Ottawa, Canada, October 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 the second quarter fiscal year 2011, ended August 31, 2010. All figures are reported in U.S. dollars and were prepared in accordance with Canadian generally accepted accounting principles.

Revenue for the second quarter of fiscal year 2011 was $27.2 million, compared with $32.4 million in the second quarter of fiscal year 2010. Revenue from customers within North America was $20.3 million, compared with $29.1 million in the second quarter of the prior fiscal year. Revenue from customers outside North America was $6.9 million, compared with $3.3 million in the second quarter of the prior fiscal year. DragonWave had two customers that each contributed more than 10% of revenue in the second quarter of fiscal year 2011.

Net income in the second quarter of fiscal year 2011 was $1.2 million or $0.03 per diluted share, compared with net income of $5.7 million or $0.19 per diluted share in the second quarter of fiscal year 2010. Gross margin for the second quarter was 44%, compared with 42% in the second quarter of the prior fiscal year; operating margin was 4% in the quarter, compared with 17% in the second quarter of the prior fiscal year.

"I am satisfied with our progress in the second quarter in meeting key objectives to strengthen our global market presence, expand our customer and partner base, and to continue to deliver innovative solutions," said DragonWave President and CEO Peter Allen. "The industry-leading Horizon Quantum shipped commercially and contributed to revenue for the first time in the quarter. In addition, we generated revenue from our OEM partnership for the first time this quarter, and we are close to adding another OEM partner. The global demand for mobile broadband Internet services continues to expand — we are still in the early stages of the growth potential for DragonWave mobile backhaul solutions in markets throughout the world."

Revenue for the first six months of fiscal year 2011 was $75.9 million, an increase of 67% compared with $45.4 million for the first six months of the prior fiscal year. Net income for the first six months of fiscal year 2011 was $10.9 million or $0.29 per diluted share, compared with net income of $3.4 million or $0.12 per diluted share for the first half of fiscal year 2010.

Cash, cash equivalents, and short-term investments totaled $98.5 million at the end of the second quarter of fiscal year 2011, compared to $115.8 million at the end of the prior quarter, and $19.5 million at the end of the second quarter of fiscal year 2010. The Company used $9.3 million of cash in support of the share repurchase program.

The Company expects revenue for the third quarter of fiscal year 2011 to be approximately $30 million.

DragonWave began reporting financial results in US dollars in the first quarter of fiscal year 2011. For comparative purposes all 2010 figures have been translated to US dollars.

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

Toll-free North America Dial-in: 877-312-9202
International Dial-in: 408-774-4000

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.

Certain statements in this release, including the estimate and sources of revenue for the third 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:

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 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.



Assets
Current Assets
	Cash and cash equivalents	43,921		105,276
	Short term investments	54,556		8,074
	Trade receivables	20,654		28,926
	Other receivables	931		1,801
	Inventory	27,508		23,910
	Prepaid expenses	1,819		721
	Future income tax asset	338		436

		149,727		169,144
Long Term Assets
	Property, equipment and intangible assets	8,505		7,546
	Future income tax asset	106		59

		8,611		7,605
Total Assets		158,338		176,749

Liabilities
Current Liabilities
	Accounts payable and accrued liabilities	13,245		33,949
	Income taxes payable	93		835
	Deferred revenue	2,662		1,017

		16,000		35,801
Long Term Liabilities		2,473		2,102
Commitments
Shareholders' equity
	Capital stock	170,364		179,174
	Contributed surplus	1,992		1,375
	Deficit	(22,873	)	(32,085	)
	Accumulated other comprehensive income	(9,618	)	(9,618	)

		139,865		138,846
Total Liabilities and Shareholders' Equity		158,338		176,749

Shares issued & outstanding		35,112,860		36,934,917

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Expressed in US $000's except share and per share amounts
(unaudited)

		Three months ended August 31					Six months ended August 31

		2010		2009			2010		2009
REVENUE			27,171		32,423			75,897		45,422
	Cost of sales		15,219		18,795			42,714		27,304

Gross profit			11,952		13,628			33,183		18,118

EXPENSES
	Research and development		3,733		3,236			8,431		5,701
	Selling and marketing		4,468		3,257			8,604		5,326
	General and administrative		2,607		1,661			5,183		2,664
	Investment tax credits		—		(55	)		—		(104	)

			10,808		8,099			22,218		13,587

Income from operations			1,144		5,529			10,965		4,531
	Interest income/(expense)		76		(5	)		108		17
	Investment gain		62		—			13		—
	Gain on sale of property, equipment and intangible assets		—		32			—		32
	Foreign exchange gain (loss)		69		64			186		(1,310	)

Income before income taxes			1,351		5,620			11,272		3,270
	Income tax expense (recovery)		126		(125	)		357		(125	)

Net and Comprehensive Income			1,225		5,745			10,915		3,395
Income per share
	Basic		0.03		0.20			0.30		0.12
	Diluted		0.03		0.19			0.29		0.12
Weighted Average Shares Outstanding
	Basic		35,978,213		28,620,162			36,447,553		28,594,700
	Diluted		36,690,926		29,675,696			37,345,767		29,281,050

		Three months ended August 31						Six months ended August 31

		2010			2009			2010			2009
Operating Activities
Net Income			1,225			5,745			10,915			3,395
Items not affecting cash
	Depreciation		796			308			1,509			556
	Stock-based compensation		336			276			631			473
	Unrealized foreign exchange loss		174			328			190			1,169
	Gain on sale of property, equipment and intangible assets		—			(32	)		—			(32	)
	Benefit on recognition of future income tax asset		—			(316	)		—			(316	)
	Inventory impairment		707			300			650			320
	Unrealized gain on short term investments		(65	)		—			(16	)		—
	Accrued interest on short term investments		(33	)		—			(40	)		—

			3,140			6,609			13,839			5,565
Changes in non-cash working capital items			(10,290	)		(5,526	)		(15,324	)		(1,643	)

			(7,150	)		1,083			(1,485	)		3,922

Investing Activities
	Acquisition of property, equipment and intangible assets		(917	)		(1,368	)		(3,142	)		(1,850	)
	Purchase of short term investments		(69,917	)		—			(115,225	)		—
	Maturirty of short term investments		60,725			—			68,799			11,800

			(10,109	)		(1,368	)		(49,568	)		9,950

Financing Activities
	Change in line of credit		—			1			—			31
	Share repurchase		(9,269	)		—			(10,323	)		—
	Issuance of common shares net of issuance costs		64			32			211			41

			(9,205	)		33			(10,112	)		72

Effect of foreign exchange on cash and cash equivalents			(174	)		(328	)		(190	)		(1,169	)
Net increase (decrease) in cash and cash equivalents			(26,638	)		(580	)		(61,355	)		12,775
Cash and cash equivalents at beginning of period			70,559			20,048			105,276			6,693

Cash and cash equivalents at end of period			43,921			19,468			43,921			19,468

Cash paid during the period for interest			—			13			—			19


Investor Contact:		Media Contact:
John Lawlor VP, Investor Relations DragonWave Inc. jlawlor@dragonwaveinc.com Tel: 613-599-9991 ext 2252		Nadine Kittle Marketing Communications DragonWave Inc. nkittle@dragonwaveinc.com Tel: 613-599-9991 ext 2262