GALION, Ohio, Oct. 19 /PRNewswire-FirstCall/ -- PECO II, Inc. , a full-service provider of engineering and installation services and a manufacturer of communications power systems to the communications industry, announced today that it will outsource certain manufacturing operations to reduce costs, enhance its leading-edge customer responsiveness capability, and solidify its long-term competitive position.

John G. Heindel, President and Chief Executive Officer, said the Company intends to implement supply chain strategies to outsource the capabilities to world-class manufacturers. The Company plans to fully implement this initiative by March 31, 2007.

As part of this initiative, the Company will outsource its cable assemblies, printed wiring board, metals, and painting component manufacturing operations in its Galion, Ohio, facility. The Company expects to take a charge to its fourth-quarter financials, primarily for non-cash costs including inventory and fixed assets.

"Following our alliance with Delta Group, this initiative represents the next step in our ongoing drive to strengthen our competitive position and improve our long-term financial performance," said Heindel. "As we execute this strategic shift, we intend to ensure that our customers continue to receive the outstanding service that they have come to expect from PECO II. At the same time, we are deeply committed to treating our employees fairly and with compassion."

Employees were informed of this strategic initiative today. The Company will provide transition assistance to those whose positions are eliminated.

About PECO II, Inc.

PECO II, headquartered in Galion, Ohio, provides engineering and on-site installation services and designs, manufactures and markets communications power systems and power distribution equipment. As the largest independent full-service provider of telecommunications power systems, the Company provides total power quality and reliability solutions, and supports the power infrastructure needs of communications service providers in the local exchange, long-distance, wireless, broadband and Internet markets. Additional information about PECO II can be found at http://www.peco2.com/.

Forward-Looking Statements

Statements in this release that are not historical fact are forward- looking statements, which involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements, including those related to the nature, timing and costs of the Company's strategic initiatives. Factors that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, a general economic recession; a downturn in our principal customers' businesses; the growth in the communications industry; the ability to develop and market new products and product enhancements; the ability to attract and retain customers; competition and technological change; and successful implementation of the Company's business strategy. In addition, this release contains time-sensitive information that reflects management's best analysis only as of the date of this release. PECO II does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in PECO II's periodic filings with the Securities and Exchange Commission.

CONTACT: Sandra A. Frankhouse, Chief Financial Officer and Treasurer of
PECO II, +1-419-468-7600

Web site: http://www.peco2.com/

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