Soapstone Networks Reports Second Quarter 2008 Results

Market Wire, July, 2008

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.