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5 December 2007


Finisar files delayed quarterly and annual reports

Fiber-optic component and subsystem maker Finisar Corp of Sunnyvale, CA, USA has completed and filed with the Securities and Exchange Commission (SEC) its Form 10-K annual report for the fiscal year to end-April 2007, as well as its delayed Form 10-Q quarterly reports for fiscal second and third quarters 2007 and first-quarter 2008 (including restated financial statements due to the investigation of the firm’s historical stock option granting practices conducted by the audit committee of its board of directors).

Finisar now believes that it has complied with applicable Nasdaq rules and satisfied conditions for continued listing of its common stock on the Nasdaq Global Select Market.

In late August 2006, Finisar’s management started a preliminary voluntarily internal review of stock options granted since its initial public offering in November 1999. Following the initial review, the audit committee undertook a more comprehensive investigation of practices for granting and accounting for stock options up to 8 September 2006.

The audit committee determined that measurement dates used by the firm when accounting for certain stock option grants were incorrect, and that this was due to process-related deficiencies and that the individuals involved in the option granting process lacked a thorough understanding of the relevant accounting rules. However, it found no evidence of intentional misconduct or malfeasance on the part of personnel involved in selecting and approving the grant dates or administering the stock option granting process.

It was discovered that a broad-based annual performance grant of options to purchase a total of 2,540,000 shares made in June 2000 by the CEO, acting as the stock plan committee, had erroneously included grants of options to purchase an aggregate of 235,000 shares to three of Finisar’s officers (including its chief financial officer). The measurement dates for these grants have been revised, along with the grants to non-officers with which they were included. None of the three officers exercised the options related to these grants.

The revisions have resulted in an additional non-cash stock-based compensation expense of $107.6m, to be recognized in fiscal 2000-2006. About 85% ($91.1m) is due to six key granting actions between November 1999 and August 2003, representing 21 million shares (20% of all options granted during the review period). About 82% of the additional expense was recognized prior to fiscal 2004. Also, the firm identified modifications to certain stock options related to extended leaves of absence that resulted in further expense of $5.0m.

For stock option grants awarded at less than fair market value and vested after 2004, in the interests of stockholders and staff the board has decided to reduce or eliminate the excise tax of up to 40% and comparable state tax provisions to which staff may be liable (under Internal Revenue Code Section 409A). This will result in further charges totaling about $7m (to be recognized in the current fiscal third quarter).

*Finisar appoints StorIT as Middle East distributor

Finisar has selected StorIT of Dubai, United Arab Emirates as an authorized distributor for the Middle East, including UAE, Saudi Arabia, Qatar, and Egypt. StorIT provides solutions and services that enable enterprises to efficiently store, protect and manage business-critical data.

“We look forward to working with StorIT to extend Finisar’s leading market share in pluggable optical modules to this important marketplace,” says Federico Zanotti, Finisar’s sales director for Europe, the Middle East and Africa (EMEA).

“This opportunity enables us to broaden our extensive spectrum of solutions to better serve our large customer base of value-added resellers and system integrators,” says StorIT’s managing director Suren Vedantham.

See related items:

Finisar’s revenues dip due to 10/40Gbps shipment glitches

Finisar receives Nasdaq staff determination notice for last fiscal year

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