BILLERICA, MA, Jul 17, 2008 (MARKET WIRE via COMTEX) ----Soapstone Networks Inc. (NASDAQ: SOAP) today reported results for its second quarter ended June 30, 2008.

Revenue for the three and six months ended June 30, 2008 was $3.9 million and $6.6 million, respectively, compared to $29.6 million and $50.2 million, respectively, for the three and six months ended June 30, 2007. The three and six months ended June 30, 2007 included $26.9 million and $45.3 million, respectively, in router product revenue. The Company shipped its last router products in December 2007 and has exited the manufacturing and sale of router products. In the current quarter the Company recorded as product revenue certain revenue deferrals from prior years' product shipments in connection with the termination of certain customer terms and conditions.

"We are extremely pleased with the progress of the PNC development and marketing, and we anticipate general availability for the product in the third quarter," said Bill Leighton, Chief Executive Officer, Soapstone Networks. "We are seeing new opportunities for the PNC as carriers continue to rapidly adopt Carrier Ethernet. Our product remains unique in the market as the next generation control plane for real-time provisioning, monitoring and controlling of heterogeneous Carrier Ethernet resources."

GAAP net loss for the second quarter ended June 30, 2008 was $4.3 million, or $0.29 per share, compared to a GAAP net income of $12.1 million, or $0.82 per share, in the prior year's second quarter. GAAP net loss in the 2008 period includes $1.0 million of non-cash equity based charges associated with Financial Accounting Standards Board Statement No. 123R ("SFAS 123R"). GAAP net income in the 2007 period includes $0.7 million of non-cash equity based charges associated with SFAS 123R partially offset by $0.1 million from the utilization of certain inventory previously written off.

GAAP net loss for the six months ended June 30, 2008 was $8.0 million, or $0.54 per share, compared to a GAAP net income of $18.1 million, or $1.24 per share, in the six months ended June 30, 2007. GAAP net loss in the 2008 period includes $1.5 million of non-cash equity based charges associated with Financial Accounting Standards Board Statement No. 123R ("SFAS 123R"). GAAP net income in the 2007 period includes $1.1 million of non-cash equity based charges associated with SFAS 123R, and $0.3 million of special charges associated with a restructuring in the first quarter of 2006, partially offset by $0.2 million from the utilization of certain inventory previously written off.

Non-GAAP net loss (GAAP net loss or income excluding charges for restructuring, certain stock based compensation and inventory credits) for the second quarter ended June 30, 2008 was $3.2 million, or $0.22 per share compared to non-GAAP net income of $12.7 million, or $0.86 per share in the second quarter of 2007.

Non-GAAP net loss for the six months ended June 30, 2008 was $6.5 million, or $0.44 per share compared to non-GAAP net income of $19.2 million, or $1.32 per share in the six month period ended June 30, 2007.

Cash, cash equivalents and marketable securities totaled $105.4 million at June 30, 2008 compared to $104.5 million at March 31, 2008.

Soapstone Networks will discuss these quarterly results as well as future business and financial expectations in an investor conference on July 17, 2008 at 8:30 AM eastern daylight savings time. The conference telephone number is (800) 230-1096. A replay of the conference call will be available after 11:15 AM. Replay information will be available at (800) 475-6701 (USA) access code: 952860. Replay of this call is also available on Soapstone's Web site, www.soapstonenetworks.com, along with a copy of this release.

Soapstone is a trademark of Soapstone Networks Inc.

This release contains information about Soapstone's future expectations, plans, and prospects, including Soapstone's expectations for annual revenue, profitability, product introduction, commercial activities and the growth opportunity for Soapstone Networks, that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Statements made with regard to interim results are not necessarily indicative of results that may be expected for future interim periods or for the full year. When used in this press release, the word "will," "expected" and other similar expressions are intended to identify such forward looking statements. Such risks and uncertainties include, but are not limited to, Soapstone's ability to manage the transition of its core router business, the early stage of Soapstone Networks, market acceptance of our products, services and enhancements, dependence on our major customer, customer purchasing patterns and commitments, development of the market place, product development and enhancement, intensity of competition of other vendors, technological changes, reliance on technology and distribution partners, and other risks set forth in Soapstone's filings with the Securities and Exchange Commission. Soapstone does not undertake any duty to update forward-looking statements.

About Soapstone Networks

Soapstone Networks Inc., headquartered in Billerica, Massachusetts is at the forefront of the movement to Carrier Ethernet by delivering resource control systems that help to realize the value of NGN software-provisioned services in the new Carrier Ethernet transport network. Soapstone's common control framework decouples services from underlying network technologies. The Soapstone solution dynamically provisions precise, SLA-quality services, continuously optimizing utilization of network resources to bring orderly, predictable business-driven behavior to service provider networks. Soapstone changed its name from Avici Systems in the first quarter of 2008. Avici has provided purpose-built carrier-class routing solutions for the Internet. Such routing systems provide IP solutions to some of the world's leading service providers. The future of Carrier Ethernet -- www.soapstonenetworks.com.

 SOAPSTONE NETWORKS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN
   THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------------
   ---------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Revenue: Product (1) $ 1,201 $ 26,900
   $ 1,201 $ 45,324 Service 2,721 2,738 5,350 4,826 ---------- ---------- ---------- ---------- Total revenue 3,922 29,638 6,551
   50,150 Cost of revenue - Product (2) -- 7,994 -- 13,315 Cost of revenue - Service (3) 1,016 365 1,961 822 ---------- ----------
   ---------- ---------- Total cost of revenue 1,016 8,359 1,961 14,137 ---------- ---------- ---------- ---------- Gross margin
   2,906 21,279 4,590 36,013 ---------- ---------- ---------- ---------- Operating expenses: Research and development (3) 4,027
   6,929 7,464 14,020 Sales and marketing (3) 1,260 674 2,402 1,260 General and administrative (3) 1,542 1,674 2,912 2,941 Stock-based
   compensation 978 660 1,458 1,105 Restructuring expenses -- -- -- 100 ---------- ---------- ---------- ---------- Total operating
   expenses 7,807 9,937 14,236 19,426 ---------- ---------- ---------- ---------- (Loss) income from operations (4,901) 11,342
   (9,646) 16,587 Interest income, net 635 965 1,576 1,851 Other Income -- -- 87 -- Provision for income tax -- (240) -- (370)
   ---------- ---------- ---------- ---------- Net (loss) income $ (4,266) $ 12,067 $ (7,983) $ 18,068 ========== ==========
   ========== ========== Net (loss) earnings per diluted share $ (0.29) $ 0.82 $ (0.54) $ 1.24 ========== ========== ==========
   ========== Weighted average common shares used in computing diluted net (loss) income per share 14,825,768 14,765,241 14,808,928
   14,522,034 ========== ========== ========== ========== (1) Revenue deferral from prior years' product shipments recorded as
   product revenue due to the termination of certain customer terms and conditions in the 2008 periods. (2) Includes inventory
   charge and (credits), as follows: Inventory and inventory related charge $ -- $ -- $ -- $ 175 Credits from utilization of
   inventory previously written off in 2006 and 2001 $ -- $ (73) $ -- $ (218) (3) Excludes certain non-cash, stock-based compensation,
   as follows: Cost of revenue - Service $ 43 $ -- $ 66 $ -- Research and development 383 442 588 673 Sales and marketing 235
   (43) 349 40 General and administration 360 261 521 392 SOAPSTONE NETWORKS INC. NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
   (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (Unaudited) Note 1 Three Months Ended Six Months Ended June 30, June 30,
   ---------------------- ---------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Revenue: Product
   (2) $ 1,201 $ 26,900 $ 1,201 $ 45,324 Service 2,721 2,738 5,350 4,826 ---------- ---------- ---------- ---------- Total revenue
   3,922 29,638 6,551 50,150 Cost of revenue - Product -- 8,067 -- 13,358 Cost of revenue - Service 973 365 1,895 822 ----------
   ---------- ---------- ---------- Total cost of revenue 973 8,432 1,895 14,180 ---------- ---------- ---------- ----------
   Gross margin 2,949 21,206 4,656 35,970 ---------- ---------- ---------- ---------- Operating expenses: Research and development
   4,027 6,929 7,464 14,020 Sales and marketing 1,260 674 2,402 1,260 General and administrative 1,542 1,674 2,912 2,941 ----------
   ---------- ---------- ---------- Total operating expenses 6,829 9,277 12,778 18,221 ---------- ---------- ---------- ----------
   (Loss) income from operations (3,880) 11,929 (8,122) 17,749 Interest income, net 635 965 1,576 1,851 Other Income -- -- 87
   -- Provision for income tax -- (240) -- (370) ---------- ---------- ---------- ---------- Non-GAAP net (loss) income $ (3,245)
   $ 12,654 $ (6,459) $ 19,230 ========== ========== ========== ========== Non-GAAP (loss) earnings per diluted share $ (0.22)
   $ 0.86 $ (0.44) $ 1.32 ========== ========== ========== ========== Weighted average common shares used in computing diluted
   net (loss) income per share 14,825,768 14,765,241 14,808,928 14,522,034 ========== ========== ========== ========== Note 1
   - The above non-GAAP consolidated statements of operations for the three and six months ended June 30, 2008 and 2007 are not
   presented in accordance with generally accepted accounting principles (GAAP) and are presented for informational purposes
   only. These statements exclude the impact of restructuring expenses, non-cash charges related certain stock based compensation
   as well as charges and credits related to inventory and related items as presented in the following reconciliation for the
   applicable periods. The Company believes that this presentation of non-GAAP results provides helpful information to both management
   and investors in assessing our core operating performance. Such information should not be considered superior to, in isolation
   from, or as a substitute for results presented in accordance with generally accepted accounting principles. Three Months Ended
   Six Months Ended June 30, June 30, 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Non-GAAP net (loss) income
   $ (3,245) $ 12,654 $ (6,459) $ 19,230 Restructuring expenses -- -- -- (100) Certain non-cash stock based compensation (1,021)
   (660) (1,524) (1,105) Inventory and inventory related charge -- -- -- (175) Utilization of inventory previously written-off
   -- 73 -- 218 ---------- ---------- ---------- ---------- GAAP net (loss) income $ (4,266) $ 12,067 $ (7,983) $ 18,068 ==========
   ========== ========== ========== Note 2 - Revenue deferral from prior years' product shipments recorded as product revenue
   due to the termination of certain customer terms and conditions in the 2008 periods. SOAPSTONE NETWORKS INC. CONDENSED CONSOLIDATED
   BALANCE SHEETS (IN THOUSANDS) (Unaudited) June 30, December 31, ------------ ------------ 2008 2007 ------------ ------------
   Assets Cash, Cash equivalents and marketable securities $ 105,445 $ 99,988 Trade accounts receivable, net 300 11,769 Other
   current assets 767 790 ------------ ------------ Total current assets 106,512 112,547 Long-term marketable securities -- 3,000
   Property and equipment, net 3,162 3,306 Other Non-Current Assets 102 -- ------------ ------------ Total assets $ 109,776 $
   118,853 ============ ============ Liabilities and Stockholders' Equity Accounts payable and accrued expenses $ 3,873 $ 9,002
   Deferred revenue 4,541 2,343 Stockholders' equity 101,362 107,508 ------------ ------------ Total liabilities and stockholders'
   equity $ 109,776 $ 118,853 ============ ============ December 31, 2007 amounts are derived from audited financial statements.
   

 For more information, contact: Inna Vyadro Director of Investor Relations Soapstone Networks 978-715-2300 Email
   Contact William J. Stuart Chief Financial Officer Soapstone Networks 978-715-2300 Email Contact 

SOURCE: Soapstone Networks

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