SDL Announces Record Results For 2000 Second Quarter

Revenue Rises 53 Percent and Pro forma Operating Income Increases 72 Percent Versus Q1 2000

San Jose, California SDL, Inc. (Nasdaq: SDLI) today announced record revenues of $110.5 million and pro forma net income of $27.2 million, or $0.33 per diluted share, for the second quarter ended June 30, 2000.

Driven by significant increases in shipments of communications products for both terrestrial and undersea fiber optic systems, second quarter revenue was 156 percent above that reported for the second quarter ended June 30, 1999 and 53 percent higher than revenue in the first quarter of 2000. Revenue from fiber optic communications products increased 60 percent over the first quarter and by 242 percent over the prior year quarter. Results for the second quarter include three full months of operations for the Queensgate and Veritech acquisitions and four weeks of operations at Photonics Integration Research (PIRI). Excluding these three acquired businesses, total revenue increased by 31 percent sequentially and by 116 percent over the prior year quarter, and base fiber optic communications revenue grew by 36 percent sequentially and by 189 percent over the June 1999 quarter.

Including acquisition-related and purchased intangibles amortization charges and non-cash stock compensation expense, the company reported a net loss of $70.7 million, or $0.89 per diluted share for the quarter. This includes $26.2 million of charges for in-process research and development related to the Veritech and PIRI transactions, $71.6 million of amortization of purchased intangible assets and $4.8 million 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 $27.2 million, or $0.33 per share for the quarter, an increase of 342 percent over the $6.1 million, or $0.09 per share, pro forma net income for the quarter ended June 30, 1999. Pro forma operating income rose by 72 percent over Q1 2000. Pro forma operating margin was a record 34.4 percent, up 3.9 points from the March 2000 quarter and up 16.9 points from the prior year quarter. Almost half of the sequential increase was derived from strong margins from the three recent acquisitions and the remainder from continued gross margin improvement in the base business due to the growth in telecom volume and increases in yields and factory efficiency.

For the six months ended June 30, 2000, SDL reported revenue of $182.7 million, up 126 percent compared to revenues of $80.8 million in the first six months of 1999. Pro forma net income for the same period was a record $44.2 million or $0.55 per diluted share, compared to pro forma net income of $11.0 million or $0.17 per diluted share in the first half of 1999.

Commenting on the quarter s performance, SDL s Chairman and Chief Executive Officer, Donald R. Scifres said, "SDL s fiber optic businesses, including the three recently acquired businesses, Queensgate, PIRI and Veritech, continued to expand at a rapid rate. Q2 highlights include the continued revenue growth in both terrestrial and undersea fiber optic market sectors, markedly higher margins due to operating efficiencies, improved product mix and higher yields, and a major improvement in cash flow."

Scifres concluded, "Looking forward, we are in the process of expanding our manufacturing capabilities at our three new operations as well as at our Santa Clara, California manufacturing site in order to accommodate the expected strong demand for fiber optic products. Based on excellent order levels, the second half of 2000 is also projected to be strong."

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 plans to expand manufacturing capabilities at four of its sites in anticipation of strong customer demand for fiber optic products, and the company s expectations for strong performance in the second half of 2000. 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, and Form 10-Q for the quarter ended March 31, 2000.

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. Donald R. Scifres, Chairman and CEO Michael L. Foster, VP Finance and CFO Tel: (408) 943-9411 or Financial Relations Board Lisa Horn Chainey/Marcia Nakamura (general) Susan Katz (investors) Chris Wood (media) Tel: (415) 986-1591