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OTTAWA, ONTARIO--(Marketwire - July 7, 2010) - DragonWave Inc. (TSX:DWI)(NASDAQ:DRWI) a leading global supplier of packet microwave radio systems for mobile and access networks, today announced financial results for its first quarter fiscal year 2011, ended May 31, 2010. All figures are reported in U.S. dollars and were prepared in accordance with Canadian generally accepted accounting principles.

Q1 FY2011 Performance Summary

- Revenue of $48.7 million, up 275% versus $13.0 million in Q1 FY2010

- Gross margin of 44% compared with 35% in Q1 FY2010 Operating margin of 20%

- GAAP diluted earnings per share of $0.26

- Cash generated from operations of $3.5 million

- Ending cash, cash equivalents and short-term investments of $115.8 million

Revenue for the first quarter of fiscal year 2011 was $48.7 million, compared with $13.0 million in the first quarter of fiscal year 2010 and $61.0 million in the fourth quarter of fiscal year 2010. Revenue from customers within North America was $42.9 million, compared with $10.5 million in the first quarter of the prior fiscal year. DragonWave had one major customer in the first quarter of fiscal year 2011 that generated 78% of revenue.

Net income in the first quarter of fiscal year 2011 was $9.7 million or $0.26 per diluted share, compared with a net loss of $2.4 million or ($0.08) per diluted share in the first quarter of 2010. Gross margin for the first quarter was 43.6%, compared with 34.5% in the first quarter of the prior fiscal year; operating margin was 20% in the quarter.

"DragonWave delivered strong year-over-year growth in the first quarter," said DragonWave President and CEO Peter Allen. "We are focused on achieving our key strategic objectives of broadening and deepening our global market presence, expanding our customer base and continuing to deliver innovative solutions. The global mobile broadband Internet is unstoppable, which will drive the growth for DragonWave solutions in markets throughout the world."

Cash, cash equivalents, and short-term investments totaled $115.8 million at the end of Q1 FY2011, compared to $113.4 million at the end of the prior quarter, and $20.0 million at the end of Q1 FY2010.

Revenue Outlook for Q2 FY2011

Beginning in Q1 FY2011, DragonWave is reporting financial results in US dollars. The Company expects revenue for Q2 FY2011 to be approximately $25 million. DragonWave's largest customer is expected to contribute approximately 25% of Q2 FY2011 revenue. We expect significant growth from other customers from the $10.7 million level in Q1 of FY2011 and estimate that revenue from these customers will be approximately 75% of total revenue in Q2 of FY2011.

Webcast and Conference Call Details

The DragonWave management team will discuss the results on a conference call and webcast beginning at 8:30 a.m. Eastern Time, tomorrow, July 8, 2010.

Toll-free North America Dial-in: 877-312-9202

International Dial-in: 408-774-4000

The live webcast and presentation slides will be available at: [ http://investor.dragonwaveinc.com/events.cfm ].

An archive of the webcast will be available at the same link.

About DragonWave

DragonWave® is a leading provider of high-capacity packet microwave solutions that drive next- generation IP networks. DragonWave's carrier-grade point-to-point packet microwave systems transmit broadband voice, video and data, enabling service providers, government agencies, enterprises and other organizations to meet their increasing bandwidth requirements rapidly and affordably. The principal application of DragonWave's products is wireless network backhaul. Additional solutions include leased line replacement, last mile fiber extension and enterprise networks. DragonWave's corporate headquarters is located in Ottawa, Ontario, with sales locations in Europe, Asia, the Middle East and North America. For more information, visit [ http://www.dragonwaveinc.com ].

DragonWave® is a registered trademark of DragonWave Inc.

Forward-Looking Statements

Certain statements in this release, including the estimate and sources of revenue for the second quarter of fiscal year 2011 provided above, constitute forward-looking statements or forward- looking information within the meaning of applicable securities laws. These statements are subject to certain assumptions, risks and uncertainties. Material factors and assumptions used to develop such estimates include:

- DragonWave's expectations regarding network deployment plans of its existing and new customers; and

- DragonWave's expectations regarding the volume and timing of anticipated order activity.

Readers are cautioned not to place undue reliance on such statements. These statements are provided to assist external stakeholders in understanding DragonWave's expectations as of the date of this release and may not be appropriate for other purposes.

Actual results, performance, achievements or developments of DragonWave may differ materially from the results, performance, achievements or developments expressed or implied by such statements. Risk factors that may cause the actual results, performance, achievements or developments of DragonWave to differ materially from the results, performance, achievements or developments expressed or implied by such statements can be found in DragonWave's Annual Information Form dated May 6, 2010 and other public documents filed by DragonWave with Canadian and United States securities regulatory authorities, which are available at [ www.sedar.com ] and [ www.sec.gov ], respectively, and include the following:

- DragonWave relies on a small number of customers for a large percentage of its revenue.

- DragonWave's growth is dependent on the development and growth of the market for high-capacity wireless communications services.

- DragonWave faces intense competition from several competitors and if it does not compete effectively with these competitors, its revenues may not grow and could decline. DragonWave also faces competition from indirect competitors.

- DragonWave relies on its suppliers to supply components for its products and the Company is exposed to the risk that these suppliers will not be able to supply components on a timely basis, or at all.

- DragonWave may conduct acquisitions of products and businesses. There are risks associated with such acquisitions.

- DragonWave's success depends on its ability to develop new products and enhance existing products.

- If DragonWave is required to change its pricing models to compete successfully, its margins and operating results may be adversely affected.

- DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate substantially.

- DragonWave has a lengthy and variable sales cycle.

DragonWave assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether because of new information, future events or otherwise, except as expressly required by law.

CONSOLIDATED BALANCE SHEETS

Expressed in US $000's

		As at		As at
		May 31,		February 28,
		2010		2010
Assets
Current Assets
	Cash and cash equivalents	70,559		105,276
	Short term investments	45,266		8,074
	Trade receivables	17,687		28,926
	Other receivables	983		1,801
	Inventory	28,006		23,910
	Prepaid expenses	1,336		721
	Future income tax asset	331		436
		164,168		169,144
Long Term Assets
	Property, equipment and intangible assets	8,517		7,546
	Future income tax asset	155		59
		8,672		7,605
Total Assets		172,840		176,749
Liabilities
Current Liabilities
	Accounts payable and accrued liabilities	21,317		33,949
	Income taxes payable	363		835
	Deferred revenue	800		1,017
		22,480		35,801
Long Term Liabilities		2,436		2,102
Shareholders' equity
	Capital stock	178,482		179,174
	Contributed surplus	1,663		1,375
	Deficit	(22,603	)	(32,085	)
	Accumulated other comprehensive income	(9,618	)	(9,618	)
		147,924		138,846
Total Liabilities and Shareholders' Equity		172,840		176,749
Shares issued & outstanding		36,789,760		36,934,917

CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME (LOSS)

Expressed in US $000's except share and per share amounts

	Three months ended
	May 31
	2010		2009
REVENUE	48,726		12,999
Cost of sales	27,495		8,509
Gross profit	21,231		4,490
EXPENSES
Research and development	4,698		2,465
Selling and marketing	4,136		2,069
General and administrative	2,576		1,003
Investment tax credits	—		(49	)
	11,410		5,488
Income (Loss) from operations	9,821		(998	)
Interest income	32		22
Investment loss	(49	)	—
Foreign exchange gain (loss)	117		(1,374	)
Income (Loss) before income taxes	9,921		(2,350	)
Income tax expense	231		—
Net and Comprehensive Income (Loss)	9,690		(2,350	)
Income (Loss) per share
Basic	0.26		(0.08	)
Diluted	0.26		(0.08	)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in US $000's

		Three months ended
		May 31
		2010		2009
Operating Activities
Net Income (loss)		9,690		(2,350	)
Items not affecting cash
	Depreciation	713		248
	Stock-based compensation	295		197
	Unrealized foreign exchange loss	16		841
	Inventory impairment (recovery)	(57	)	20
	Unrealized loss on short term investments	49		—
	Accrued interest on short term investments	(7	)	—
		10,699		(1,044	)
Changes in non-cash working capital items		(5,034	)	3,883
		5,665		2,839
Investing Activities
	Acquisition of property, equipment and intangible assets	(2,225	)	(482	)
	Purchase of short term investments	(45,308	)	—
	Maturity of short term investments	8,074		11,800
		(39,459	)	11,318
Financing Activities
	Change in line of credit	—		30
	Share repurchase	(1,054	)	—
	Issuance of common shares net of issuance costs	147		9
		(907	)	39
Effect of foreign exchange on cash and cash equivalents		(16	)	(841	)
Net increase (decrease) in cash and cash equivalents		(34,717	)	13,355
Cash and cash equivalents at beginning of period		105,276		6,693
Cash and cash equivalents at end of period		70,559		20,048
Cash paid during the period for interest		-		6

Contributing Sources

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Market Wire

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