Capella Closes $15 Million in Venture Capital Funding

Market Wire, January, 2008

Capella Intelligent Subsystems, the leading provider of Wavelength Selective Switches (WSS) for use in reconfigurable optical add/drop multiplexers (ROADM) applications, today announced it closed $15 million in equity financing. The financing was led by the Lucas Venture Group, and existing investors Levensohn Venture Partners, Rustic Canyon Partners, and Formative Ventures participated fully.

The $15 million in new capital will be used to expand and strengthen Capella's presence in the ROADM market, which is expected to grow to $2.8 billion over the next 4 years, according to the most recent Needham investment analysis report. New product offerings and operational improvements are Capella's key focus in the coming months, as the company expands to meet growing market demand.

"We are in the midst of global network transformation driven by consumer services such as video, music and social networking. Capella is well-positioned as a key enabler in broadband IP content distribution. As companies upgrade their networks to support IP-based consumer services, Capella's technology will be critical," said Larry Schwerin, president and chief executive officer of Capella. "Networks need to deliver quality broadband services at a price consumers will pay, and Capella provides the industry-leading solution to enable their customers to build cost-effective, flexible networks."

"We have been pleased with the progress of Capella, and this financing reflects the strength of its market position and technology platform. We have great confidence in the management team and technology, and look forward to seeing how Capella positively impacts this IP evolution," remarked Michael Kim, partner at Rustic Canyon Partners.

"Capella is also utilizing its strong intellectual property portfolio to expand its product line to meet growing market needs across a broader range of network applications. Our best-of-breed core product capabilities can be applied flexibly and cost-effectively to serve evolving IP network requirements," said Kip Sheeline, Managing Partner of Levensohn Venture Partners.

About Capella Intelligent Subsystems

Capella is the industry leader of wavelength selective switch (WSS) technology for use in reconfigurable optical add/drop multiplexers (ROADM) and optical cross connect (OXC) applications. Capella's patented WavePath® products provide the best performing WSS on the market offering dynamic, remote reconfigurability with fully integrated optical channel monitoring (OCM) for simplifying network operations and planning, while dramatically reducing costs. Capella's products are used in both metro and long haul applications. Founded in 2000, Capella is a privately-held company located in San Jose, California. For more information, go to www.capellainc.com .

Contact: Capella Intelligent Subsystems Kenneth J. Falta VP of Sales and Marketing Tel: +1-408-360-4241 Email Contact www.capellainc.com Stepping Out Communications Lisa Copass Tel: +1-925-253-8445 Email Contact