887969--3/6/2007--MRV_COMMUNICATIONS

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{customer, product, revenue}

{property, intellectual, protect}

{stock, price, share}

{operation, natural, condition}

{regulation, change, law}

{personnel, key, retain}

{stock, price, operating}

{competitive, industry, competition}

{financial, litigation, operation}

{tax, income, asset}

{acquisition, growth, future}

{cost, operation, labor}

{condition, economic, financial}

{cost, regulation, environmental}

{product, market, service}

{debt, indebtedness, cash}

{provision, law, control}

{loss, insurance, financial}

{system, service, information}

{operation, international, foreign}

Our Gross Margin May Fluctuate from Period to Period and Our Gross Margins for Optical Components and/or Networking Equipment May Be Adversely Affected by a Number Of Factors. One Customer Accounted for over 10 percent of Our Sales During the Three and Twelve Months Ended December 31, 2006, Increasing Both Our Dependence on a Single Revenue Source and the Risk that Our Operations Will Suffer Materially If the Customer Stopped Ordering from Us or Substantially Reduced Its Business With Us. Our Markets Are Subject to Rapid Technological Change, and to Compete Effectively, We Must Continually Introduce New Products That Achieve Market Acceptance. Defects In Our Products Resulting from Their Complexity Or Otherwise Could Hurt Our Financial Performance. The Long Sales Cycles for Our Products May Cause Revenues and Operating Results to Vary from Quarter to Quarter, Which Could Cause Volatility In Our Stock Price. Our Business Has Been Adversely Impacted By the Worldwide Economic Slowdown and Related Uncertainties. Cost Containment Is Critical to Achieving Positive Cash Flow from Operations and Profitability Consistently. Our Business and Future Operating Results Are Subject to a Wide Range of Uncertainties Arising Out of the Continuing Threat of Terrorist Attacks and Ongoing Military Action In the Middle East. We Face Risks in Reselling the Products of Other Companies. Our 2003 Notes Provide for Various Events of Default That Would Entitle the Holder to Require Us to Repay Upon its Demand the Outstanding Principal Amount, Plus Accrued and Unpaid Interest. If We Complete the Acquisition of Fiberxon Without Waivers from the Holder We Will be in Default. In the Event of a Change of Control, Holders of the 2003 Notes Have the Option to Require Immediate Repayment of the 2003 Notes At a Premium and This Right Could Prevent a Takeover Otherwise Favored By Stockholders. Sales Of Substantial Amounts Of Our Shares By Selling Stockholders Could Cause The Market Price Of Our Shares To Decline. Our Ability to Utilize Our NOLs and Certain Other Tax Attributes May Be Limited. The Price of Our Shares May Continue to Be Highly Volatile. We Face Risks from Our International Operations. We Have Been Transitioning Volume Manufacturing of Our Optical Components to Taiwan and China and We Expect This to Increase, Especially If Our Acquisition of Fiberxon is Successfully Consummated, Which Exposes Us, and Will Expose Us Even More, to Risks Inherent in Doing Business in China. Our Manufacturing Capacity May be Interrupted, Limited or Delayed If We Cannot Maintain Sufficient Sources of Electricity in China, or If There is a Natural Disaster or Other Catastrophic Event in China. China s Legal System Embodies Uncertainties That Could Harm Our Business Operations. We May Not Address Successfully Problems Encountered in Connection With Our Acquisition of Fiberxon, If Successfully Consummated, or Any Other Acquisition on Which We May Embark. We Currently Depend On Third-Party Contract Manufacturers and Therefore Could Face Delays Harming Our Sales. We May Lose Sales If Suppliers of Other Critical Components Fail to Meet Our Needs. We May Suffer Losses as a Result of Entering into Fixed Price Contracts. Our Inability to Achieve Adequate Production Yields for Certain Components We Manufacture Internally Could Result In a Loss of Sales and Customers. 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, Which Could Be Costly and Subject Us to Significant Liability. In the Future, We May Initiate Claims Or Litigation Against Third Parties for Infringement of Our Proprietary Rights to Protect These Rights Or to Determine the Scope and Validity of Our Proprietary Rights Or the Proprietary Rights Of Competitors. These Claims Could Result In Costly Litigation and the Diversion of Our Technical and Management Personnel. We Are Dependent On Certain Members of Our Senior Management. Our Business Requires Us to Attract and Retain Qualified Personnel. Environmental Regulations Applicable to Our Manufacturing Operations Could Limit Our Ability to Expand Or Subject Us to Substantial Costs. Our Headquarters Are Located In Southern California, and Certain of Our Manufacturing Facilities Are Located In Southern California and Taiwan, Where Disasters May Occur That Could Disrupt Our Operations and Harm Our Business. If We Fail to Forecast Component and Material Requirements for Our Manufacturing Facilities Accurately, We Could Incur Additional Costs or Experience Manufacturing Delays. Legislative Actions, Higher Insurance Costs and Potential New Accounting Pronouncements Are Likely to Impact Our Future Financial Position and Results of Operations and In the Case of FASB s New Pronouncement Regarding the Expensing of Stock Options Will Adversely Impact Our Financial Results. We Are At Risk of Securities Class Action Or Other Litigation That Could Result In Substantial Costs and Divert Management s Attention and Resources. If Our Cash Flow Significantly Deteriorates In the Future, Our Liquidity and Ability to Operate Our Business Could Be Adversely Affected. The Prevailing Market Price of Our Common Stock May Limit Our Ability to Raise Equity Capital.

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887969--3/6/2007--MRV_COMMUNICATIONS_INC