8-K

SECURITIES AND EXCHANGE COMMISSION
 

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): October 22, 2003

MRV COMMUNICATIONS, INC.

(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE	06-1340090
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
20415 NORDHOFF STREET	91311
CHATSWORTH, CA	(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

ISSUER’S TELEPHONE NUMBER: (818) 773-0900

(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

TABLE OF CONTENTS

	Item 5. Other Events.
	Item 12 — Results of Operations and Financial Condition.
SIGNATURE
EXHIBIT 99.1
EXHIBIT 99.2

Item 5. Other Events.

On October 22, 2003, MRV publicly announced its statements of operations for the three and nine months ended September 30, 2003 and 2002, and its balance sheets at September 30, 2003 and December 31, 2002. These financial statements, which are included herein as part of Item 5 of this Report, follow on pages 3 and 4 of this report.

[Remainder of this page intentionally left blank]

2

MRV Communications, Inc.

Statements of Operations

(In thousands, except per share data)

		Three Months Ended						Nine Months Ended
		Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
		2003			2002			2003			2002
Net revenue		$	56,817		$	60,833		$	169,892		$	184,878
Cost of goods sold			38,397			43,377			117,044			127,205
Gross profit			18,420			17,456			52,848			57,673
Operating costs and expenses:
	Product development and engineering		8,088			11,681			23,714			41,726
	Selling, general and administrative		16,832			21,365			45,432			69,224
	Amortization of intangibles		9			29			25			86
	Impairment loss on long-lived assets		—			16,516			—			16,516
	Impairment loss on goodwill and other intangibles		356			72,697			356			72,697
Total operating costs and expenses			25,285			122,288			69,527			200,249
Operating loss			(6,865	)		(104,832	)		(16,679	)		(142,576	)
Other expense, net			526			374			5,930			10,328
Loss before minority interest, provision for taxes, extraordinary gain, and cumulative effect of an accounting change			(7,391	)		(105,206	)		(22,609	)		(152,904	)
Minority interest			51			43			79			145
Provision for taxes			412			11,869			1,333			12,911
Loss before extraordinary gain and cumulative effect of an accounting change			(7,854	)		(117,118	)		(24,021	)		(165,960	)
Extraordinary gain, net of tax			1,950			—			1,950			—
Cumulative effect of an accounting change			—			—			—			(296,355	)
Net loss		$	(5,904	)	$	(117,118	)	$	(22,071	)	$	(462,315	)
Earnings per share:
Basic and diluted loss per share:
	Loss before extraordinary gain and cumulative effect of an accounting change	$	(0.08	)	$	(1.24	)	$	(0.24	)	$	(1.85	)
	Extraordinary gain, net of tax	$	0.02		$	—		$	0.02		$	—
	Cumulative effect of an accounting change	$	—		$	—		$	—		$	(3.30	)
	Net loss	$	(0.06	)	$	(1.24	)	$	(0.22	)	$	(5.15	)
Weighted average number of shares:
Basic and diluted			103,097			94,351			101,152			89,800

2

MRV Communications, Inc.

Balance Sheets

(In thousands)

		Sept. 30,		December 31,
		2003		2002
		(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents	$	75,136	$	100,618
	Short-term marketable securities		1,666		11,738
	Time deposits		1,711		2,789
	Accounts receivable, net		52,297		50,965
	Inventories		35,857		32,695
	Other current assets		4,694		11,283
Total current assets			171,361		210,088
Property and equipment, net			27,761		35,169
Goodwill			29,965		29,740
Intangibles			110		135
Long-term marketable securities			9,158		1,447
Deferred income taxes			3,314		2,637
Investments			3,063		3,063
Other assets			2,030		2,524
		$	246,762	$	284,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current maturities of long-term debt and short-term obligations	$	2,790	$	7,393
	Convertible subordinated notes		—		32,418
	Accounts payable		42,590		41,308
	Accrued liabilities		24,872		31,542
	Deferred revenue		3,540		3,950
	Other current liabilities		3,044		2,289
Total current liabilities			76,836		118,900
Long-term debt			349		390
Convertible notes			23,000		—
Other long-term liabilities			4,293		3,666
Minority interest			5,284		7,371
Commitments and contingencies
Stockholders’ equity			137,000		154,476
		$	246,762	$	284,803

###

3

Item 12 — Results of Operations and Financial Condition.

On October 22, 2003, registrant made an earnings release announcing registrant’s third quarter 2003 financial results, the text of which is set forth in Exhibit 99.1 attached hereto. All information in the press release is presented as of October 22, 2003, and registrant does not assume any obligation to update such information in the future.

On October 22, 2003, as previously announced, registrant held a teleconference and audio web cast to discuss its third quarter 2003 results. The script prepared for use by registrant’s executives at this presentation is furnished herewith as Exhibit 99.2. All information in the script and web cast is presented as of October 22, 2003, and registrant does not assume any obligation to update such information in the future.

The information included in this Item 12, as well as Exhibits 99.1 and 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

4

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: October 24, 2003

MRV COMMUNICATIONS, INC.
By:	/s/ Noam Lotan
	Noam Lotan
	President and Chief Executive Officer

5 EX-99.1 3 v93924exv99w1.htm EXHIBIT 99.1

Exhibit 99.1

NEWS RELEASE

MRV REPORTS THIRD QUARTER 2003 FINANCIAL RESULTS

Chatsworth, CA — October 22, 2003 – MRV COMMUNICATIONS, INC. (Nasdaq: MRVC) today reported its financial results for the third quarter ended September 30, 2003.

Net loss for the third quarter of 2003 was $5.9 million, or $0.06 per share, compared to a net loss of $9.8 million, or $0.10 per share for the prior quarter, and a net loss of $117.1 million, or $1.24 per share, for the third quarter of 2002. Revenues for the third quarter of 2003 were $56.8 million compared to $62.0 million for the prior quarter, and $60.8 million for the third quarter last year.

Outlook
For the fourth quarter, the Company expects mid to high single digit percentage improvement in both its top and bottom line.

Noam Lotan, president and CEO, commented: “We are pleased with the consistent improvements MRV is making. During the quarter, we have upgraded our channel partners, introduced several new products and executed on our marketing initiatives. We reduced our cash consumption to $4.1 million in the third quarter of 2003, compared to $12.3 million in the previous quarter. Overall North American sales improved 7% sequentially. Sales from our optical component division, Luminent, also increased 7% sequentially.”

Forward-Looking Statements
Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. For example, our statements regarding our expected revenues and net loss for the third quarter ending September 30, 2003 are forward-looking statements. Actual results could differ materially because of the following factors, among others, which may cause revenues and income (loss) to fall short of anticipated levels: vigorous competition relating to our entry into new markets or from our existing markets, market acceptance of new products, continued acceptance of existing products and continued success in selling the products of other companies, product price discounts, the timing and amount of significant orders from customers, delays in product development and related product release schedules; obsolete inventory or product returns; warranty and other claims on products; technological shifts; the availability of competitive products at prices below MRV’s prices; the continued ability to protect MRV’s intellectual property rights; changes in product mix; maturing product life cycles; product sale terms and conditions; currency fluctuations; implementation of operating cost structures that align with revenue growth; the financial condition of MRV’s customers and vendors; adverse results in litigation; the impact of legislative actions, higher insurance costs and potential new accounting pronouncements; the effects of terrorist activity and armed conflict such as disruptions in general economic activity and changes in MRV’s operations and security arrangements; the effects of travel restrictions and quarantines associated with major health problems, such as the Severe Acute Respiratory Syndrome, on general economic activity; and continued softness in corporate information technology spending or other changes in general economic conditions that affect demand for MRV’s products.

For further information regarding risks and uncertainties associated with MRV’s business, please refer to the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Risk Factors” sections of MRV’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting MRV’s investor relations department at (818) 886-6782 or at MRV’s investor relations website at http://www.mrv.com.

All information in this release is as of October 22, 2003. MRV undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in MRV’s expectations.

—MORE—

About MRV Communications, Inc.
MRV designs, manufactures, sells, distributes, integrates and supports network infrastructure equipment and services, and optical components. MRV conducts its business along three principal segments: the networking group, the optical components group and development stage enterprises. MRV’s networking group provides equipment used by commercial customers, governments and telecommunications service providers, and include switches, routers, network physical infrastructure equipment and remote device management equipment as well as specialized networking products for defense and aerospace applications. MRV’s optical components group designs, manufactures and sells optical communications components, primarily through its wholly owned subsidiary, Luminent, Inc., www.luminent.com . These components include fiber optic transceivers and discrete lasers, as well as components for Fiber-to-the-Premises, or FTTP, applications. MRV markets and sells its products worldwide, through a variety of channels, which include a dedicated direct sales force, manufacturers’ representatives, value-added-resellers, distributors and systems integrators. MRV has operations in Europe that provide network system design, integration and distribution services that include products manufactured by third-party vendors, as well as MRV products. Such specialization enhances access to customers and allows MRV to penetrate targeted vertical and regional markets. For more information, call MRV at 818/773-0900 or visit www.mrv.com .

Simultaneous Webcast and Teleconference Information
MRV Communications, Inc. will host a teleconference at 5:00 p.m. Eastern Time/2:00 p.m. Pacific Time on Wednesday, October 22, 2003 to discuss third quarter 2003 results. To participate via telephone, the dial-in number is 617-847-3007, access code 54338055. Please call ten minutes prior to the scheduled conference call time. For live Webcasting, please go to the MRV Web site at www.mrv.com.

The conference call will be archived on the MRV Web site. A replay will be accessible by telephone after 8:00 p.m. Eastern/5:00 p.m. Pacific on October 22, 2003 through 8:00 pm Eastern Time, October 24, 2003. To replay the call, dial 617-801-6888 using the access code 21784876.

Media/Investor Relations Contact
          Diana L. Hayden, 818-886-6782, ir@mrv.com

MRV Communications, Inc.

Statements of Operations

(In thousands, except per share data)

		Three Months Ended						Nine Months Ended
		Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
		2003			2002			2003			2002
Net revenue		$	56,817		$	60,833		$	169,892		$	184,878
Cost of goods sold			38,397			43,377			117,044			127,205
Gross profit			18,420			17,456			52,848			57,673
Operating costs and expenses:
	Product development and engineering		8,088			11,681			23,714			41,726
	Selling, general and administrative		16,832			21,365			45,432			69,224
	Amortization of intangibles		9			29			25			86
	Impairment loss on long-lived assets		—			16,516			—			16,516
	Impairment loss on goodwill and other intangibles		356			72,697			356			72,697
Total operating costs and expenses			25,285			122,288			69,527			200,249
Operating loss			(6,865	)		(104,832	)		(16,679	)		(142,576	)
Other expense, net			526			374			5,930			10,328
Loss before minority interest, provision for taxes, extraordinary gain, and cumulative effect of an accounting change			(7,391	)		(105,206	)		(22,609	)		(152,904	)
Minority interest			51			43			79			145
Provision for taxes			412			11,869			1,333			12,911
Loss before extraordinary gain and cumulative effect of an accounting change			(7,854	)		(117,118	)		(24,021	)		(165,960	)
Extraordinary gain, net of tax			1,950			—			1,950			—
Cumulative effect of an accounting change			—			—			—			(296,355	)
Net loss		$	(5,904	)	$	(117,118	)	$	(22,071	)	$	(462,315	)
Earnings per share:
Basic and diluted loss per share:
	Loss before extraordinary gain and cumulative effect of an accounting change	$	(0.08	)	$	(1.24	)	$	(0.24	)	$	(1.85	)
	Extraordinary gain, net of tax	$	0.02		$	—		$	0.02		$	—
	Cumulative effect of an accounting change	$	—		$	—		$	—		$	(3.30	)
	Net loss	$	(0.06	)	$	(1.24	)	$	(0.22	)	$	(5.15	)
Weighted average number of shares:
Basic and diluted			103,097			94,351			101,152			89,800

MRV Communications, Inc.

Balance Sheets

(In thousands)

		Sept. 30,		December 31,
		2003		2002
		(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents	$	75,136	$	100,618
	Short-term marketable securities		1,666		11,738
	Time deposits		1,711		2,789
	Accounts receivable, net		52,297		50,965
	Inventories		35,857		32,695
	Other current assets		4,694		11,283
Total current assets			171,361		210,088
Property and equipment, net			27,761		35,169
Goodwill			29,965		29,740
Intangibles			110		135
Long-term marketable securities			9,158		1,447
Deferred income taxes			3,314		2,637
Investments			3,063		3,063
Other assets			2,030		2,524
		$	246,762	$	284,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current maturities of long-term debt and short-term obligations	$	2,790	$	7,393
	Convertible subordinated notes		—		32,418
	Accounts payable		42,590		41,308
	Accrued liabilities		24,872		31,542
	Deferred revenue		3,540		3,950
	Other current liabilities		3,044		2,289
Total current liabilities			76,836		118,900
Long-term debt			349		390
Convertible notes			23,000		—
Other long-term liabilities			4,293		3,666
Minority interest			5,284		7,371
Commitments and contingencies
Stockholders’ equity			137,000		154,476
		$	246,762	$	284,803

###

EX-99.2 4 v93924exv99w2.txt EXHIBIT 99.2 EXHIBIT 99.2 MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 1 MRV COMMUNICATIONS, INC. OCTOBER 22, 2003 2:00 P.M. PT Moderator Good day, ladies and gentlemen. Welcome to your MRV Communications Third Quarter Results conference call. My name is Amanda, and I will be your coordinator today. At this time, all participants are in a listen-only mode with a question and answer session to follow your presentation. You will receive instructions on how to submit questions or comments at that time. As a reminder, this conference is being recorded for replay purposes. Now, I would like to turn the program over to your host for today's call, Ms. Diana Hayden. Please go ahead, ma'am. D. Hayden Thank you, Amanda. Good afternoon, everyone, and thank you for joining us today. With me is Noam Lotan, our President and CEO; and Shay Gonen, our CFO. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 2 If you haven't seen the press release, it can be retrieved at www.mrv.com or off of First Call, our PR Newswire. In addition, this conference call is being Webcast on our company Web page and will be available for replay. We will provide replay information at the end of today's call. Today, Shay will review in detail, the financial results for the third quarter ending September 30, 2003. Following Shay's comments, Noam will discuss the third quarter highlights and MRV's opportunities. Before we begin with the call, let me take a few minutes to remind you, there are remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. For example, our statements regarding our expected revenues and net loss for the third quarter ending September 30, 2003 are forward-looking statements. Actual results could differ materially because of the following factors, among others, which may cause revenues and income or loss to fall short of anticipated levels: Vigorous competition related to our entry into new markets or from our existing markets; market acceptance of new products; continued acceptance of existing products and continued success in selling MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 3 the products of other companies, products price discounts; the timing and amount of significant orders from customers; delays in product development and related product release schedules; obsolete inventory or product returns; warranty and other claims on products; technological shifts; the availability of competitive products at prices below MRV's prices; the continued ability to protect MRV's intellectual property rights; changes in product mix; maturing product life cycles; product sale terms and conditions; currency fluctuations; implementation of operating cost structures that align with revenue growth; the financial condition of MRV's customers and vendors; adverse results in litigation; the impact of legislative actions; higher insurance costs and potential new accounting pronouncements; the effects of terrorist activity and armed conflicts, such as disruptions and general economic activity and changes in MRV's operations and security arrangements; the effect of travel restrictions and quarantines associated with major health problems; general economic activity; and continued softness in corporate information technology spending, or other changes in general economic conditions that affect demand for MRV's products. For further information regarding risks and uncertainties associated with MRV's business, please refer to the management's discretion and analysis MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 4 of results of operations and financial conditions, and our risk factors section of MRV's SEC filings, including, but not limited to its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting MRV's investor relations department at 818-886-6782 or at MRV's investor relations Web site at www.mrv.com. All information in this release is as of October 22, 2003. MRV undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in MRV's expectations. Shay? S. Gonen Thank you, Diana. Good afternoon, everyone, and thank you for joining us for MRV's third quarter conference call. Our net loss for Q3 was $5.9 million, compared to $9.8 million for Q2. This translates to a loss of $0.06 per share for Q3, compared to $0.10 per share for Q2. Our revenues were $56.8 million in Q3, in line with guidance, compared to $62 million in the previous quarter. As for our cash position, our forecast position during the third quarter of '03, we reduced our cash consumption to $4.1 million, compared to $12.3 million in the previous quarter. Therefore, our cash consolidated cash short and long term marketable securities and timed deposits were $87.7 million, compared to $91.8 million for the previous quarter. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 5 Let's talk about segment reporting. Beginning in Q1 of this year, we presented segment reporting information according to the following segments: Networking group, optical component group, and development state and price group. The segment presentation effectively breaks out the previously reported operating entity segment into two segments: our networking group, and our optical component group. We believe this provides greater transparency to our financial performance and more accurately reflects the way in which we manage our business. Accordingly, revenues by segment for Q3 and Q2 were as follows: revenues for the networking group decreased sequentially by 10% to $48.3 million in Q3, compared to $53.9 million for Q2. The decrease, which we anticipated, was substantially due to one-time large order shift in Q2 and a seasonal slowdown in Europe for Q3. Revenues for optical component group increased by 7% to $9.1 million for Q3, compared to $8.5 million in the previous quarter. Our inter-segment revenues from optical component group to the networking group were $661,000 in Q3, compared to $887,000 in the previous quarter, which is eliminated in our consolidated revenues. There were no revenue generated by the development stage and prices group. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 6 With respect to geographical breakdown, we provide revenue data by the following regions: United States, Europe, Asia Pacific, and other regions, which include Middle East and Africa. The geographical breakdown as a percentage of revenues for Q3 and Q2 were as follows: Q3 revenues in the United States were 22% in Q3, compared to 19% in Q2. In absolute dollars, revenues in the United States increased by $785,000 or 7%. Q3 revenues in Europe were 71%, compared to 75% in Q2. In absolute dollars, revenues in Europe decreased by $6.3 million. This increase, as previously discussed, was primarily due to a large order from Europe, we counted for approximately $8 million of our second quarter revenues and a seasonally slow summer quarter in Europe. Q3 revenues in Asia Pacific were 7% in Q3, compared to 5% in Q2. In absolute dollars, revenues for Asia Pacific increased by $711,000 or 22%. Q3 revenues in other regions remain constant at less than 1%. As mentioned, revenues were $66.8 million, of which 91% consisted of product revenues, while 9% were service related revenues. ... revenues, as a percentage of revenues for Q3, versus Q2 were as follows: optical access component were 15% in Q3, compared to 13% in Q2. Optical ... component were 5% in Q3, compared to 7% in Q2. Network physical MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 7 infrastructure products were 22% in Q3, compared to 20% in Q2. Switches and routers were 24% in Q3, compared to 34% in Q2. In absolute dollars, revenue decreased by $7.1 million, mainly though third party products sold in Europe. Remote device management products were 9% in Q3, compared to 6% in Q2. In absolute dollars, remote management products increased by $1.3 million. Of service and other revenues, service and related revenues were 9% of revenues in Q3, compared to 8% of revenues in Q2, a slight increase in absolute dollars. In other network product revenue will include communication networks for ...of Japan, and others application, including cellular communication. These revenues were 15% in Q3, compared to 13% of revenues in Q2, with a resulting increase of $796,000. Looking at our consolidated P&L, the following items are worthy of note: Net loss: as stated before, our net loss in Q3 was $5.9 million, compared to $9.8 million in Q2. Also included in our net loss in Q3, was income of $861,000, less than $0.01 from the recapturing of accelerated ...expense for terminated employees, compared to $3.1 million or $0.03 in the MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 8 previous quarter. Q2 also included a loss of $5.4 million or $0.05, resulting from our issuance of 4.2 million shares of common stock in a exchange for a $5.9 million, principal amount 5% convertible to alternative notes that were issued in 1998 and paid off during the second quarter. In Q3, we acquired preferred shares in one of our development stage divisions from a minority shareholder that resulted in an extraordinary gain of approximately $2 million. Gross profit; our gross margin for Q3 remained at 32% of revenue. In absolute dollars, gross profit decreased by $1.4 million to $18.4 million; however, gross profit for Q2 include $1.1 million of income from recapturing accelerated deferred stock expense, due to terminated employees, compared to $22,000 in Q3. Product development and engineering: our product development and engineering expense in Q3 was $8.1 million or 14% of revenues, compared to $6.9 million or 11% in Q2; however, Q2 R&D expenses include income from recapturing accelerated deferred stock expense, totaling $1.2 million, due to terminated employees; whereas Q3 deferred stock expense were just $151,000 in R&D. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 9 Sales general administration: our SG&A expense in Q3 was $16.8 million or 30% of revenue, compared to $16.7 million or 27% for Q2. In Q3, SG&A includes income from the recapturing of deferred stock expense, due to terminated employees, totaling $985,000, as compared to $718,000 in Q2. Other expenses net: other expenses for Q3 were $526,000 or 1% of revenue, compared to $5.4 million or 9% of revenue for Q2. Q3 other expenses consisted mainly interest expense of $290,000 on our convertible notes issued in 2003. Q2 other expenses include $5.4 million charge ... related to our extinguishments of $5.9 million principal amount, 5% convertible subordinated note. Looking at our consolidated balance sheet, the following items are worthy of note: Overall debt, our short- and long-term debt as of September 30, '03 was $26.1 million, compared to $26.5 million as of June 30, '03. Our cash to debt ratio as of September 30 was 3.4 to one, compared to 3.5 to one at the end of Q2. Cash, as of September 30, '03, our consolidated cash short- and long-term multiple security and timed deposits were $87.7 million, compared to MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 10 $91.8 million for the previous quarter. The decrease in cash in Q3 was $4.1 million, compared to a decrease of $12.3 million in Q2. Our cash reduction included approximately $1.4 million used in our development stage enterprises group. Last week, we raised approximately $5 million through the sale of 1,667,000 newly issued shares of MRV's common stock to several institutional investors at our managed client accounts of a large investment management firms. Accounts receivable: in Q3, accounts receivable decreased to $52.3 million, compared to $54.3 million in Q2, a decrease of $2 million or approximately 4%. This decrease is mainly attributed to the decrease in our revenues. DSOs in Q3 were 84 days, compared to 75 days in Q2. Inventory: in Q3, inventories remained unchanged at $35.9 million. Days in inventory for Q3 were 84 days, compared to 82 days in Q2. Days in inventory increased slightly, due to reduced shipments. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 11 Accounts payable: accounts payable in Q3 decreased to $42.6 million, compared to $45.9 million in Q2, representing a decrease of $3.3 million or approximately 7%. As for the outlook for the fourth quarter of '03, we expect mid to high single-digit percentage improvement in both top and bottom lines. With that, I would like to turn the call over to Noam Lotan, our President and CEO. N. Lotan Thank you, Shay, and good day. Q3 was a good quarter. We continue to make progress. Revenues fell well within guidance. In fact, net of last year's divesture of the passive component division, we're up year-over-year for the second quarter in a row. Since the beginning of the year, we have improved our margin from 29% to 32%. Operating expenses were in the $25 million range, down significantly from a year ago, and so was cash consumption. As a result, the bottom line continued to improve. Last year, we were a company in transition; we unified the sales force, and for the first time in our history, branded our networking product as MRV. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 12 Our merged sales force, which came from different disciplines, is now adept at selling the entire product line. Thus, we emerged confident in our ability to add value and increase our share of networking projects. We were able to stabilize revenue by introducing new products, by staying close to our customers and by working hard for them. In the long run, it is customer satisfaction that determines the viability of a company. Besides improvement in revenue and gross margins, we addressed our operating expenses. From the beginning of last year, we were able to reduce operating expenses by more than one-third; this translates to $50 million in annual savings. Our efforts contributed to significant improvement in the bottom line. We are proud of the way MRV continues to make progress. Obviously, return to profitability is our number one priority. What makes MRV unique is that we leverage on our optical component technologically to build intelligent optical access systems. Our people have an unusual blend of skills, with 15 years of deep optical component experience and 20 years of networking experience; vertical integration of core technology is at the heart of what we do. For example, Luminent MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 13 optical components are sold to many network equipment vendors and also constitute building blocks for MRV's products. Last quarter, we introduced our Media Cross-Connect, a physical layer connectivity solution with pluggable fiber optic technology. This platform provides configurable connectivity, like an intelligent patch panel. It is aiming at test labs and ... enterprise environments. Additionally, several new Fiber Driver modules also include pluggable optics connectivity. The new products have already contributed to revenues, resulting in quarter-over-quarter double-digit sequential growth in our Fiber Driver family of products. We expect to launch more new products in Q4 as well. Pluggable technology provides users with significant capex and opex benefits, due to flexibility, inventory control, and digital diagnostics. As a bonus, small objects from Luminent used in MRV equipment and sold through our distribution channels carry above average gross margins. In remote device management area, MRV has made progress with its new LX product line, which now includes devices from two ports, all the way through 48 ports. We currently witness gross opportunities of the highest segment of the market; specifically, our remote management solutions are MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 14 gaining momentum as a strong management tool for server clusters. This product also fits well on channel and government initiatives, where we're seeing increased opportunities. I'm proud to report that here, too, we enjoy the double-digit sequential growth. Our pipeline is newly introduced and updated product within the last three months can be viewed on the new product section of our Web site under the product pull-down tab. Let's talk about growth opportunities. Our revenue in North America increased both in percentages of the total and in absolute dollars. As Shay mentioned, our sequential revenue decline is due mainly to a large $8 million order shipped in Q2, as well as the usual summer slowdown in Europe; however, we continue to strengthen our system integration and distribution capabilities there. We sell and market our products with other products manufactured by third party vendors, supplied as part of network integration and distribution services. Successful partnerships are a key component of our overall strategy, and allow MRV to offer best-of-class networking solutions. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 15 Looking at opportunities ahead, both our economy and our lifestyle continue to benefit from the deployment of broadband application and services. Broadband has the power to transform the global economy by spurring innovation in almost every aspect of our lives; therefore, broadband becomes mission critical. Recent requests for proposals for Fiber-to-the-Premises, FTTP, by BellSouth, SBC, and Verizon suggest that new investment cycle could be looming. Luminent, our wholly owned subsidiary, is a leading manufacturer of optical components for metro and residential access. Luminent has full ownership of the laser design and manufacturing processes required for low cost, high volume production. These components are integrated into transceivers and FTTP product solutions, specifically, fiber to the home modules. In fact, Luminent has been supplying optical transmission components for fiber to the curb and fiber to the home for over ten years. Our product is serving hundreds of thousands of homes in the U.S. and in Japan. There are no assurances of these requests would lead to deployment, and there are no assurances that Luminent would be the beneficiary of such MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 16 deployments when they actually happen. However, we are clearly encouraged by this development, as they fit our number one goal of turning profitable. We're encouraged by the activity level in the emergence of this technology used by carriers, MSOs, and utilities. Another area of broadband deployment is fiber to the enterprise or broadband connectivity for business customers. Nearly all local area network traffic at the enterprise starts and ends on Ethernet; therefore, it makes perfect sense to use Ethernet technology beyond the boundary of the enterprise. It makes sense to use Ethernet not only for simple point-to-point LAN extension, but also for implanting fully-fledged carrier grade metro networks. Many carriers all over the world are building their own IP-based metro optical Ethernet infrastructure. Some are already offering Ethernet services, by providing unlimited connectivity for mission critical networks. MRV continues to assist carriers deploy these services. We contribute access to solutions for Ethernet in the first mile ESM, optical WDF transport solutions, as well as in some cases, end-to-end metro aggregation network. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 17 MRV is focused on three core initiative that will help us realize goal number one, profitability. Last conference call, we discussed those core initiatives. I'd like to provide an update. Core initiatives are the following: Sales channel development, federal government business, and a development of the MRV brand. The vast majority of our sales are generated with the support of qualified network resellers and distributors; therefore, our first initiative is a worldwide commitment to our channel partners program. MRV has chosen to reach each end user through a tier distribution model. We consider the channel a key component of our growth strategy. By selecting the right partners, we can target certain verticals and have better access to customers, including the ability to better support them after the sale. Since the beginning of the year, we have increased the number of qualified resellers by 50% and improved geographical and vertical coverage. We recently began MRV educational services to certify our partners on all of our product platforms. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 18 Our second initiative is developing new business with the federal government. Our remote device management and optical transport solution, including free space optics, FSO, and switching are ideal for many branches of the government. It is clear that there are significant opportunities here. In fact, our year-to-date federal business nearly tripled. We also ... the government with specific tradeshow, marketing efforts, and dedicated federal sales resources to spearhead this development. We participated in two shows in Q3, and five more are planned for Q4, specifically focused on this market. We continue to identify new problems, where MRV can make a contribution. Our third initiative is the development of the MRV brand in association with connectivity unlimited for mission critical networks. In Q3, MRV celebrated its 15-year anniversary; however, for the first 13 years, we have not marketed our networking product under the brand name MRV. This is a new beginning for us, and we're investing in a carefully designed marketing campaign, including regional and industry focused tradeshows, customer seminars, and advertising. These are all targeted activities with a goal of developing the MRV brand name. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 19 We participated in eight shows during Q3, ranging from technology seminars, focused on storage and cable, industry verticals, like credit unions and governments, channel specific and regional shows. We also conducted our seminar series titled Technology Doesn't Byte, in which we toured ten cities in the past two months. We continue to advertise for branding and product awareness through Network World magazine and light readings. Now to the outlook: as indicated before and in the press release, we anticipate a resumption of growth in the fourth quarter, resulting from new products, a seasonal pickup in Europe, as well as a more favorable business climate. We project mid to high single-digit improvement in both the top and bottom line. When we review the trend line for the past few quarters, it is apparent that our operating performance is steadily improving. We believe we can sustain the momentum, and further improvement can be expected in future quarters. With that, I'd like to turn the call back to Amanda for Q&A. Moderator Our first question comes Ashal Ieal of CIBC World Market. Please go ahead. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 20 A. Ieal Thank you. Hello, guys, good afternoon. A couple of quick questions from me, Shay, given the progress that you have been observing in the past couple of quarters for the most part, when do you anticipate a break-even point, probably going into 2004, but at what point approximately? N. Lotan This is Noam. I think I just said very simply that if we review the trend line for the past few quarters, it is apparent that our performance is improving steadily. In this case, I would say the trend is my friend. A. Ieal Okay, fair enough. Noam, one of the comments that you made with respect to fiber to the home and fiber to the enterprise trend, obviously, yesterday SBC coming out and giving less than a favorable outlook about this topic, any comments? What is it that you guys are seeing that we're not seeing maybe from this side of the equation? N. Lotan I think, specifically, the responses are out and the expectation that we currently have that next year is going to be a year of trial. I don't know whether we should anticipate a full deployment that we saw in some project of one million homes in '05. I don't know if that will actually, in what will it translate in terms of trials for next year, but it's a big test. It's MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 21 probably a 20-year test to wire every home in North America. In fact, Japan is going to be ahead of the U.S., I would suspect. The encouraging thing is that there is definitely a sense of direction here in greenfield application in premium neighborhoods, and we're going in the right direction. In my opinion, and I can talk for quite a while on this, but I don't want to make this a subject of our call, I think there is tremendous benefit for the large operating companies for doing that. They are currently losing revenue, losing customers to alternative solutions, like the MSOs, others, and wireless, and so this is an attempt for them to capture the broadband market. This was especially revived since the FCC recently ruled that they actually get to keep their fiber, once they install it. But we are looking at it very carefully. We are, obviously, evaluating, and we are keeping a very close contact to what's happening out there. It's looking reasonably promising, but we cannot make any projection out of it at this point. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 22 A. Ieal Fair enough. What was the employee headcount by the end of the third quarter? S. Gonen Actually, less than 1,300. A. Ieal Okay. Any update about Charlotte? N. Lotan We just continue to stay the course. Moderator Our next question comes from Greg Waters of Investors Asset Management. G. Waters Good afternoon. Can you clarify staying the course? I know that there were several comments made about an out-strategy there. Is that still a strategy, or is staying the course mean that you're going to continue to develop products and look towards actually selling them at some point? N. Lotan Yes, I don't have any specific items to report to you on Charlotte, except that we just continue to stay the course. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 23 G. Waters Okay. You mentioned one of your, I guess, points for growth opportunities is partnerships. Can you elaborate on the partnerships? I know that there was information from IBM, that there is an OEM relationship with them. Are there other similar relationships, and if so, can you tell us a little bit more about them? S. Gonen We recently announced the Marconi relationship, and that would probably translate into revenue only sometime early to mid next year. The other relationship that we have in the pipeline, obviously, not for us to discuss at this point, since quite a bit of it is under NDA. But I also mentioned partnership with suppliers, and that's also important. G. Waters Okay. You mentioned the optical build-out in '04. Are you starting to see, other than RFPs, are you starting, obviously, the optical build is starting a little bit with the pick-up that we see in Luminent. Are you seeing that from smaller enterprises at this point? N. Lotan I'm sorry, Greg, what do you mean by smaller enterprises? G. Waters The non-large carriers, the smaller companies, the greenfields, some of the smaller carriers. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 24 N. Lotan Yes, we do see a pick-up with MSOs, for example, smaller carriers, and also European carriers. G. Waters You said that the Media Cross-Connect is already selling. Can you give an idea of how well that is selling? N. Lotan I think it's just the beginning. The indication I gave that that particular product line had a double-digit sequential growth, so I don't want to elaborate specifically into this particular product; but obviously, it's a new platform and we have some plans going forward with that. Moderator Now, Ken Hart of Wachovia. K. Hart Hello, Noam. Given your cost structure, it seems to me, that you're going to need about $15 million to $20 million of increased revenues over the next couple of quarters to achieve that break-even level. Can you tell us your vision and what products you expect to increase your sales by that $15 million to get to that break-even? N. Lotan In general, I don't believe the number of the magic number may or may not be $15 million; it depends on the product mix. But I think your MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 25 question is relevant. Certainly, our expertise and our gross margin is in an area, where we have a tremendous added value in optics and also in our remote presence equipment. In those two areas, we feel comfortable, and we also feel very confident that we can make an impact. So certainly, our focus in terms of revenue growth is and should be on this area. K. Hart Can you tell us a little bit more about SES or CES? N. Lotan There is really not a lot to report that I'm at liberty to discuss at this point, so I'm not sure exactly what I can add. K. Hart Finally, are you expecting to continue your purchase of value added resellers, as a way to sell your product? N. Lotan I think in the near-term, we have a lot of other areas that we are focusing on. Given the fact of your previous question, I think we have our work cut out with where we are right now, plus the opportunities in Luminent, so we're focusing on a lot of things that have to do with growth from internal. MRV COMMUNICATIONS, INC. HOST: ANNE-MARIE FRISCH OCTOBER 22, 2003/2:00 P.M. PT PAGE 26 Moderator Ladies and gentlemen, thank you for your questions. At this time we will end the question and answer session. Now, closing remarks. N. Lotan I'd like to thank everybody for being on the call today. I think it was important for us to explain the trend line for the past two quarters. It's obviously apparent that our operating performance is steadily improving, and we believe that momentum can be sustained. Again, thank you for being on the call, and we look forward to your participation again next quarter. Thank you. Moderator Ladies and gentlemen, thank you for your participation in the MRV Communications Third Quarter Results conference call. Have a great day. This concludes your program. 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EX-99.1

MRV Communications, Inc.

EX-99.2

                                                                    EXHIBIT 99.2

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 1

                            MRV COMMUNICATIONS, INC.

                                OCTOBER 22, 2003
                                  2:00 P.M. PT

Moderator                  Good day, ladies and gentlemen. Welcome to your MRV
                           Communications Third Quarter Results conference call.
                           My name is Amanda, and I will be your coordinator
                           today. At this time, all participants are in a
                           listen-only mode with a question and answer session
                           to follow your presentation. You will receive
                           instructions on how to submit questions or comments
                           at that time.

                           As a reminder, this conference is being recorded for
                           replay purposes. Now, I would like to turn the
                           program over to your host for today's call, Ms. Diana
                           Hayden. Please go ahead, ma'am.

D. Hayden                  Thank you, Amanda. Good afternoon, everyone, and
                           thank you for joining us today. With me is Noam
                           Lotan, our President and CEO; and Shay Gonen, our
                           CFO.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 2


                           If you haven't seen the press release, it can be
                           retrieved at www.mrv.com or off of First Call, our PR
                           Newswire. In addition, this conference call is being
                           Webcast on our company Web page and will be available
                           for replay. We will provide replay information at the
                           end of today's call. Today, Shay will review in
                           detail, the financial results for the third quarter
                           ending September 30, 2003. Following Shay's comments,
                           Noam will discuss the third quarter highlights and
                           MRV's opportunities.

                           Before we begin with the call, let me take a few
                           minutes to remind you, there are remarks that we may
                           make about the company's future expectations, plans,
                           and prospects constitute forward-looking statements
                           for purposes of the Safe Harbor Provisions under the
                           Private Securities Litigation Reform Act of 1995. For
                           example, our statements regarding our expected
                           revenues and net loss for the third quarter ending
                           September 30, 2003 are forward-looking statements.

                           Actual results could differ materially because of the
                           following factors, among others, which may cause
                           revenues and income or loss to fall short of
                           anticipated levels: Vigorous competition related to
                           our entry into new markets or from our existing
                           markets; market acceptance of new products; continued
                           acceptance of existing products and continued success
                           in selling

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 3


                           the products of other companies, products price
                           discounts; the timing and amount of significant
                           orders from customers; delays in product development
                           and related product release schedules; obsolete
                           inventory or product returns; warranty and other
                           claims on products; technological shifts; the
                           availability of competitive products at prices below
                           MRV's prices; the continued ability to protect MRV's
                           intellectual property rights; changes in product mix;
                           maturing product life cycles; product sale terms and
                           conditions; currency fluctuations; implementation of
                           operating cost structures that align with revenue
                           growth; the financial condition of MRV's customers
                           and vendors; adverse results in litigation; the
                           impact of legislative actions; higher insurance costs
                           and potential new accounting pronouncements; the
                           effects of terrorist activity and armed conflicts,
                           such as disruptions and general economic activity and
                           changes in MRV's operations and security
                           arrangements; the effect of travel restrictions and
                           quarantines associated with major health problems;
                           general economic activity; and continued softness in
                           corporate information technology spending, or other
                           changes in general economic conditions that affect
                           demand for MRV's products.

                           For further information regarding risks and
                           uncertainties associated with MRV's business, please
                           refer to the management's discretion and analysis

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 4


                           of results of operations and financial conditions,
                           and our risk factors section of MRV's SEC filings,
                           including, but not limited to its annual report on
                           Form 10-K and quarterly reports on Form 10-Q, copies
                           of which may be obtained by contacting MRV's investor
                           relations department at 818-886-6782 or at MRV's
                           investor relations Web site at www.mrv.com. All
                           information in this release is as of October 22,
                           2003. MRV undertakes no duty to update any
                           forward-looking statements to conform the statements
                           to actual results or changes in MRV's expectations.
                           Shay?

S. Gonen                   Thank you, Diana. Good afternoon, everyone, and thank
                           you for joining us for MRV's third quarter conference
                           call. Our net loss for Q3 was $5.9 million, compared
                           to $9.8 million for Q2. This translates to a loss of
                           $0.06 per share for Q3, compared to $0.10 per share
                           for Q2.

                           Our revenues were $56.8 million in Q3, in line with
                           guidance, compared to $62 million in the previous
                           quarter. As for our cash position, our forecast
                           position during the third quarter of '03, we reduced
                           our cash consumption to $4.1 million, compared to
                           $12.3 million in the previous quarter. Therefore, our
                           cash consolidated cash short and long term marketable
                           securities and timed deposits were $87.7 million,
                           compared to $91.8 million for the previous quarter.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 5


                           Let's talk about segment reporting. Beginning in Q1
                           of this year, we presented segment reporting
                           information according to the following segments:
                           Networking group, optical component group, and
                           development state and price group. The segment
                           presentation effectively breaks out the previously
                           reported operating entity segment into two segments:
                           our networking group, and our optical component
                           group.

                           We believe this provides greater transparency to our
                           financial performance and more accurately reflects
                           the way in which we manage our business. Accordingly,
                           revenues by segment for Q3 and Q2 were as follows:
                           revenues for the networking group decreased
                           sequentially by 10% to $48.3 million in Q3, compared
                           to $53.9 million for Q2. The decrease, which we
                           anticipated, was substantially due to one-time large
                           order shift in Q2 and a seasonal slowdown in Europe
                           for Q3.

                           Revenues for optical component group increased by 7%
                           to $9.1 million for Q3, compared to $8.5 million in
                           the previous quarter. Our inter-segment revenues from
                           optical component group to the networking group were
                           $661,000 in Q3, compared to $887,000 in the previous
                           quarter, which is eliminated in our consolidated
                           revenues. There were no revenue generated by the
                           development stage and prices group.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 6


                           With respect to geographical breakdown, we provide
                           revenue data by the following regions: United States,
                           Europe, Asia Pacific, and other regions, which
                           include Middle East and Africa. The geographical
                           breakdown as a percentage of revenues for Q3 and Q2
                           were as follows: Q3 revenues in the United States
                           were 22% in Q3, compared to 19% in Q2. In absolute
                           dollars, revenues in the United States increased by
                           $785,000 or 7%.

                           Q3 revenues in Europe were 71%, compared to 75% in
                           Q2. In absolute dollars, revenues in Europe decreased
                           by $6.3 million. This increase, as previously
                           discussed, was primarily due to a large order from
                           Europe, we counted for approximately $8 million of
                           our second quarter revenues and a seasonally slow
                           summer quarter in Europe. Q3 revenues in Asia Pacific
                           were 7% in Q3, compared to 5% in Q2. In absolute
                           dollars, revenues for Asia Pacific increased by
                           $711,000 or 22%.

                           Q3 revenues in other regions remain constant at less
                           than 1%. As mentioned, revenues were $66.8 million,
                           of which 91% consisted of product revenues, while 9%
                           were service related revenues. ... revenues, as a
                           percentage of revenues for Q3, versus Q2 were as
                           follows: optical access component were 15% in Q3,
                           compared to 13% in Q2. Optical ... component were 5%
                           in Q3, compared to 7% in Q2. Network physical

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 7


                           infrastructure products were 22% in Q3, compared to
                           20% in Q2. Switches and routers were 24% in Q3,
                           compared to 34% in Q2. In absolute dollars, revenue
                           decreased by $7.1 million, mainly though third party
                           products sold in Europe.

                           Remote device management products were 9% in Q3,
                           compared to 6% in Q2. In absolute dollars, remote
                           management products increased by $1.3 million. Of
                           service and other revenues, service and related
                           revenues were 9% of revenues in Q3, compared to 8% of
                           revenues in Q2, a slight increase in absolute
                           dollars.

                           In other network product revenue will include
                           communication networks for ...of Japan, and others
                           application, including cellular communication. These
                           revenues were 15% in Q3, compared to 13% of revenues
                           in Q2, with a resulting increase of $796,000.

                           Looking at our consolidated P&L, the following items
                           are worthy of note: Net loss: as stated before, our
                           net loss in Q3 was $5.9 million, compared to $9.8
                           million in Q2. Also included in our net loss in Q3,
                           was income of $861,000, less than $0.01 from the
                           recapturing of accelerated ...expense for terminated
                           employees, compared to $3.1 million or $0.03 in the

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 8


                           previous quarter. Q2 also included a loss of $5.4
                           million or $0.05, resulting from our issuance of 4.2
                           million shares of common stock in a exchange for a
                           $5.9 million, principal amount 5% convertible to
                           alternative notes that were issued in 1998 and paid
                           off during the second quarter. In Q3, we acquired
                           preferred shares in one of our development stage
                           divisions from a minority shareholder that resulted
                           in an extraordinary gain of approximately $2 million.

                           Gross profit; our gross margin for Q3 remained at 32%
                           of revenue. In absolute dollars, gross profit
                           decreased by $1.4 million to $18.4 million; however,
                           gross profit for Q2 include $1.1 million of income
                           from recapturing accelerated deferred stock expense,
                           due to terminated employees, compared to $22,000 in
                           Q3.

                           Product development and engineering: our product
                           development and engineering expense in Q3 was $8.1
                           million or 14% of revenues, compared to $6.9 million
                           or 11% in Q2; however, Q2 R&D expenses include income
                           from recapturing accelerated deferred stock expense,
                           totaling $1.2 million, due to terminated employees;
                           whereas Q3 deferred stock expense were just $151,000
                           in R&D.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                          PAGE 9


                           Sales general administration: our SG&A expense in Q3
                           was $16.8 million or 30% of revenue, compared to
                           $16.7 million or 27% for Q2. In Q3, SG&A includes
                           income from the recapturing of deferred stock
                           expense, due to terminated employees, totaling
                           $985,000, as compared to $718,000 in Q2.

                           Other expenses net: other expenses for Q3 were
                           $526,000 or 1% of revenue, compared to $5.4 million
                           or 9% of revenue for Q2. Q3 other expenses consisted
                           mainly interest expense of $290,000 on our
                           convertible notes issued in 2003. Q2 other expenses
                           include $5.4 million charge ... related to our
                           extinguishments of $5.9 million principal amount, 5%
                           convertible subordinated note.

                           Looking at our consolidated balance sheet, the
                           following items are worthy of note: Overall debt, our
                           short- and long-term debt as of September 30, '03 was
                           $26.1 million, compared to $26.5 million as of June
                           30, '03. Our cash to debt ratio as of September 30
                           was 3.4 to one, compared to 3.5 to one at the end of
                           Q2.

                           Cash, as of September 30, '03, our consolidated cash
                           short- and long-term multiple security and timed
                           deposits were $87.7 million, compared to

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 10


                           $91.8 million for the previous quarter. The decrease
                           in cash in Q3 was $4.1 million, compared to a
                           decrease of $12.3 million in Q2. Our cash reduction
                           included approximately $1.4 million used in our
                           development stage enterprises group.

                           Last week, we raised approximately $5 million through
                           the sale of 1,667,000 newly issued shares of MRV's
                           common stock to several institutional investors at
                           our managed client accounts of a large investment
                           management firms.

                           Accounts receivable: in Q3, accounts receivable
                           decreased to $52.3 million, compared to $54.3 million
                           in Q2, a decrease of $2 million or approximately 4%.
                           This decrease is mainly attributed to the decrease in
                           our revenues.

                           DSOs in Q3 were 84 days, compared to 75 days in Q2.

                           Inventory: in Q3, inventories remained unchanged at
                           $35.9 million. Days in inventory for Q3 were 84 days,
                           compared to 82 days in Q2. Days in inventory
                           increased slightly, due to reduced shipments.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 11


                           Accounts payable: accounts payable in Q3 decreased to
                           $42.6 million, compared to $45.9 million in Q2,
                           representing a decrease of $3.3 million or
                           approximately 7%.

                           As for the outlook for the fourth quarter of '03, we
                           expect mid to high single-digit percentage
                           improvement in both top and bottom lines.

                           With that, I would like to turn the call over to Noam
                           Lotan, our President and CEO.

N. Lotan                   Thank you, Shay, and good day. Q3 was a good quarter.
                           We continue to make progress. Revenues fell well
                           within guidance. In fact, net of last year's
                           divesture of the passive component division, we're up
                           year-over-year for the second quarter in a row. Since
                           the beginning of the year, we have improved our
                           margin from 29% to 32%.

                           Operating expenses were in the $25 million range,
                           down significantly from a year ago, and so was cash
                           consumption. As a result, the bottom line continued
                           to improve. Last year, we were a company in
                           transition; we unified the sales force, and for the
                           first time in our history, branded our networking
                           product as MRV.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 12


                           Our merged sales force, which came from different
                           disciplines, is now adept at selling the entire
                           product line. Thus, we emerged confident in our
                           ability to add value and increase our share of
                           networking projects. We were able to stabilize
                           revenue by introducing new products, by staying close
                           to our customers and by working hard for them. In the
                           long run, it is customer satisfaction that determines
                           the viability of a company.

                           Besides improvement in revenue and gross margins, we
                           addressed our operating expenses. From the beginning
                           of last year, we were able to reduce operating
                           expenses by more than one-third; this translates to
                           $50 million in annual savings. Our efforts
                           contributed to significant improvement in the bottom
                           line. We are proud of the way MRV continues to make
                           progress. Obviously, return to profitability is our
                           number one priority.

                           What makes MRV unique is that we leverage on our
                           optical component technologically to build
                           intelligent optical access systems. Our people have
                           an unusual blend of skills, with 15 years of deep
                           optical component experience and 20 years of
                           networking experience; vertical integration of core
                           technology is at the heart of what we do. For
                           example, Luminent

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 13


                           optical components are sold to many network equipment
                           vendors and also constitute building blocks for MRV's
                           products.

                           Last quarter, we introduced our Media Cross-Connect,
                           a physical layer connectivity solution with pluggable
                           fiber optic technology. This platform provides
                           configurable connectivity, like an intelligent patch
                           panel. It is aiming at test labs and ... enterprise
                           environments. Additionally, several new Fiber Driver
                           modules also include pluggable optics connectivity.

                           The new products have already contributed to
                           revenues, resulting in quarter-over-quarter
                           double-digit sequential growth in our Fiber Driver
                           family of products. We expect to launch more new
                           products in Q4 as well. Pluggable technology provides
                           users with significant capex and opex benefits, due
                           to flexibility, inventory control, and digital
                           diagnostics.

                           As a bonus, small objects from Luminent used in MRV
                           equipment and sold through our distribution channels
                           carry above average gross margins. In remote device
                           management area, MRV has made progress with its new
                           LX product line, which now includes devices from two
                           ports, all the way through 48 ports. We currently
                           witness gross opportunities of the highest segment of
                           the market; specifically, our remote management
                           solutions are

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 14


                           gaining momentum as a strong management tool for
                           server clusters. This product also fits well on
                           channel and government initiatives, where we're
                           seeing increased opportunities.

                           I'm proud to report that here, too, we enjoy the
                           double-digit sequential growth. Our pipeline is newly
                           introduced and updated product within the last three
                           months can be viewed on the new product section of
                           our Web site under the product pull-down tab. Let's
                           talk about growth opportunities.

                           Our revenue in North America increased both in
                           percentages of the total and in absolute dollars. As
                           Shay mentioned, our sequential revenue decline is due
                           mainly to a large $8 million order shipped in Q2, as
                           well as the usual summer slowdown in Europe; however,
                           we continue to strengthen our system integration and
                           distribution capabilities there. We sell and market
                           our products with other products manufactured by
                           third party vendors, supplied as part of network
                           integration and distribution services. Successful
                           partnerships are a key component of our overall
                           strategy, and allow MRV to offer best-of-class
                           networking solutions.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 15


                           Looking at opportunities ahead, both our economy and
                           our lifestyle continue to benefit from the deployment
                           of broadband application and services. Broadband has
                           the power to transform the global economy by spurring
                           innovation in almost every aspect of our lives;
                           therefore, broadband becomes mission critical. Recent
                           requests for proposals for Fiber-to-the-Premises,
                           FTTP, by BellSouth, SBC, and Verizon suggest that new
                           investment cycle could be looming.

                           Luminent, our wholly owned subsidiary, is a leading
                           manufacturer of optical components for metro and
                           residential access. Luminent has full ownership of
                           the laser design and manufacturing processes required
                           for low cost, high volume production. These
                           components are integrated into transceivers and FTTP
                           product solutions, specifically, fiber to the home
                           modules.

                           In fact, Luminent has been supplying optical
                           transmission components for fiber to the curb and
                           fiber to the home for over ten years. Our product is
                           serving hundreds of thousands of homes in the U.S.
                           and in Japan.

                           There are no assurances of these requests would lead
                           to deployment, and there are no assurances that
                           Luminent would be the beneficiary of such

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 16


                           deployments when they actually happen. However, we
                           are clearly encouraged by this development, as they
                           fit our number one goal of turning profitable. We're
                           encouraged by the activity level in the emergence of
                           this technology used by carriers, MSOs, and
                           utilities.

                           Another area of broadband deployment is fiber to the
                           enterprise or broadband connectivity for business
                           customers. Nearly all local area network traffic at
                           the enterprise starts and ends on Ethernet;
                           therefore, it makes perfect sense to use Ethernet
                           technology beyond the boundary of the enterprise. It
                           makes sense to use Ethernet not only for simple
                           point-to-point LAN extension, but also for implanting
                           fully-fledged carrier grade metro networks.

                           Many carriers all over the world are building their
                           own IP-based metro optical Ethernet infrastructure.
                           Some are already offering Ethernet services, by
                           providing unlimited connectivity for mission critical
                           networks. MRV continues to assist carriers deploy
                           these services. We contribute access to solutions for
                           Ethernet in the first mile ESM, optical WDF transport
                           solutions, as well as in some cases, end-to-end metro
                           aggregation network.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 17


                           MRV is focused on three core initiative that will
                           help us realize goal number one, profitability. Last
                           conference call, we discussed those core initiatives.
                           I'd like to provide an update. Core initiatives are
                           the following: Sales channel development, federal
                           government business, and a development of the MRV
                           brand.

                           The vast majority of our sales are generated with the
                           support of qualified network resellers and
                           distributors; therefore, our first initiative is a
                           worldwide commitment to our channel partners program.
                           MRV has chosen to reach each end user through a tier
                           distribution model. We consider the channel a key
                           component of our growth strategy. By selecting the
                           right partners, we can target certain verticals and
                           have better access to customers, including the
                           ability to better support them after the sale.

                           Since the beginning of the year, we have increased
                           the number of qualified resellers by 50% and improved
                           geographical and vertical coverage. We recently began
                           MRV educational services to certify our partners on
                           all of our product platforms.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 18


                           Our second initiative is developing new business with
                           the federal government. Our remote device management
                           and optical transport solution, including free space
                           optics, FSO, and switching are ideal for many
                           branches of the government. It is clear that there
                           are significant opportunities here. In fact, our
                           year-to-date federal business nearly tripled.

                           We also ... the government with specific tradeshow,
                           marketing efforts, and dedicated federal sales
                           resources to spearhead this development. We
                           participated in two shows in Q3, and five more are
                           planned for Q4, specifically focused on this market.
                           We continue to identify new problems, where MRV can
                           make a contribution.

                           Our third initiative is the development of the MRV
                           brand in association with connectivity unlimited for
                           mission critical networks. In Q3, MRV celebrated its
                           15-year anniversary; however, for the first 13 years,
                           we have not marketed our networking product under the
                           brand name MRV. This is a new beginning for us, and
                           we're investing in a carefully designed marketing
                           campaign, including regional and industry focused
                           tradeshows, customer seminars, and advertising. These
                           are all targeted activities with a goal of developing
                           the MRV brand name.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 19


                           We participated in eight shows during Q3, ranging
                           from technology seminars, focused on storage and
                           cable, industry verticals, like credit unions and
                           governments, channel specific and regional shows. We
                           also conducted our seminar series titled Technology
                           Doesn't Byte, in which we toured ten cities in the
                           past two months. We continue to advertise for
                           branding and product awareness through Network World
                           magazine and light readings.

                           Now to the outlook: as indicated before and in the
                           press release, we anticipate a resumption of growth
                           in the fourth quarter, resulting from new products, a
                           seasonal pickup in Europe, as well as a more
                           favorable business climate. We project mid to high
                           single-digit improvement in both the top and bottom
                           line. When we review the trend line for the past few
                           quarters, it is apparent that our operating
                           performance is steadily improving. We believe we can
                           sustain the momentum, and further improvement can be
                           expected in future quarters.

                           With that, I'd like to turn the call back to Amanda
                           for Q&A.

Moderator                  Our first question comes Ashal Ieal of CIBC World
                           Market. Please go ahead.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 20


A. Ieal                    Thank you. Hello, guys, good afternoon. A couple of
                           quick questions from me, Shay, given the progress
                           that you have been observing in the past couple of
                           quarters for the most part, when do you anticipate a
                           break-even point, probably going into 2004, but at
                           what point approximately?

N. Lotan                   This is Noam. I think I just said very simply that if
                           we review the trend line for the past few quarters,
                           it is apparent that our performance is improving
                           steadily. In this case, I would say the trend is my
                           friend.

A. Ieal                    Okay, fair enough. Noam, one of the comments that you
                           made with respect to fiber to the home and fiber to
                           the enterprise trend, obviously, yesterday SBC coming
                           out and giving less than a favorable outlook about
                           this topic, any comments? What is it that you guys
                           are seeing that we're not seeing maybe from this side
                           of the equation?

N. Lotan                   I think, specifically, the responses are out and the
                           expectation that we currently have that next year is
                           going to be a year of trial. I don't know whether we
                           should anticipate a full deployment that we saw in
                           some project of one million homes in '05. I don't
                           know if that will actually, in what will it translate
                           in terms of trials for next year, but it's a big
                           test. It's

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 21


                           probably a 20-year test to wire every home in North
                           America. In fact, Japan is going to be ahead of the
                           U.S., I would suspect.

                           The encouraging thing is that there is definitely a
                           sense of direction here in greenfield application in
                           premium neighborhoods, and we're going in the right
                           direction.

                           In my opinion, and I can talk for quite a while on
                           this, but I don't want to make this a subject of our
                           call, I think there is tremendous benefit for the
                           large operating companies for doing that. They are
                           currently losing revenue, losing customers to
                           alternative solutions, like the MSOs, others, and
                           wireless, and so this is an attempt for them to
                           capture the broadband market. This was especially
                           revived since the FCC recently ruled that they
                           actually get to keep their fiber, once they install
                           it. But we are looking at it very carefully.

                           We are, obviously, evaluating, and we are keeping a
                           very close contact to what's happening out there.
                           It's looking reasonably promising, but we cannot make
                           any projection out of it at this point.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 22


A. Ieal                    Fair enough. What was the employee headcount by the
                           end of the third quarter?

S. Gonen                   Actually, less than 1,300.

A. Ieal                    Okay.  Any update about Charlotte?

N. Lotan                   We just continue to stay the course.

Moderator                  Our next question comes from Greg Waters of Investors
                           Asset Management.

G. Waters                  Good afternoon. Can you clarify staying the course? I
                           know that there were several comments made about an
                           out-strategy there. Is that still a strategy, or is
                           staying the course mean that you're going to continue
                           to develop products and look towards actually selling
                           them at some point?

N. Lotan                   Yes, I don't have any specific items to report to you
                           on Charlotte, except that we just continue to stay
                           the course.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 23


G. Waters                  Okay. You mentioned one of your, I guess, points for
                           growth opportunities is partnerships. Can you
                           elaborate on the partnerships? I know that there was
                           information from IBM, that there is an OEM
                           relationship with them. Are there other similar
                           relationships, and if so, can you tell us a little
                           bit more about them?

S. Gonen                   We recently announced the Marconi relationship,
                           and that would probably translate into revenue only
                           sometime early to mid next year. The other
                           relationship that we have in the pipeline, obviously,
                           not for us to discuss at this point, since quite a
                           bit of it is under NDA. But I also mentioned
                           partnership with suppliers, and that's also
                           important.

G. Waters                  Okay. You mentioned the optical build-out in '04. Are
                           you starting to see, other than RFPs, are you
                           starting, obviously, the optical build is starting a
                           little bit with the pick-up that we see in Luminent.
                           Are you seeing that from smaller enterprises at this
                           point?

N. Lotan                   I'm sorry, Greg, what do you mean by smaller
                           enterprises?

G. Waters                  The non-large carriers, the smaller companies, the
                           greenfields, some of the smaller carriers.

                                                        MRV COMMUNICATIONS, INC.
                                                         HOST: ANNE-MARIE FRISCH
                                                   OCTOBER 22, 2003/2:00 P.M. PT
                                                                         PAGE 24


N. Lotan                   Yes, we do see a pick-up with MSOs, for example,
                           smaller carriers, and also European carriers.

G. Waters                  You said that the Media Cross-Connect is already
                           selling. Can you give an idea of how well that is
                           selling?

N.                         Lotan I think it's just the beginning. The indication
                           I gave that that particular product line had a
                           double-digit sequential growth, so I don't want to
                           elaborate specifically into this particular product;
                           but obviously, it's a new platform and we have some
                           plans going forward with that.

Moderator                  Now, Ken Hart of Wachovia.

K. Hart                    Hello, Noam. Given your cost structure, it seems to
                           me, that you're going to need about $15 million to
                           $20 million of increased revenues over the next
                           couple of quarters to achieve that break-even level.
                           Can you tell us your vision and what products you
                           expect to increase your sales by that $15 million to
                           get to that break-even?

N. Lotan                   In general, I don't believe the number of the magic
                           number may or may not be $15 million; it depends on
                           the product mix. But I think your

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                           question is relevant. Certainly, our expertise and
                           our gross margin is in an area, where we have a
                           tremendous added value in optics and also in our
                           remote presence equipment. In those two areas, we
                           feel comfortable, and we also feel very confident
                           that we can make an impact. So certainly, our focus
                           in terms of revenue growth is and should be on this
                           area.

K. Hart                    Can you tell us a little bit more about SES or CES?

N. Lotan                   There is really not a lot to report that I'm at
                           liberty to discuss at this point, so I'm not sure
                           exactly what I can add.

K. Hart                    Finally, are you expecting to continue your purchase
                           of value added resellers, as a way to sell your
                           product?

N. Lotan                   I think in the near-term, we have a lot of
                           other areas that we are focusing on. Given the fact
                           of your previous question, I think we have our work
                           cut out with where we are right now, plus the
                           opportunities in Luminent, so we're focusing on a lot
                           of things that have to do with growth from internal.

                                                        MRV COMMUNICATIONS, INC.
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Moderator                  Ladies and gentlemen, thank you for your questions.
                           At this time we will end the question and answer
                           session. Now, closing remarks.

N. Lotan                   I'd like to thank everybody for being on the
                           call today. I think it was important for us to
                           explain the trend line for the past two quarters.
                           It's obviously apparent that our operating
                           performance is steadily improving, and we believe
                           that momentum can be sustained. Again, thank you for
                           being on the call, and we look forward to your
                           participation again next quarter. Thank you.

Moderator                  Ladies and gentlemen, thank you for your
                           participation in the MRV Communications Third Quarter
                           Results conference call. Have a great day. This
                           concludes your program.