rights, or we could initiate claims or litigation against third parties for infringement of our proprietary rights to protect these rights. Our business requires us to attract and retain qualified personnel. Delaware law and our ability to issue preferred stock may have anti-takeover effects that could prevent a change in control, which may cause our stock price to decline.

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887969--10/8/2009--MRV_COMMUNICATIONS_INC