Net income attributable to Cogo Group, Inc. for the third quarter of 2010 was $4.6 million, up 38.2% from $3.4 million in the same period last year, with Non-GAAP net income (excluding share-based compensation expenses, acquisition-related costs, including amortization of intangible assets and related deferred taxation) attributable to Cogo Group, Inc. up 19.1% from the same period last year. Earnings per share "EPS") Diluted attributable to Cogo Group, Inc. on a GAAP basis was $0.12, and $0.21 on a Non-GAAP basis. Non-GAAP Diluted EPS was up 16.7% from the third quarter of 2009.

Key Financial Indicators
(all numbers in USD thousands, except share data)
							
							Q3 2010(1)	Q3 2009(1)
							(unaudited)	(unaudited)	Percent Change
							----------------	----------------	---------------------
Net Revenue						$100,200 		$82,042  		22.1%
Cost of Sales 						$86,004 		$70,201 		22.5%
Gross Profit						$14,196 		$11,841 		19.9%
Operating Expenses						$8,962 		$9,206 		-2.7%
Net Income attributable to Cogo Group, Inc. 			$4,648		$3,363		38.2%
EPS Diluted attributable to Cogo Group, Inc.			$0.12 		$0.09 		33.3%
Non-GAAP EPS Diluted attributable to Cogo Group, Inc.(2)	$0.21 		$0.18  		16.7%

(1)	The US dollar amounts are calculated based on a conversion rate of US $1 to 
	RMB 6.6905 as of September 30, 2010 and US $1 to RMB 6.8262 as of September 30, 2009.
(2)	Included in the Q3 2010 net income attributable to Cogo Group, Inc. was $2.6 million 
	of share-based compensation expense recognized in accordance with Accounting Standards
	Codification ("ASC") 718, Compensation-Stock Compensation and $0.7 million of acquisition
	related costs, net, such as amortization and impairment of intangible assets and related 
	deferred taxation. Non-GAAP net income attributable to Cogo Group, Inc., excluding the effects
	of share-based compensation expense and acquisition related costs, was $8.0 million.

Financial Results
Revenue for the third quarter was $100.2 million, a 22.1% increase from the $82.0 million reported for the same period in 2009. The revenue breakdown is as follows:

Cogo's cost of sales, which includes the aggregate purchase of components from suppliers and the direct cost of services, was $86.0 million compared to $70.2 million in the third quarter of 2009, representing an increase of 22.5% year-over-year. Gross profit for the third quarter was $14.2 million, up 19.9% from $11.8 million during the third quarter of last year. Gross margin for third quarter was 14.2%, compared to 14.4% reported for the third quarter of 2009.

Operating expenses, including selling, general and administrative, and research and development, totaled $9.0 million, down 2.7%, compared to $9.2 million reported for the third quarter of last year.

Income from operations was $5.2 million, an increase of 98.6% from $2.6 million reported in the same period of 2009. Operating margin for the third quarter was 5.2% compared to 3.2% for the third quarter of 2009. Excluding the effects of share-based compensation and acquisition-related costs, operating margin would have been 8.7% for the third quarter of 2010, similar to the same period in 2009.

The effective tax rate for the third quarter of 2010 was 11.7%, compared to 12.9% for the same period in 2009. Noncontrolling interests' share of income was $0.05 million for the third quarter of 2010, down from $0.3 million in the corresponding period of 2009.

Net income attributable to Cogo Group, Inc. for the third quarter of 2010 was $4.6 million or EPS Diluted attributable to Cogo Group, Inc. of $0.12 on a GAAP basis, compared to net income of $3.4 million, or EPS Diluted attributable to Cogo Group, Inc. of $0.09, in the third quarter of 2009. Included in the third quarter of 2010 was $2.6 million attributable to share-based compensation expense and $0.7 million attributable to acquisition-related costs, including amortization of intangible assets and related deferred taxation. Excluding stock-based compensation expenses and acquisition-related costs and including amortization of intangible assets and related deferred taxation, the net income would have been $8.0 million or $0.21 Non-GAAP EPS Diluted attributable to Cogo Group, Inc. for the third quarter of 2010. The weighted average number of shares used in the calculation of diluted EPS was 37.9 million compared to 37.8 million in the third quarter of 2009.

For the nine month period ended September 30, 2010, the Company reported revenue of $275.0 million, an increase of 25.6% from the $219.0 million reported during the same period in 2009. Gross profit was $38.9 million, an increase of 24.2% from $31.3 million reported during the nine month period ended September 30, 2009. Gross margin was 14.1% of sales, down from a gross margin of 14.3% of sales for the same period last year. Net operating expenses were $25.8 million, slightly up from $25.0 million for the same period last year. Income from operations was $13.2 million, an increase of 106.8%, from the $6.4 million reported during the prior year period. The Company had an effective tax rate of 10.6% compared to 11.6% during the prior year period. Noncontrolling interests' share of income was $0.1 million as compared to $0.4 million during the same period in 2009. Net income attributable to Cogo Group, Inc. for the nine month period was up 64.5% to $12.3 million, or $0.32 per fully diluted share, compared to $7.5 million, or $0.20 per fully diluted share, for the same period last year.

Balance Sheet
The Company completed the quarter with cash of $137.1 million, up $39.3 million from the $97.8 million reported at the end of 2009. Total net cash at the end of the third quarter was $80.7 million. Pledged bank deposits were $20.0 million as of September 30, 2010 and $17.0 million as of December 31, 2009. Total bank borrowings as of September 30, 2010 were $76.4 million compared with $17.5 million as of December 31, 2009. Inventories increased from $21.4 million on December 31, 2009 to $44.3 million as of September 30, 2010, attributed to the Company's expectations of strong demand across all business segments for the remainder of 2010 and 2011. Accounts receivable decreased from $90.5 million as of December 31, 2009 to $89.4 million as of September 30, 2010, and was collected in an average of 82 days during the third quarter. Inventory turnover in the third quarter of 2010 was 47 days. Accounts payable decreased slightly from $11.9 million at the end of 2009 to $11.8 million as of September 30, 2010. Cogo Group, Inc. equity was $243.4 million as of September 30, 2010, an increase from $226.1 million as of December 31, 2009. Operating cash flow was positive at $5.3 million in the third quarter of 2010.

Business Outlook
Management's guidance for the fourth quarter of 2010 is $107-108 million in revenue and an estimated Non-GAAP EPS Diluted of $0.22-0.23. The Company continues to target longer term gross margins of 15% and operating margins of 10%.

Jeffrey Kang, CEO and Chairman of Cogo, remarked, "I am very pleased by the continued strong execution by the Cogo team in the third quarter of 2010, and I remain optimistic about our prospects for the rest of 2010 and 2011. Cogo's strong growth in the third quarter demonstrates our return to a sustainable high growth mode. I continue to see promising new opportunities in a variety of end markets, including automotive, HDTV, smart meters/smart grid, tablets and 3G Smartphones and across all of our industrial verticals. The Company is using cash to help drive revenue growth and opportunistically repurchase stock. I also anticipate growth in our Small and Medium Enterprise 'SME' customer base and continued growth of our SME Average Revenue Per User ('ARPU'). We believe an improving 3G handset landscape is helping to drive growth in our digital media end market, primarily through increased dollar content per device.

"While China's GDP growth may slow in 2011 versus 2010, recent manufacturing data from China indicates a very robust economy, and I am confident that the government's monetary and fiscal policies will continue to drive very strong economic growth, and at the same time attempt to stem concerns over inflation. I also expect technology spending to remain on its positive trajectory. Overall, I consider China to be a very favorable place to do business and see multiple opportunities for new revenue growth as we head into 2011," Mr. Kang said.

Cogo 2010 Q3 Earnings Results Conference Call
Date/ Time:
November 4, 2010 (Thursday) @ 4:30 PM (ET)

Conference Call:
US/ Canada Toll-Free: 1-877-941-1427
International: +1-480-629-9664

Webcast/ Audio Recording:
http://viavid.net/dce.aspx?sid=00007BF2

Replay (from 11/04/2010 at 7:30 pm to 11/11/2010 at 11:59 pm ET):
US/ Canada Toll-Free: 1-877-870-5176 (Passcode: 4374132)
International: +1-858-384-5517 (Passcode: 4374132)

About Cogo Group, Inc.:
Cogo Group, Inc. (NASDAQ: COGO) is a leading provider of customized embedded solutions for the technology manufacturing sector in China. The Company believes it acts as a proxy to China's technology industry as it works with virtually all the major ODMs and OEMs in China. Cogo leverages these relationships and combines their IP to create designs that Cogo then sells to electronic manufacturers. These designs allow manufacturers to reduce their time to market for new products and ultimately increase sales. Cogo focuses on the telecommunications equipment, digital media and industrial applications end-markets for their customized design modules while also offering business and engineering services to their large telecommunications equipment vendor customers. Over the last fifteen years, Cogo has grown its customer list to include nearly 1,500 manufacturers across the telecommunications equipment, digital media and industrial applications markets, covering both multinational Chinese subsidiaries and Chinese domestic companies.

Safe Harbor Statement:

This press release includes certain statements that are not descriptions of historical facts, but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include statements about our proposed discussions related to our business or growth strategy such as growth in digital media, telecommunications and industrial applications businesses, as well as our potential acquisitions, which are subject to change. Such information is based upon expectations of our management that were reasonable when made, but may prove to be incorrect. All such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions, which are subject to change. For further descriptions of other risks and uncertainties, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at www.sec.gov.

About Non-GAAP Financial Measures:
To supplement Cogo Group, Inc.'s consolidated financial results presented in accordance with GAAP, Cogo uses the following measures defined as Non-GAAP financial measures by the SEC: 1) Non-GAAP net income attributable to Cogo Group, Inc. which is net income attributable to Cogo Group, Inc. excluding share-based compensation expenses and acquisition related costs, net, such as amortization and impairment of intangible assets, related deferred taxation, extraordinary gain on bargain purchase and impairment of goodwill and 2) Non-GAAP basic and diluted EPS attributable to Cogo Group, Inc., which is basic and diluted EPS excluding share-based compensation expenses and acquisition related costs such as amortization and impairment of intangible assets, related deferred taxation, extraordinary gain on bargain purchase and impairment of goodwill. The presentation of these Non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these Non-GAAP financial measures, please see the table captioned "Unaudited Reconciliations of Non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

Cogo Group, Inc. believes that these Non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses and acquisition related costs such as amortization and impairment of intangible assets that may not be indicative of its operating performance from a cash perspective. Cogo Group, Inc. believes that both management and investors benefit from referring to these Non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These Non-GAAP financial measures also facilitate management's internal comparisons to Cogo Group, Inc.'s historical performance and liquidity. Cogo Group, Inc. computes its Non-GAAP financial measures using the same consistent method from quarter to quarter.

Cogo Group, Inc. believes these Non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using Non-GAAP net income, Non-GAAP basic and diluted earnings per share, Non-GAAP income from operation and Non-GAAP operating margin is that these Non-GAAP measures exclude share-based compensation charge and acquisition related costs such as amortization and impairment of intangible assets, related deferred taxation, extraordinary gain on bargain purchase and impairment of goodwill that have been and will continue to be for the foreseeable future a recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each Non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to Non-GAAP financial measures.