Oakland, CA — April 23, 2009 — Zhone Technologies, Inc. (NASDAQ: ZHNE), a global leader in multi-service access solutions, today reported its financial results for the first quarter ended March 31, 2009.

Revenue for the first quarter of 2009 was $24.1 million compared with $31.0 million for the fourth quarter of 2008 and $43.0 million for the first quarter of 2008. Net loss for the first quarter of 2009, calculated in accordance with generally accepted accounting principles ("GAAP"), was $6.9 million or $0.05 per share compared with a net loss of $4.7 million or $0.03 per share for the fourth quarter of 2008, and a net loss of $0.9 million or $0.01 per share for the first quarter of 2008. Pro forma earnings before stock-based compensation, interest, taxes, depreciation and gain on sale of intangible assets ("EBITDA") was a $5.5 million loss for the first quarter of 2009, compared to a pro forma EBITDA loss of $4.5 million for the fourth quarter of 2008, and pro forma EBITDA loss of $2.8 million for the first quarter of 2008.

"The first quarter proved to be even more challenging because of the global economic difficulties," stated Mory Ejabat, Zhone's chief executive officer. "However, we are beginning to see signs of an improving environment and are encouraged by growing backlog and prospects for revenue growth throughout the remainder of the year."

Zhone will conduct a conference call and audio webcast today, April 23, 2009, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its first quarter 2009 results. This call is open to the public by dialing +1-800-237-9752 for U.S. callers and +1-617-847-8706 for international callers and then entering passcode 51358333. The audio webcast will be simultaneously available on the Investor Relations section of Zhone's website at http://www.zhone.com/investors/.

A replay of the conference call will be available after the original call by dialing +1-888-286-8010 for U.S. callers and +1-617-801-6888 for international callers and then entering passcode 48028058. An audio webcast replay will also be available online at http://www.zhone.com/investors/ for approximately one week following the original call.

Non-GAAP Financial Measures

To supplement Zhone's consolidated financial statements presented in accordance with GAAP, Zhone uses pro forma EBITDA, a non-GAAP measure Zhone believes is appropriate to enhance an overall understanding of Zhone's past financial performance and prospects for the future. These adjustments to GAAP results are made with the intent of providing greater transparency to supplemental information used by management in its financial and operational decision-making. These non-GAAP results are among the primary indicators that management uses as a basis for making operating decisions because they provide meaningful supplemental information regarding the company's operational performance, including the company's ability to provide cash flows to invest in research and development, and to fund capital expenditures. In addition, these non-GAAP financial measures facilitate management's internal comparisons to the company's historical operating results and comparisons to competitors' operating results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between net loss calculated on a GAAP basis and pro forma EBITDA on a non-GAAP basis is provided in a table immediately following the Unaudited Condensed Consolidated Statements of Operations.

ZHONE TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share data)

	Three Months Ended
	March 31,			December 31,			March 31,
		2009			2008			2008

Net revenue	$	24,103		$	31,038		$	43,033
Cost of revenue		16,262			21,017			29,177
Stock-based compensation		28			23			50
Gross profit		7,813			9,998			13,806
Operating expenses:
Research and product development (1)		5,796			6,283			7,144
Sales and marketing (1)		6,035			6,189			7,742
General and administrative (1)		2,578			2,920			3,012
Gain on sale of intangible assets		-			(1,100	)		(3,204	)
Total operating expenses		14,409			14,292			14,694
Operating loss		(6,596	)		(4,294	)		(888	)
Other expense, net		(293	)		(343	)		(20	)
Loss before income taxes		(6,889	)		(4,637	)		(908	)
Income tax provision		14			94			33
Net loss	$	(6,903	)	$	(4,731	)	$	(941	)
Basic and diluted net loss per share	$	(0.05	)	$	(0.03	)	$	(0.01	)
Weighted average shares outstanding used to compute basic and diluted net loss per share		150,719			150,595			150,072

(1) Amounts include stock-based compensation costs as follows:
Research and product development		97			90			145
Sales and marketing		114			99			138
General and administrative		281			257			303
		492			446			586

GAAP net loss	$	(6,903	)	$	(4,731	)	$	(941	)
Stock-based compensation		520			469			636
Interest expense, net		369			298			136
Income taxes		14			94			33
Depreciation		492			496			556
Gain on sale of intangible assets		-			(1,100	)		(3,204	)
Non-GAAP pro forma EBITDA	$	(5,508	)	$	(4,474	)	$	(2,784	)

ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands)

	March 31,			December 31,
		2009			2008

Assets
Current assets:
Cash, cash equivalents and short-term investments	$	28,879		$	36,243
Accounts receivable		18,628			23,665
Inventories		39,834			40,706
Prepaid expenses and other current assets		2,172			2,654
Total current assets		89,513			103,268
Property and equipment, net		19,787			20,003
Restricted cash		123			123
Other assets		54			55
Total assets	$	109,477		$	123,449
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	10,995		$	12,719
Line of credit		10,000			15,000
Current portion of long-term debt		394			380
Accrued and other liabilities		12,735			13,162
Total current liabilities		34,124			41,261
Long-term debt, less current portion		18,595			18,698
Other long-term liabilities		3,824			4,193
Total liabilities		56,543			64,152
Stockholders’ equity:
Common stock		151			151
Additional paid-in capital		1,065,021			1,064,493
Other stockholders’ equity		262			250
Accumulated deficit		(1,012,500	)		(1,005,597	)
Total stockholders’ equity		52,934			59,297
Total liabilities and stockholders' equity	$	109,477		$	123,449

About Zhone Technologies - Access for a Converging World

Zhone Technologies, Inc. (NASDAQ: ZHNE) is a global leader in multi-service access network (MSAN) solutions, serving more than 700 of the world's most innovative network operators. The company offers the industry's only fully-integrated portfolio of MSAP, FTTx, EFM and Wi-Fi access technologies, enabling a full suite of services, including residential and business broadband, VoIP, and High-Definition IPTV. Zhone's converged multi-service access platform helps operators rapidly deploy premium services using copper, fiber, and wireless while improving network agility and reducing costs. Based in the United States, Zhone is the only vendor in the field whose MSAN platforms are all manufactured in the USA, and our facilities are emission, waste-water and CFC free. www.zhone.com

Contacts:

Investors
Tel: +1 510-777-7013
Fax: +1 510-777-7001
Email: investor-relations@zhone.com Media
Tel : +1 510-777-7020
Fax : +1 510-777-7001
Email: public-relations@zhone.com

Zhone, the Zhone logo, and all Zhone product names are trademarks of Zhone Technologies, Inc. Other brand and product names are trademarks of their respective holders. Specifications, products, and/or product names are all subject to change without notice.

Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "target," "will," "would," variations of such words, and similar expressions are intended to identify forward-looking statements. In addition, forward-looking statements include, among others, statements that refer to first quarter 2009 financial estimates; projections of revenue, margins, expenses or other financial items; and improvement of financial markets. Readers are cautioned that actual results could differ materially from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, commercial acceptance of our products; intense competition in the communications equipment market; our ability to execute on our strategy and operating plans; and economic conditions specific to the communications, networking, internet and related industries. In addition, please refer to the risk factors contained in the Company's SEC filings available at www.sec.gov, including without limitation, the Company's annual report on Form 10-K for the year ended December 31, 2008. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Zhone undertakes no obligation to update or revise any forward-looking statements for any reason.

Zhone's Single Line Multi-Service architecture (SLMS™), allows carriers to concurrently deliver voice, new premium data and video services over copper or fiber access lines.