SDL Announces Record Results For 2000 First Quarter

Results Reflect Strong Customer Demand for SDL s Fiber Optic Communications Products

San Jose, CA. SDL, Inc. (Nasdaq: SDLI) today announced record revenues of $72.2 million and pro forma net income of $17.0 million, or $0.22 per diluted share, for the first quarter ended March 31, 2000.

Again led by significant increases in shipments of communications products for both terrestrial and undersea fiber optic systems, first quarter revenue was 92 percent above that reported for the quarter ending March 31, 1999, and 23 percent higher than revenue in the fourth quarter of 1999. Revenue from fiber optic communications products increased 35 percent over the fourth quarter, and by 163 percent over the prior year quarter. Results for the first quarter include results of Queensgate Instruments from the closing of its acquisition on March 8, 2000. SDL Queensgate contributed $929,000 to consolidated revenue in March.

Including acquisition-related and purchased intangibles amortization charges and non-cash stock compensation expense, the company reported GAAP net income of $14.2 million, or $0.19 per diluted share for the quarter. This includes a $1.2 million charge for in-process research and development related to the Queensgate transaction, $1.7 million of amortization of purchased intangible assets and $654,000 of non-cash stock compensation expense.

On a pro-forma basis, excluding acquisition-related charges, amortization of purchased intangible assets and non-cash stock compensation expense, SDL reported net income of $17.0 million, or $0.22 per share for the quarter, an increase of 250 percent over the $4.9 million, or $0.08 per share, pro forma net income for the quarter ending March 31, 1999. Pro forma operating margin was a record 30.5 percent, up 8.0 points from the December 1999 quarter and up 14.7 points from the prior year quarter. This improvement was driven by continued reduction in expenses relative to revenue and significant gross margin improvement due to the growth in telecommunications revenue and increases in yields and factory efficiency.

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The following table summarizes pro forma results for the quarters ended March 31, 2000 and 1999. (in millions, except share amounts) Three months ended March 31 2000 1999 Revenues $72.2 $37.7 Gross profit (a) 34.6 15.3 Income from operations (a) 22.0 5.9 Income before income taxes (a) 26.5 6.2 Net income (a) 17.0 4.9 Net income per diluted share (a) $0.22 $0.08 Diluted weighted average shares outstanding 76.5 64.3

(a) Pro forma results for the quarter ended March 31, 2000 exclude the in-process research and development charge related to the Queensgate acquisition, amortization of purchased intangible assets and non-cash stock compensation expenses. Pro forma results for the quarter ended March 31, 1999 exclude the in-process research and development charge and other charges related to the Polaroid fiber laser acquisition, amortization of purchased intangible assets and non-cash stock compensation expenses.

Commenting on the quarter s performance, SDL s Chairman and Chief Executive Officer, Donald R. Scifres said, "The results for the first quarter exceeded our expectations as customer demand for a wide variety of our fiber communications products increased dramatically. We benefited from rising demand for Raman amplification, 980 nm pump products, lithium niobate modulators and drivers, and fiber gratings, among other products."

Scifres continued, "Looking ahead, we are projecting a need for increased manufacturing facilities sooner than we had previously anticipated. To this end, we are in the process of identifying or building out expansion sites in Santa Clara, California, Witham, U.K., and Plainfield, New Jersey, the site of SDL Veritech, our most recent acquisition. We also just completed the expansion of our active fiber plant in Norwood, Massachusetts. We expect that our present facilities will be capable of meeting growing customer demand as we move to increased work shift coverage and investment in more automated production equipment in our existing factories."

Statements in this press release which are not historical including statements regarding SDL s or management s intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements regarding the company s need for increased manufacturing facilities sooner than previously anticipated to meet growing customer demand and the company s ability in the meanwhile to meet growing customer demand with its existing factories. It is important to note that the Company s actual results could differ materially from those in any such forward-looking statements. Factors that could cause actual results to differ materially include risks related to the company s inability to meet customer demand with its existing facilities, the company s inability to expand manufacturing facilities successfully to meet customer demand, uncertainties in competition and in customer demand for the company s products, and the risk factors listed from time to time in the Company s SEC reports including but not limited to, the annual report on Form 10-K for the year ended December 31, 1999.

SDL s products power the transmission of data, voice and Internet information over fiber optic networks to meet the needs of telecommunications, dense wavelength division multiplexing (DWDM), cable television and satellite communications applications. They enable customers to meet the bandwidth needs of increasing Internet, data, video and voice traffic by expanding their fiber optic communications networks much more quickly and efficiently than would be possible using conventional electronic and optical technologies. SDL s optical products also serve a variety of non-communications applications, including materials processing and printing. Additional information about SDL, Inc. is available on the Internet at www.sdli.com.

Contact:
SDL, Inc. Financial Relations Board
Donald R. Scifres, Chairman and CEO Lisa Horn Chainey (general info)
Michael L. Foster, VP Finance and CFO Susan Katz (investor contact)
(408) 943-9411 Marcia Nakamura (media)
(415) 986-1591