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Harmonic Announces Tentative Agreement to Settle Shareholder Class Action


Litigation Settlement and Other Adjustments to be Incorporated in 10-K Filing

Sunnyvale, Calif.- Harmonic Inc. (NASDAQ: HLIT), a leading provider of broadcast and on-demand video delivery solutions, today announced that it had reached a tentative agreement for the settlement of a securities class action filed against the Company and certain of its officers and directors in 2000. The Company believes that it is in its best interests to avoid the cost, management distraction and risk associated with a trial, currently scheduled for August 2008. The tentative agreement is subject to certain contingencies, including execution of a definitive agreement and court approval. The agreement will provide a full release of Harmonic and the other named defendants in connection with the allegations in the lawsuit without any admission of fault on the part of Harmonic or its officers and directors.. The cost of the settlement is $15 million, plus an estimated aggregate of $1.4 million in related legal fees and expenses in connection with proceedings in the securities class action and derivative lawsuits.. Of this aggregate cost of settlement, Harmonic will pay $6.4 million and the Company’s insurance carriers, having funded most litigation costs to date, will contribute the remaining $10 million. As a result of this tentative agreement, the Company will record a charge of $6.4 million in its financial statements for the year ended December 31, 2007 to be included in its Annual Report on Form 10-K to be filed with the SEC later today.

In addition, following the completion of year-end audit procedures, the Company has identified certain adjustments to its preliminary unaudited financial statements announced on January 29, 2008 for the quarter and year ended December 31, 2007. These adjustments result in the reduction of quarterly and annual revenue and net income by $984,000 and $253,000, respectively, and will also be included in the financial statements in the Annual Report on Form 10-K for 2007. The impact of the litigation settlement and these other adjustments will reduce the Company’s reported diluted GAAP EPS for the quarter and year by $0.08 for both periods, but non-GAAP EPS reported on January 29 will remain unchanged.

Approximately $820,000 of the adjusted revenue and associated cost of sales of $413,000 are expected to be recognized in the first quarter of 2008. Revised unaudited financial statements, which include the litigation settlement charge and related expenses, the effect of the year-end adjustments and a revised GAAP to non-GAAP reconciliation, are attached at the end of this release.


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