Except for the historical information contained herein, we wish to caution you that certain matters discussed in this report constitute forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including, without limitation, those risks and uncertainties discussed under the heading "Risk Factors" contained in our Definitive Proxy Statement on Schedule 14A with respect to a Special Meeting of Stockholders filed with the Securities and Exchange Commission (the "SEC") on December 28, 2012 (the "Definitive Proxy Statement") and our Annual Report on Form 10-K for the fiscal year ended July 31, 2012. The information discussed in this report should be read in conjunction with our Definitive Proxy Statement and Annual Report on Form 10-K and other reports we file from time to time with the SEC. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise. Forward-looking statements include statements regarding our expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words.

Available Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the SEC. These reports, any amendments to these reports, proxy and information statements and certain other documents we file with the SEC are available through the SEC's website at www.sec.gov or free of charge on our website as soon as reasonably practicable after we file the documents with the SEC. The public may also read and copy these reports and any other materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Executive Summary

Prior to February 1, 2013, the Company developed and marketed Intelligent Bandwidth Management solutions for fixed line and mobile network operators worldwide and provided services associated with such products (the "Intelligent Bandwidth Management Business"), and, prior to November 1, 2012, also developed and marketed a mobile broadband optimization solution (the "IQstream Business"). As used in this report, unless otherwise expressly stated or the context indicates otherwise, "Sycamore," "we," "us" or "our" refers collectively to Sycamore Networks, Inc. (the "Company") and its subsidiaries.

On October 23, 2012, the Company entered into an Asset Purchase and Sale Agreement (the "Asset Sale Agreement") with Sunrise Acquisition Corp. (now known as Sycamore Networks Solutions, Inc.), a portfolio company of Marlin Equity Partners ("Buyer"), pursuant to which Buyer agreed to acquire substantially all of the assets (the "Asset Sale") primarily related to the Intelligent Bandwidth Management business, including inventory, fixed assets, intellectual property rights (other than patents and patent applications), contracts, certain real estate leases, Sycamore's subsidiaries in Shanghai (subject to the receipt of government approval), the Netherlands and Japan, and certain shared facilities and assets for $18.75 million in cash, subject to a working capital adjustment, and the assumption by Buyer of certain liabilities. The Company's stockholders authorized the Asset Sale at a Special Meeting of Stockholders held on January 29, 2013 (the "Special Meeting"). Following the receipt of stockholder approval, on January 31, 2013, the Company completed the Asset Sale pursuant to the Asset Sale Agreement. The transfer of the equity interests of the Company's subsidiary in Shanghai is expected to occur at a later date following the receipt of Chinese regulatory approval. In connection with the closing of the Asset Sale, Buyer acquired substantially all of the Company's operating assets, including substantially all of the Company's accounts receivable, inventories and prepaid and other assets, and assumed most of the Company's remaining current liabilities, including substantially all of the Company's deferred revenue and accrued warranty obligations.

In conjunction with the approval of the Asset Sale Agreement, the Company's Board of Directors (the "Board") also approved the liquidation and dissolution of the Company (the "Dissolution") pursuant to a Plan of Complete Liquidation and Dissolution (the "Plan of Dissolution") following the completion of the Asset Sale. The Plan of Dissolution was also approved by the Company's stockholders at the Special Meeting. On March 4, 2013, the Company announced that, for the reasons stated in the Definitive Proxy Statement and following a review of the

Company's strategic alternatives for all of the Company's assets and available options for providing value to the Company's stockholders, the Board determined that it is advisable and in the best interests of stockholders to proceed with the Dissolution effective as of the close of business on March 7, 2013. The Company intends to file a certificate of dissolution with the Delaware Secretary of State (the "Certificate of Dissolution") on March 7, 2013. In connection with the filing of the Certificate of Dissolution, the Company will close its stock transfer books and discontinue recording transfers of its common stock, $0.001 par value per share (the "Common Stock") on March 7, 2013. Also on March 4, 2013, the Company submitted a request to The NASDAQ Stock Market ("NASDAQ") to suspend trading of the Common Stock on the NASDAQ Global Select Market effective as of the close of business on March 7, 2013, and notified NASDAQ that the Company intends to file a Form 25 with the SEC to delist the Common Stock from the NASDAQ Global Select Market on or about March 15, 2013.

On November 1, 2012, the Board approved a plan to halt further development and marketing of the IQstream Business. The Company continues to pursue strategic alternatives for the IQstream Business, including the possible sale of the assets and technology of the IQstream Business, and has retained a limited number of employees to maintain the IQstream technology and assist the Company in its strategic efforts relating to the IQstream Business.

As a result of the halting of further development and marketing of the IQstream Business and the completion of the Asset Sale, the Company no longer has any operating assets or revenue and, in light of the Board's determination to proceed with the Dissolution, the Company does not intend to acquire any operating or revenue producing assets. Furthermore, in connection with the closing of the transactions contemplated by the Asset Sale Agreement, Sycamore entered into a non-competition and non-solicitation agreement with Buyer pursuant to which Sycamore agreed not to compete with Buyer with respect to the Intelligent Bandwidth Management Business, not to hire employees of Buyer and not to allow any of Sycamore's officers or directors to solicit such employees to work for Sycamore or any other person, in each case subject to certain exceptions and for a period of eighteen months following the date of the closing of the Asset Sale. Upon filing of the Certificate of Dissolution, the Company intends to operate in accordance with the Plan of Dissolution, which contemplates an orderly wind down of the Company's business, including the disposition of the IQstream Business, the sale or monetization of the Company's other remaining non-cash assets, and the satisfaction or settlement of its liabilities and obligations, including contingent liabilities and claims. Subject to uncertainties inherent in the winding up of the Company's business, we expect to make a liquidating distribution as promptly as practicable after payment of, or provision for, outstanding claims in accordance with Delaware law. No assurances can be made as to the ultimate amounts to be distributed or the timing of any liquidating distributions.

On October 11, 2012, the Company paid a special cash distribution to its stockholders of $10.00 per share of Common Stock, or $288.8 million in the aggregate. On November 12, 2012, the Company paid a special cash distribution to its stockholders of $2.00 per share of Common Stock, or $57.8 million in the aggregate. On December 20, 2012, the Company paid a special cash distribution to its stockholders of $0.50 per share of Common Stock, or approximately $14.4 million in the aggregate. As a result of having an accumulated deficit, the special cash distributions were recorded as reductions to additional paid-in capital. On February 28, 2013, the Company paid a special cash distribution to its stockholders of $1.81 per share of Common Stock, or $52.3 million in aggregate.

Critical Accounting Policies and Estimates

Preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Management believes the most complex and sensitive judgments, because of their significance to the consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2012 describes the significant accounting estimates and policies used in the preparation of the financial statements. Actual results in these areas could differ from management's estimates. There have been no significant changes in the Company's critical accounting policies during the first six months of fiscal 2013.

Results of Operations

Revenue

The following table presents product and service revenue (in thousands, except
percentages):



                                                                 Three Months Ended                                                        Six Months Ended
                                          January 26,       January 28,        Variance          Variance          January 26,       January 28,        Variance          Variance
                                             2013              2012           in Dollars        in Percent            2013              2012           in Dollars        in Percent
Revenue
Product                                  $       4,591     $       7,369     $     (2,778 )             (38 )%    $      11,775     $      17,267     $     (5,492 )             (32 )%
Service                                          4,879             5,815             (936 )             (16 )%            9,759            11,297           (1,538 )             (14 )%

Total revenue                            $       9,470     $      13,184     $     (3,714 )             (28 )%    $      21,534     $      28,564     $     (7,030 )             (25 )%

Total revenue was derived exclusively from our Intelligent Bandwidth Management products and services, and decreased for the three and six months ended January 26, 2013 compared to the comparable periods ended January 28, 2012. Product revenue decreased for the three and six months ended January 26, 2013 compared to the same periods ended January 28, 2012, primarily due to a decrease in demand for our multiservice access products. Service revenue consists primarily of fees for services relating to the maintenance of our products, installation services and training. Service revenue decreased for the three and six months ended January 26, 2013 compared to the same periods ended January 28, 2012, primarily due to decreased maintenance and installation services.

For the six months ended January 26, 2013, two customers each accounted for more than 10% of our total revenue. International revenue represented 22% of our total revenue. Following the completion of the Asset Sale, the Company no longer has any operating assets or revenue and, in light of the Board's determination to proceed with the Dissolution, the Company does not intend to acquire any operating or revenue producing assets.

Gross Profit

The following table presents gross profit for product and services (in
thousands, except percentages):



                          Three Months Ended                      Six Months Ended
                    January 26,         January 28,        January 26,        January 28,
                       2013                2012               2013               2012
   Gross profit:
   Product         $       2,245       $       3,876      $       6,272      $       9,406
   Service                 3,204               3,873              6,338              7,461

   Total           $       5,449       $       7,749      $      12,610      $      16,867

   Gross profit:
   Product                    49 %                53 %               53 %               55 %
   Service                    66 %                67 %               65 %               66 %
   Total                      58 %                59 %               59 %               59 %

Product gross profit

Cost of product revenue consists primarily of amounts paid to third-party contract manufacturers for purchased materials and services, other fixed manufacturing costs and provisions for warranty, scrap, rework, and provisions which may be taken for excess or slow moving inventory. Product gross profit decreased for the three and six months ended January 26, 2013 compared to the same period ended January 28, 2012. The decrease was primarily due to a decrease in demand for our multiservice access products partially offset by lower fixed manufacturing costs.

Service gross profit

Cost of service revenue consists primarily of costs of providing services under customer service contracts, which include salaries and related expenses and other fixed costs. Service gross profit decreased for the three and six months ended January 26, 2013 compared to the same period ended January 28, 2012. The decrease was primarily due to decreased maintenance and installation services partially offset by lower fixed service related costs.

Operating Expenses

The following table presents operating expenses (in thousands, except
percentages):



                                                                    Three Months Ended                                                        Six Months Ended
                                              January 26,       January 28        Variance          Variance          January 26,       January 28         Variance          Variance
                                                 2013              2012          in Dollars        in Percent            2013              2012           in Dollars        in Percent

Research and development                     $       4,177     $      7,048     $     (2,871 )             (41 )%    $      10,666     $     13,533      $     (2,867 )             (21 )%
Sales and marketing                                  2,257            2,557             (300 )             (12 )%            4,638            5,227              (589 )             (11 )%
General and administrative                           2,793            2,140              653                31 %             5,880            4,125             1,755                43 %
Restructuring                                          264               -               264               100 %             2,252             (271 )           2,523               100 %

Total operating expenses                     $       9,491     $     11,745     $     (2,254 )             (19 )%    $      23,436     $     22,614      $        822                 4 %

Research and Development Expenses

Research and development expenses decreased for the three and six months ended January 26, 2013 compared to the same periods ended January 28, 2012. The decrease was primarily due to our cost reduction actions associated with the IQstream Business. As a result of the completion of the Asset Sale and the Company's decision to liquidate and dissolve, we do not expect any future research and development expenses other than those incurred in connection with our retaining a limited number of employees to assist the Company in its strategic efforts relating to the IQstream Business and efforts to monetize certain non-cash assets.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries, commissions and related expenses, and other sales and marketing support expenses. Sales and marketing expenses decreased for the three and six months ended January 26, 2013 compared to the same period ended January 28, 2012, primarily due to lower personnel expenses related to lower commission expense associated with lower period over period revenue. As a result of the completion of the Asset Sale and the Company's decision to liquidate and dissolve, we do not expect any sales and marketing expenses in the future.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses, professional fees and other general corporate expenses. General and administrative expenses increased for the three and six months ended January 26, 2013 compared to the same periods ended January 28, 2012. The increases were primarily due to $0.9 million and $2.1 million, respectively, of professional and advisory fees associated with the Asset Sale and the Dissolution. In accordance with the Plan of Dissolution, the Company intends to retain a limited number of general and administrative employees to assist with the completion of the Dissolution. In addition, the Company expects to continue to incur costs with respect to professional fees and other general corporate expenses in connection with the completion of the Dissolution.

Restructuring Charges

During the first quarter of fiscal 2013, the Company implemented cost-reduction actions associated with the IQstream Business, including workforce reductions and other cost containment measures. The Company recorded a workforce reduction restructuring charge of $1.6 million primarily related to employee separation packages, which include severance pay, benefits continuation and outplacement costs. The Company also recorded a restructuring charge of $0.4 million related to certain purchase commitments for the IQstream Business that have no future benefit.

During the second quarter of fiscal 2013, the Company halted further development and marketing of the IQstream Business and took further cost reduction actions associated with the IQstream Business. The Company recorded a workforce reduction restructuring charge of $0.3 million primarily related to employee separation packages, which include severance pay, benefits continuation and outplacement costs.

These actions are summarized below:

                                           Accrual                                                     Accrual
                                          Balance at                                                 Balance at
                                           July 31,         Q113         Q213                        January 26,
                                             2012         Charges       Charges       Payments          2013

Workforce reduction                      $         -      $  1,577     $     264     $    1,679     $         162
Contract termination costs                         -           411            -             341                70

Total                                    $         -      $  1,988     $     264     $    2,020     $         232

The Company expects to pay substantially all of these costs during the third quarter of fiscal 2013.

During the first quarter of fiscal 2012, the Company reversed the balance of a reserve for the consolidation of its Chelmsford, Massachusetts facility totaling $0.2 million. The adjustment related to a change in the previously estimated restructuring liability resulting from an amendment to extend the term of the facility lease and was recorded to operating expenses.

We expect to record additional restructuring charges in connection with the Dissolution.

Interest and Other Income, Net

The following table presents interest and other income, net (in thousands,
except percentages):



                                                                 Three Months Ended                                                               Six Months Ended
                                        January 26,         January 28,         Variance            Variance            January 26,         January 28,         Variance            Variance
                                           2013                2012            in Dollars          In Percent              2013                2012            in Dollars          In Percent
Interest and other income, net         $          35       $         391       $      (356 )               (91 )%      $         236       $         625       $      (389 )               (62 )%

Interest and other income net decreased for the three and six months ended January 26, 2013 compared to the same period ended January 28, 2012. The decrease was primarily due to a lower average investment balance as a result of the Company's payment of cash distributions totaling $361 million, in the aggregate, in fiscal 2013.

Income Tax Expense

Income tax expense was $1.2 million and $1.4 million for the three and six months ended January 26, 2013, respectively, primarily related to the forgiveness of an intercompany receivable due from the Company's Shanghai subsidiary in December 2012 in connection with the Asset Sale creating an income tax liability in China of $1.1 million, which was paid in the quarter ended January 26, 2013. Income tax expense for the three and six month periods ended January 28, 2012 of $0.1 million and $0.2 million, respectively, related to income tax expense in certain states and profitable foreign jurisdictions.

As a result of having substantial accumulated net operating losses, the Company determined that it is more likely than not that our deferred tax assets will not be realized. Therefore, we maintain a valuation allowance on the full amount of our net deferred tax assets. If the Company were to generate future taxable income against which these tax attributes may be applied, the net operating loss carry-forwards may be utilized and some or all of the valuation allowance reversed. If the valuation allowance is reversed, portions would be recorded as an increase to paid-in capital and the remainder would be recorded as a reduction in income tax expense.

The occurrence of ownership changes, as defined in Section 382 of the Internal Revenue Code, as amended (the "Code"), is not controlled by the Company, and could significantly limit the amount of net operating loss carryforwards and research and development credits that could be utilized annually to offset future taxable income. The Company completed an updated Section 382 study for the period April 2006 through July 31, 2011 and the results of this study showed that no ownership change within the meaning of the Code had occurred from April 2006 through July 31, 2011.

Liquidity and Capital Resources

Total cash, cash equivalents and investments were $64.5 million at January 26, 2013 compared to $439.4 million at July 31, 2012. Included in the January 26, 2013 balances were cash and cash equivalents of $36.5 million, compared to $136.7 million at July 31, 2012. The total decrease in cash and cash equivalents of $100.1 million during the six months ended January 26, 2013 was primarily attributable to cash used in financing activities of $361.0 million and cash used in operating activities of $13.8 million, offset by cash provided by investing activities of $274.7 million.

Net cash used in operating activities during the six months ended January 26, 2013 was $13.8 million. Net loss was $12.0 million including non-cash charges for share-based compensation of $1.4 million, an inventory provision of $0.1 million and depreciation and amortization of $1.0 million. Accounts receivable increased to $8.4 million at January 26, 2013 from $7.8 million at July 31, 2012. The increase was primarily due to the timing and levels of shipments within the fiscal quarter and service contract renewals. Our accounts receivable and days sales outstanding are impacted primarily by the timing of shipments, collections performance and timing of support contract renewals. Deferred revenue decreased to $7.8 million at January 26, 2013 from $9.3 million at July 31, 2012. The decrease was primarily due to the timing of service contract renewals.

Net cash provided by investing activities during the six months ended January 26, 2013 was $274.7 million and consisted of net maturities of investments.

Net cash used in financing activities during the six months ended January 26, 2013 was $361.0 million and relates to the cash distributions that were paid on October 11, 2012, November 12, 2012 and December 20, 2012.

Our primary source of liquidity comes from our cash, cash equivalents and investments, which totaled $64.5 million as of January 26, 2013, the majority of which is held in the United States. Our investments are classified as available-for-sale and consist of marketable securities that are readily convertible to cash, including certificates of deposits and government securities. As of January 26, 2013, $27.9 million of investments with maturities of less than one year were classified as short-term investments. As of January 26, 2013, we did not have any outstanding debt or credit facilities, and do not anticipate entering into any debt or credit agreements in the foreseeable future.

On January 31, 2013, the Asset Sale was completed and the Company received proceeds of $18.75 million plus reimbursement of certain costs previously paid by the Company on behalf of Buyer of approximately $0.6 million. On February 7, 2013, the Board approved a special cash distribution of $1.81 per share of Common Stock, or $52.3 million in the aggregate, which was paid to stockholders on February 28, 2013.

We believe that our current cash, cash equivalents and investments are sufficient to satisfy our anticipated cash requirements through the Dissolution period.

Commitments, Contractual Obligations and Off-Balance Sheet Arrangements

As of January 26, 2013, our future obligations, which consist of contractual
commitments for operating leases and inventory and other purchase commitments,
were as follows (in thousands):



                                                        Less than
                                            Total        1 Year         1-3 Years      3-5 Years       Thereafter

Operating leases                           $ 2,859     $     1,246     $     1,613     $       -      $         -
Inventory and other purchase commitments     2,412           2,412              -              -                -
. . .