BigBand Networks (BBND)

Other income (expense), net, which consists primarily of foreign exchange gains (losses), was an expense of $0.1 million for the three months ended September 30, 2008 compared to an expense of $0.4 million for the three months ended September 30, 2007.

Other income (expense), net for the nine months ended September 30, 2008 was income of $1.3 million compared to an expense of $5.4 million for the nine months ended September 30, 2007. In May 2008, we reduced our forecasted cash flows in Israeli New Shekels and therefore reduced the notional value of our outstanding derivatives with maturity dates from June through December 2008. As a result of this change in forecasted cash flow, the derivative instruments were no longer deemed to be highly effective resulting in the ineffective portion of the gain on these derivatives of $0.8 million being recognized in other income (expense), net in the nine months ended September 30, 2008. The nine months ended September 30, 2007 included a $5.0 million charge from fair value adjustments of preferred stock warrants. Upon the completion of our initial public offering on March 27, 2007, the warrants to purchase redeemable convertible preferred stock became warrants to purchase our common stock and accordingly we ceased adjusting these warrants for changes in fair value and reclassified their respective liabilities to stockholders’ equity.

Other income (expense), net for the three months ended June 30, 2008 was $1.4 million compared to $0.1 million for the three months ended June 30, 2007. During the three months ended June 30, 2008, we reduced our forecasted cash flows in Israeli New Shekels and reduced the notional value of our outstanding derivatives with maturity dates of June through December 2008. As a result, our derivative instruments were no longer deemed effective from an accounting perspective, resulting in a $1.0 million gain in the three months period ended June 30, 2008, which was not recognized in the comparable prior period. Additionally, we recognized foreign exchange gains of $0.4 million and $0.1 million for the three months ended June 30, 2008 and 2007, respectively.

Other income (expense), net for the six months ended June 30, 2008 was $1.4 million income compared to $5.0 million expense for the six months ended June 30, 2007. The six months ended June 30, 2008 included the $1.0 million derivative gain previously described, which was not realized in the comparable prior period and $0.5 million of exchange gains. The six months ended June 30, 2007 included a $5.0 million charge from fair value adjustments of preferred stock warrants. Upon the completion of our initial public offering on March 27, 2007, the warrants to purchase redeemable convertible preferred stock became warrants to purchase our common stock and accordingly we ceased adjusting these warrants for changes in fair value and reclassified their respective liabilities to stockholders’ equity.

In the three months ended March 31, 2008, other income (expense), net increased $6.3 million to an income of $1.8 million from an expense of $4.6 million in the three months ended March 31, 2007. Included in other income (expense), net in the three months ended March 31, 2008 and 2007 was interest income of $1.7 million and $0.9 million, respectively, and interest expense of $0.3 million in the three months ended March 31, 2007. The increase in interest income in the three months ended March 31, 2008 was the result of investing a significant portion of our initial public offering proceeds in interest earning cash equivalents and marketable securities. Proceeds from our initial public offering were also used to repay outstanding borrowings, which resulted in a decrease in interest expense in the three months ended March 31, 2008 compared to the same period in 2007. Other income (expense), net during the three months ended March 31, 2007 also reflected a $5.0 million charge from fair value adjustments of preferred stock warrants. Interest income is expected to drop each quarter for the remainder of the year, due to lower interest rates on cash and investments.

For the years ended December 31, 2007, 2006 and 2005, other income (expense), net, included foreign currency losses, proceeds from the sale of preferred stock of an unrelated company, and the expense resulting from fair value adjustments of redeemable convertible preferred stock warrants.

FACE="Times New Roman" SIZE="2">For the years ended December 31, 2007, 2006 and 2005, other income (expense), net, included foreign currency losses, proceeds from the sale of preferred stock of an unrelated company, and the expense resulting
from fair value adjustments of redeemable convertible preferred stock warrants.

In the three months ended September 30, 2007, other income (expense), net increased $2.3 million to an income of $1.4 million from an expense of $0.9 million in the three months ended September 30, 2006. Included in other income (expense), net in the three months ended September 30, 2007 and 2006 is interest income of $1.9 million and $0.4 million, respectively, and interest expense of $10,000 and $0.4 million, respectively. The increase in interest income in the three months ended September 30, 2007 is the result of investing a significant portion of our initial public offering proceeds in interest earning cash equivalents and marketable securities. Proceeds from our initial public offering were also used to repay outstanding borrowings which resulted in a decrease in interest expense in the three months ended September 30, 2007 compared to the same period in 2006. Other income (expense), net, during the three months ended September 30, 2007 also reflected a foreign exchange loss of $0.4 million associated with net liabilities denominated in New Israeli Shekels. Other income (expense), net, during the three months ended September 30, 2006 also reflected a $1.2 million charge from fair value adjustments of our preferred stock warrants and a gain on sale of investments of $0.6 million.

In the nine months ended September 30, 2007, other income (expense), net decreased $0.4 million to an expense of $1.1 million from an expense of $1.5 million in the nine months ended September 30, 2006. The net decrease includes approximately $5.0 million in fair value adjustments of our preferred stock warrants under FSP 150-5. As a result of our initial public offering, all outstanding preferred warrants subject to FSP 150-5 have been either terminated or became warrants to purchase common stock and, as a consequence, will not be subject to fair value adjustments in future periods. Also, included in other income (expense), net, in the nine months ended September 30, 2007 and 2006 is interest income of $4.9 million and $0.8 million, respectively, and interest expense of $0.6 million and $1.3 million, respectively.

In the three months ended June 30, 2007, other income (expense), net increased to an income of $2.0 million from an expense of $0.4 million in the three months ended June 30, 2006. Included in other expense in the three months ended June 30, 2007 and 2006 is interest expense of $0.3 million and $0.5 million, respectively, and interest income of $2.2 million and $0.3 million, respectively. The increased interest income in the three months ended June 30, 2007 is the result of our initial public offering which has substantially increased cash, cash equivalent and marketable securities balances. The cash raised during the initial public offering also allowed the repayment of outstanding borrowings which resulted in a decrease in interest expense in the three months ended June 30, 2007 compared to the same period in 2006. In the six months ended June 30, 2007, other income (expense), net increased to an expense of $2.6 million from an expense of $0.6 million in the six months ended June 30, 2006. The net increase includes approximately $5.0 million in fair value adjustments of our preferred stock warrants under FSP 150-5. As a result of our initial public offering, all outstanding preferred warrants subject to FSP 150-5 have been either terminated or became warrants to purchase common stock and, as a consequence, will not be subject to fair value adjustments in future periods. Also, included in other income (expense), net, in the six months ended June 30, 2007 and 2006 is interest expense of $0.6 million and $0.8 million, respectively, and interest income of $3.0 million and $0.5 million, respectively. The increased interest income in the six months ended June 30, 2007 is the result of our initial public offering which has substantially increased cash, cash equivalent and marketable securities balances. The cash raised during the initial public offering also allowed the repayment of outstanding borrowings which resulted in a decrease in interest expense in the six months ended June 30, 2007 compared to the same period in 2006.