OTTAWA, Canada, January 11, 2012 — 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 third quarter of fiscal year 2012, ended November 30, 2011. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles.

Revenue for the third quarter of fiscal year 2012 was $11.8 million, compared with $13.6 million in the second quarter of fiscal year 2012 and $27.0 million in the third quarter of fiscal year 2011. Revenue from customers within North America was $8.2 million, compared with $11.8 million in the second quarter of this fiscal year and $22.8 million in the third quarter of fiscal year 2011. DragonWave had two customers who each contributed more than 10% of revenue in the third quarter.

Gross margin for the third quarter of fiscal year 2012 was 41%, compared with 42% in the second quarter of fiscal year 2012 and 48% in the third quarter of fiscal year 2011. Net and comprehensive loss applicable to shareholders in the third quarter of fiscal year 2012 was $8.0 million or ($0.23) per diluted share. This compares to a net and comprehensive loss applicable to shareholders of $2.2 million or ($0.06) per diluted share in the second quarter of fiscal year 2012 and net loss of $0.04 million, which equated to ($0.00) per diluted share in the third quarter of fiscal year 2011.

"We took a major step forward in our global diversification and growth strategy this quarter through the transformational comprehensive agreements we announced jointly with Nokia Siemens Networks, including our plans to acquire NSN's microwave transport business," said DragonWave President and CEO Peter Allen. "This strategic relationship with NSN will further strengthen our market-leading product and technology base and substantially expand opportunities with major mobile operators throughout the world. We continue to expect the planned acquisition to close in the first quarter of calendar 2012."

Cash, cash equivalents, restricted cash, and short-term investments totaled $60.2 million, compared to $71.6 million at the end of the second quarter of fiscal year 2012, and $89.7 million at the end of the fourth quarter of fiscal year 2011.

Revenue for the first nine months of fiscal year 2012 was $36.5 million, compared to $102.9 million for the same period of fiscal year 2011. Net and comprehensive loss applicable to shareholders for the first nine months of fiscal year 2012 was $20.1 million or ($0.57) per diluted share, compared to net and comprehensive income applicable to shareholders of $10.9 million or $0.29 per diluted share for the first nine months of fiscal year 2011.

DragonWave expects revenue for the fourth quarter of fiscal year 2012 to be in the range of $12.0 million to $15.0 million. This does not include any revenue from the planned acquisition of NSN's microwave transport business, as the precise closing date of the acquisition has not yet been determined.

The DragonWave management team will discuss the results on a webcast and conference call beginning at 8:30 a.m. Eastern Time tomorrow, January 12, 2012.

The live webcast and presentation slides will be available at the Investor Relations section of the DragonWave website at: http://investor.dragonwaveinc.com/events.cfm

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 of the revenue range for the fourth quarter of fiscal year 2012 and the statements regarding the proposed transactions involving Nokia Siemens Networks (the "NSN Transactions"), 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 revenue estimates include DragonWave's expectations regarding: the network deployment plans of its existing and new customers, and the volume and timing of orders, shipments and revenue recognition. Material factors and assumptions relating to the NSN Transactions include the parties' beliefs regarding the industry and markets in which the parties operate; successful completion of the proposed transaction; expectations regarding potential synergies and prospects for the business if the transaction is closed. The NSN Transactions are subject to risks, including: the risks that the parties will not proceed with the transactions for any reason; that the ultimate terms of the transactions will differ from those that are currently contemplated; that if the transactions are completed, that expected synergies will not materialize; that unexpected costs will be incurred to integrate the business; or that end-customer demand will not meet expectations. In particular, the completion of the NSN Transactions is subject to a number of terms and conditions, including, without limitation, no occurrence of a material adverse effect. These conditions to the transaction may not be satisfied, in which case the NSN Transactions could be modified, restructured or terminated. Material risks and uncertainties following closing of the NSN Transactions are described under the heading "Risks and Uncertainties" in the MD&A dated January 11, 2012 and on pages 20 and 21 of the Company's Annual Information Form, dated May 4, 2011. Readers are cautioned not to place undue reliance on forward-looking 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, in addition to those detailed above, 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 4, 2011 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.

CONSOLIDATED BALANCE SHEETS
Expressed in US $000's except share and per share amounts
(unaudited)



Assets
Current Assets
Cash and cash equivalents	57,927		77,819
Restricted cash	132		714
Short term investments	2,123		11,181
Trade receivables	12,302		11,579
Inventory	29,608		28,204
Other current assets	5,866		5,306
Deferred income tax asset	365		553

	108,323		135,356
Long Term Assets
Property and equipment	5,990		7,560
Deferred income tax asset	2,393		808
Intangible assets	5,495		14,929
Goodwill	11,927		11,927

	25,805		35,224
Total Assets	134,128		170,580

Liabilities
Current Liabilities
Accounts payable and accrued liabilities	12,496		15,967
Deferred revenue	1,233		1,453
Contingent royalty	300		622
Contingent consideration	2,470		14,622

	16,499		32,664
Long Term Liabilities
Contingent royalty	1,431		3,290
Other long term liabilities	1,184		1,999

	2,615		5,289
Commitments
Shareholders' equity
Capital stock	172,189		171,570
Contributed surplus	4,211		2,642
Deficit	(52,080	)	(31,967	)
Accumulated other comprehensive loss (AOCL)	(9,693	)	(9,618	)

Total Shareholder's equity	114,627		132,627
Non-controlling interests	387		—

Total Equity	115,014		132,627
Total Liabilities and Shareholder's equity	134,128		170,580

Shares issued & outstanding	35,567,896		35,421,893

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

	Three months ended November 30						Nine months ended November 30

	2011			2010			2011			2010
REVENUE		11,830			27,008			36,506			102,905
Cost of sales		6,992			14,049			21,249			56,763

Gross profit		4,838			12,959			15,257			46,142

EXPENSES
Research and development		5,661			4,817			18,623			13,104
Selling and marketing		3,793			4,735			11,722			13,339
General and administrative		4,704			3,286			11,793			8,453
Government assistance		(265	)		(246	)		(902	)		(246	)

		13,893			12,592			41,236			34,650

Income (loss) before amortization of intangible assets and other items		(9,055	)		367			(25,979	)		11,492
Amortization of intangible assets		(404	)		(277	)		(1,613	)		(421	)
Accretion expense		(60	)		(122	)		(612	)		(122	)
Interest income		143			88			354			196
Investment gain (loss)		1			155			21			168
Impairment of intangible assets		—			—			(8,315	)		—
Gain on change in estimate of contingent liabilities		1,362			—			14,523			—
Foreign exchange gain		(202	)		(44	)		(118	)		142

Income (loss) before income taxes		(8,215	)		167			(21,739	)		11,455
Income tax expense (recovery)		(157	)		209			(1,458	)		566

Net Income (loss)		(8,058	)		(42	)		(20,281	)		10,889
Net Loss Attributable to Non-Controlling Interest		41			—			168			—

Net Income (Loss) applicable to shareholders		(8,017	)		(42	)		(20,113	)		10,889
Foreign currency translation differences for foreign operations		57			—			75			—

Net and Comprehensive Income (Loss) applicable to shareholders		(8,074	)		(42	)		(20,188	)		10,889
Income (loss) per share
Basic		(0.23	)		(0.00	)		(0.57	)		0.30
Diluted		(0.23	)		(0.00	)		(0.57	)		0.29
Weighted Average Shares Outstanding
Basic		35,542,247			35,125,724			35,486,924			36,010,148
Diluted		35,542,247			35,125,724			35,486,924			36,957,219

	Three months ended November 30						Nine months ended November 30

	2011			2010			2011			2010
Operating Activities
Net Income (Loss)		(8,058	)		(42	)		(20,281	)		10,889
Items not affecting cash
Amortization of property and equipment		839			761			2,513			2,126
Amortization of intangible assets		404			277			1,613			421
Accretion expense		60			122			612			122
Non cash royalty amortization		(21	)		—			(423	)		—
Impairment of intangible assets		—			—			8,315			—
Gain on change in estimate of contingent liabilities		(1,362	)		—			(14,523	)		—
Stock-based compensation		475			331			1,549			946
Unrealized foreign exchange loss		56			100			130			290
Non cash future income tax expense (recovery)		(157	)		92			(1,458	)		92
Inventory impairment		29			538			190			1,188
Unrealized gain on short term investments		11			74			(53	)		58
Accrued interest on short term investments		(17	)		(46	)		(19	)		(86	)

		(7,741	)		2,207			(21,835	)		16,046
Changes in non-cash working capital items		(3,220	)		3,997			(6,551	)		(11,327	)

		(10,961	)		6,204			(28,386	)		4,719

Investing Activities
Acquisition of property and equipment		(274	)		(402	)		(943	)		(3,208	)
Acquisition of intangible assets		(91	)		(200	)		(494	)		(536	)
Acquisition of Axerra Networks Inc., net of cash acquired		—			(8,700	)		—			(8,700	)
Purchase of short term investments		—			—			(22,432	)		(115,225	)
Maturity of short term investments		7,077			7,429			31,562			76,228

		6,712			(1,873	)		7,693			(51,441	)

Financing Activities
Share repurchase		—			(415	)		—			(10,738	)
Equity contribution by non-controlling interest in DW-HFCL		—			—			555			—
Issuance of common shares net of issuance costs		106			142			450			353

		106			(273	)		1,005			(10,385	)

Effect of foreign exchange on cash and cash equivalents		(112	)		(100	)		(204	)		(290	)
Net increase (decrease) in cash and cash equivalents		(4,255	)		3,958			(19,892	)		(57,397	)
Cash and cash equivalents at beginning of period		62,182			43,921			77,819			105,276

Cash and cash equivalents at end of period		57,927			47,879			57,927			47,879

Cash paid during the period for interest		—			194			—			194


Investor Contact & Media Contact:
John Lawlor
VP, Investor Relations
DragonWave Inc.
jlawlor@dragonwaveinc.com
Tel: 613-895-7000