UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q
(Mark One)
X      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2010
                               -----------------

__     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the transition period from _____________________ to ________________________


                          Commission file number 0-6620


                                  ANAREN, INC.
             (Exact name of registrant as specified in its Charter)

            New York                                    16-0928561
            --------                                    ----------
     (State of incorporation)               (I.R.S Employer Identification No.)

         6635 Kirkville Road                13057
         East Syracuse, New York            -----
         -----------------------            (Zip Code)
         (Address of principal
         executive offices)

Registrant's telephone number, including area code: 315-432-8909

--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate  by Check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __

Indicate by checkmark  whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be  submitted  and posted  pursuant to Rule 405 of  regulation  S-T  (Section
232.405 of this  chapter)  during the  preceding  12 months (or for such shorter
period that the registrant was required to submit and post such files. Yes __
No __

Indicate by check mark whether the Registrant is a large  accelerated  filer, an
accelerated  filer, a  non-accelerated  filer, or smaller  reporting company (as
defined in Rule 12b-2 of the Exchange Act).

Check One:  Large accelerated filer __      Accelerated filer X

            Non-accelerated filer  __       Smaller reporting company __

     Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes __ No X

     The  number  of  shares  of   Registrant's   Common   Stock  outstanding on
January 20, 2011 was 15,110,718.

<PAGE>

                                  ANAREN, INC.
                                    FORM 10-Q
                                      INDEX

PART I - FINANCIAL INFORMATION                                       Page No.
------------------------------                                       --------

       Item 1.    Financial Statements

                  Condensed Consolidated Balance Sheets as of            3
                  December 31, 2010 and June 30, 2010 (unaudited)

                  Condensed Consolidated Statements of Income            4
                  for the Three Months Ended December 31,
                  2010 and 2009 (unaudited)

                  Condensed Consolidated Statements of Income            5
                  for the Six Months Ended December 31,
                  2010 and 2009 (unaudited)

                  Condensed Consolidated Statements of Cash Flows        6
                  for the Six Months Ended December 31,
                  2010 and 2009 (unaudited)

                  Notes to Condensed Consolidated Financial              7 - 13
                  Statements (unaudited)

       Item 2.    Management's Discussion and Analysis                  14 - 20
                  of Financial Condition and Results of Operations

       Item 3.    Quantitative and Qualitative Disclosures About        20 - 21
                  Market Risk

       Item 4.    Controls & Procedures                                 21

PART II - OTHER INFORMATION
---------------------------

       Item 1A.   Risk Factors                                          21

       Item 6.    Exhibits                                              22

   Officer Certifications                                               23 - 27


                                       2
<PAGE>

   PART I - FINANCIAL INFORMATION

   Item 1.         Financial Statements

                                  ANAREN, INC.
                      Condensed Consolidated Balance Sheets
                       December 31, 2010 and June 30, 2010
                    (in thousands, except per share amounts)
                                   (unaudited)


                                                      December 31,     June 30,
                                                          2010           2010
                                                      ------------     --------
                     ASSETS
                     ------
Assets:
     Cash and cash equivalents                            $ 50,031     $ 50,521
     Securities held to maturity                             4,369        2,334
     Receivables, less an allowance of $358
        and $375 at December 31, 2010 and
        June 30, 2010, respectively                         26,715       29,124
     Inventories                                            35,218       31,361
     Prepaid expenses and other current assets               5,489        2,916
     Deferred income taxes                                   1,178        1,955
                                                          --------     --------
        Total current assets                               123,000      118,211
     Securities available-for-sale                              --        1,051
     Securities held to maturity                            16,831       19,756
     Property, plant, and equipment, net                    48,311       48,711
     Other assets                                            1,623        1,031
     Goodwill                                               42,435       42,435
     Other intangible assets, net of
       accumulated amortization                              9,557       10,153
                                                          --------     --------
          Total assets                                    $241,757     $241,348
                                                          ========     ========

       LIABILITIES AND STOCKHOLDERS' EQUITY
       ------------------------------------
Liabilities and Shareholders' Equity:
     Current installments of long-term obligation         $ 10,000     $ 10,000
     Accounts payable                                        7,331        9,271
     Accrued expenses                                        4,937        5,661
     Customer advance payments                                 268          888
     Other current liabilities                               2,403        2,920
                                                          --------     --------
        Total current liabilities                           24,939       28,740
     Deferred income taxes                                     682          726
     Pension and postretirement benefit obligation           7,326        7,083
     Long-term obligation                                   20,000       30,000
     Other liabilities                                       2,029        1,873
                                                          --------     --------
          Total liabilities                                 54,976       68,422
                                                          --------     --------
Stockholders' Equity:
      Common stock, $0.01 par value. Authorized
      200,000 shares; issued 28,942 and 28,506
      at December 31, 2010 and June 30, 2010,
      respectively                                             289          285
      Additional paid-in capital                           211,447      206,193
      Retained earnings                                    126,871      118,111
      Accumulated other comprehensive loss                  (2,091)      (2,813)
                                                          --------     --------
                                                           336,516      321,776
       Less 13,864 and 13,811  treasury  shares
       at December 31, 2010 and June 30, 2010,
       respectively, at cost                               149,735      148,850
                                                          --------     --------
          Total stockholders' equity                       186,781      172,926
                                                          --------     --------
      Total liabilities and stockholders' equity          $241,757     $241,348
                                                          ========     ========

      See accompanying notes to condensed consolidated financial statements


                                       3
<PAGE>

                                  ANAREN, INC.
                   Condensed Consolidated Statements of Income
                  Three Months Ended December 31, 2010 and 2009
                    (in thousands, except per share amounts)
                                   (unaudited)


                                                            2010         2009
                                                         ---------    ---------
Net Sales                                                $  43,443    $  41,019
Cost of Sales                                               27,149       26,713
                                                         ---------    ---------
        Gross profit                                        16,294       14,306

Operating Expenses:
   Marketing                                                 2,596        2,237
   Research and development                                  3,538        3,534
   General and administrative                                4,628        4,641
                                                         ---------    ---------
        Total operating expenses                            10,762       10,412
                                                         ---------    ---------
        Operating income                                     5,532        3,894

Other income (expense):
   Interest expense                                           (105)        (138)
   Other, primarily interest income                            177           86
                                                         ---------    ---------
        Total other income (expense), net                       72          (52)
                                                         ---------    ---------
        Income before income tax expense                     5,604        3,842
Income tax expense                                             950        1,320
                                                         ---------    ---------
        Net income                                       $   4,654    $   2,522
                                                         =========    =========

Earnings per share:
   Basic                                                 $    0.33    $    0.18
                                                         =========    =========
   Diluted                                               $    0.32    $    0.17
                                                         =========    =========

Weighted average common shares
   outstanding:
      Basic                                                 13,961       14,210
                                                         =========    =========
      Diluted                                               14,720       14,706
                                                         =========    =========

      See accompanying notes to condensed consolidated financial statements


                                       4
<PAGE>

                                  ANAREN, INC.
                   Condensed Consolidated Statements of Income
                   Six Months Ended December 31, 2010 and 2009
                    (in thousands, except per share amounts)
                                   (unaudited)


                                                            2010         2009
                                                         ---------    ---------
Net Sales                                                $  87,982    $  81,356
Cost of Sales                                               54,055       52,386
                                                         ---------    ---------
        Gross profit                                        33,927       28,970
Operating Expenses:
   Marketing                                                 4,995        4,599
   Research and development                                  7,369        7,142
   General and administrative                                9,862        9,122
                                                         ---------    ---------
        Total operating expenses                            22,226       20,863
                                                         ---------    ---------
        Operating income                                    11,701        8,107
Other income (expense):
   Interest expense                                           (289)        (321)
   Other, primarily interest income                            298          213
                                                         ---------    ---------
        Total other income (expense), net                        9         (108)
                                                         ---------    ---------
        Income before income tax expense                    11,710        7,999
Income tax expense                                           2,950        2,620
                                                         ---------    ---------
        Net income                                       $   8,760    $   5,379
                                                         =========    =========

Earnings per share:
   Basic                                                 $    0.63    $    0.38
                                                         =========    =========
   Diluted                                               $    0.60    $    0.37
                                                         =========    =========

Weighted average common shares
   outstanding:
      Basic                                                 13,900       14,163
                                                         =========    =========
      Diluted                                               14,573       14,727
                                                         =========    =========

      See accompanying notes to condensed consolidated financial statements


                                       5
<PAGE>

                                  ANAREN, INC.
                 Condensed Consolidated Statements of Cash Flows
                   Six Months Ended December 31, 2010 and 2009
                                 (in thousands)
                                   (unaudited)

                                                            2010          2009
                                                         ---------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                         $   8,760    $   5,379
      Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation                                           4,193        4,207
      Amortization                                             972          671
      Deferred income taxes                                    (34)        (158)
      Equity based compensation                              2,164        1,622

      Changes in operating assets and liabilities:
         Receivables                                         2,408       (1,376)
         Inventories                                        (3,836)       2,122
         Prepaid expenses and other current assets          (3,163)        (675)
         Accounts payable                                   (2,019)      (1,092)
         Accrued expenses                                     (724)      (1,640)
         Customer advance payments                            (620)          45
         Other liabilities                                     405          811
         Pension and postretirement benefit obligation         243          376
                                                         ---------    ---------
           Net cash provided by operating activities         8,749       10,292
                                                         ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Capital expenditures                                  (3,713)      (2,160)
      Maturities of held to maturity and sale of
        available-for-sale securities                        3,011       10,750
      Purchases of held to maturity securities              (1,057)          --
                                                         ---------    ---------
           Net cash (used in) provided by
             investing activities                           (1,759)       8,590
                                                         ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Payment on long-term obligation                      (10,000)      (9,800)
      Stock options exercised                                2,895        3,149
      Excess tax benefit from exercise of stock options        179          214
      Purchase of treasury stock                              (885)      (4,657)
                                                         ---------    ---------
           Net cash used in financing activities            (7,811)     (11,094)
                                                         ---------    ---------
Effect of exchange rates on cash                               331           16
                                                         ---------    ---------
           Net (decrease) increase in cash and
              cash equivalents                                (490)       7,804
       Cash and cash equivalents, beginning of year         50,521       49,893
                                                         ---------    ---------
       Cash and cash equivalents, end of period          $  50,031    $  57,697
                                                         =========    =========

Supplemental disclosures of cash flow information:
       Cash paid during the period for:
         Interest                                        $     261    $     454
                                                         =========    =========
       Income taxes, net of refunds                      $   5,280    $   2,810
                                                         =========    =========

     See accompanying notes to condensed consolidated financial statements.


                                       6
<PAGE>

                                  ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)


The condensed  consolidated  financial  statements are unaudited and reflect all
adjustments  (consisting of normal recurring  adjustments)  and accruals,  which
are, in the opinion of  management,  necessary  for a fair  presentation  of the
financial position and operating results for the interim periods.  The condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
consolidated financial statements and notes thereto,  together with management's
discussion  and  analysis of  financial  condition  and  results of  operations,
contained in the Company's  Annual Report on Form 10-K for the fiscal year ended
June 30,  2010.  The results of  operations  for the three and six months  ended
December 31, 2010 are not  necessarily  indicative of the results for the entire
fiscal year ending June 30, 2011, or any future interim period.

The income tax rate utilized for interim  financial  statement  purposes for the
three  months and six months  ended  December  31, 2010 is based on estimates of
income and utilization of tax credits for the entire fiscal year ending June 30,
2011.

(1)  Securities
The amortized cost and fair value of securities are as follows:

<TABLE>
<CAPTION>
                                                                       December 31, 2010
                                                ----------------------------------------------------------------
                                                                   Gross            Gross
                                                Amortized        unrealized       unrealized
(amounts in thousands)                             Cost            gains            losses            Fair value
                                                ---------        ----------       ----------          ----------
<S>                                              <C>                <C>               <C>               <C>
Securities held to maturity:
   Municipal bonds                               $18,531            $298              $--               $18,829
   Corporate bonds                                 2,170              54               --                 2,224
   Federal agency bonds                              499               5               --                   504
                                                 -------            ----              ---               -------
      Total securities held to maturity          $21,200            $357              $--               $21,557
                                                 =======            ====              ===               =======
</TABLE>

<TABLE>
<CAPTION>
                                                                         June 30, 2010
                                                ----------------------------------------------------------------
                                                                   Gross            Gross
                                                Amortized        unrealized       unrealized
(amounts in thousands)                             Cost            gains           losses             Fair value
                                                ---------        ----------       ----------          ----------
<S>                                              <C>                <C>              <C>                <C>
Securities available-for-sale:
   Auction rate securities                       $ 1,440            $ --             $(389)             $ 1,051

Securities held to maturity:
   Municipal bonds                               $21,088            $353             $  --              $21,441
   Corporate bonds                                   503               4                --                  507
   Federal agency bonds                              499               7                --                  506
                                                 -------            ----             -----              -------
      Total securities held to maturity          $22,090            $364             $  --              $22,454
                                                 =======            ====             =====              =======
</TABLE>

Contractual  maturities  of  marketable  debt  securities  held to maturity  are
summarized as follows:

<TABLE>
<CAPTION>
                                                       December 31, 2010                    June 30, 2010
                                                ----------------------------------------------------------------
                                                                     Fair                                  Fair
                                                Amortized           market          Amortized             market
                                                   Cost              value             Cost               value
                                                ---------           ------          ---------            -------
<S>                                              <C>                <C>              <C>                 <C>
(amounts in thousands)
 Within one year                                 $ 4,369            $ 4,447          $ 2,334             $ 2,379
 One year to three years                          16,831             17,110           19,756              20,075
                                                 -------            -------          -------             -------
    Total                                        $21,200            $21,557          $22,090             $22,454
                                                 =======            =======          =======             =======
</TABLE>


                                       7
<PAGE>

                                 ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

Contractual  maturities  of  auction  rate  securities  available  for  sale are
summarized as follows:

<TABLE>
<CAPTION>
                                                       December 31, 2010                    June 30, 2010
                                                ----------------------------------------------------------------
                                                                     Fair                                  Fair
                                                                    market                                market
                                                   Cost              value             Cost               value
                                                ---------           ------          ---------            -------
<S>                                              <C>                <C>              <C>                  <C>
(Amounts in thousands)
 Within one year                                 $ --               $ --             $1,440               $1,051
</TABLE>

(2)  Fair Value Measurements
The carrying amount of financial instruments,  including cash, trade receivables
and  accounts  payable,  approximated  their fair value as of December  31, 2010
because of the short maturity of these instruments. Also, the Company's carrying
cost for its revolving credit note approximates fair value.

The carrying value of cash equivalents are based on fair market value.

The following table provides the assets and liabilities carried at fair value as
measured on a recurring basis as of December 31, 2010:

<TABLE>
<CAPTION>
(amounts in thousands)
                                Total Carrying                              Significant other      Significant
                                   Value at           Quoted prices in         observable          unobservable
                                 December 31,          active markets            inputs               inputs
                                     2010                (Level 1)             (Level 2)             (Level 3)
                                --------------        ----------------      -----------------      ------------
<S>                                 <C>                   <C>                     <C>                 <C>
Asset Category
Cash equivalents                    $6,760                $6,760                  $ --                $ --
</TABLE>

(3)  Intangible Assets
The major components of intangible assets are as follows:

<TABLE>
<CAPTION>
                                                December 31, 2010                      June 30, 2010
(amounts in thousands)                      Gross                Net             Gross               Net
                                           Carrying           Carrying          Carrying          Carrying
                                            Amount             Amount            Amount            Amount
                                           --------           --------          --------          --------
<S>                                         <C>               <C>                <C>               <C>
Amortizable intangible assets:
   Customer relationships                   $7,530            $ 5,723            $7,530            $ 6,099
   Developed technology                        780                403               780                481
   Non-competition agreements                1,130                451             1,130                593
                                            ------            -------            ------            -------
      Total                                 $9,440            $ 6,577            $9,440            $ 7,173
                                            ======            =======            ======            =======

Non-amortizable intangible assets:
   Trade names                                                  2,980                                2,980
                                                              -------                              -------
Total intangible assets                                       $ 9,557                              $10,153
                                                              =======                              =======
</TABLE>

Intangible  asset  amortization  expense for the three months ended December 31,
2010 and 2009  aggregated  $0.3  million  in each  period and for the six months
ended  December  31,  2010 and 2009  aggregated  $0.6  million  in each  period.
Amortization  expense  related to  developed  technology  is recorded in cost of
sales,  and  amortization  expense  for  non-compete   agreements  and  customer
relationships is recorded in general and administrative expense.

There have been no changes to the  goodwill  balance in the three and six months
ended December 31, 2010.


                                       8
<PAGE>

                                 ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

(4) Inventories
Inventories are summarized as follows:

                                               December 31,            June 30,
(amounts in thousands)                             2010                  2010
                                               ------------            --------
Raw Materials                                     $18,761               $17,319
Work in process                                    12,605                 9,396
Finished goods                                      3,852                 4,646
                                                  -------               -------
                                                  $35,218               $31,361
                                                  =======               =======

(5) Property, Plant, and Equipment
Components of property, plant, and equipment consists of the following:

                                               December 31,            June 30,
(amounts in thousands)                             2010                  2010
                                               ------------            --------
Land and land improvements                       $   5,167             $  5,167
Construction in process                              3,386                1,451
Buildings, furniture, and fixtures                  34,298               34,052
Machinery and equipment                             63,492               62,267
                                                 ---------             --------
                                                   106,343              102,937
Less accumulated depreciation                      (58,032)             (54,226)
                                                 ---------             --------
                                                 $  48,311             $ 48,711
                                                 =========             ========

(6) Accrued Expenses
Accrued expenses consists of the following:

                                               December 31,            June 30,
(amounts in thousands)                             2010                  2010
                                               ------------            --------
Compensation                                      $3,732                $4,483
Health insurance                                     498                   423
Commissions and other                                707                   755
                                                  ------                ------
                                                  $4,937                $5,661
                                                  ======                ======

(7) Other Liabilities
Other liabilities consist of the following:

                                               December 31,            June 30,
(amounts in thousands)                             2010                  2010
                                               ------------            --------
Deferred compensation                             $   405               $   425
Supplemental retirement plan                          714                   670
Accrued lease                                       1,411                 1,107
Warranty accrual                                      332                   320
Income tax liability                                  791                 1,610
Deferred grant income                                 375                   375
Other                                                 404                   286
                                                  -------               -------
                                                    4,432                 4,793
Less current portion                               (2,403)               (2,920)
                                                  -------               -------
                                                  $ 2,029               $ 1,873
                                                  =======               =======


                                       9
<PAGE>

                                 ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

The Company provides warranty policies on its products. In addition, the Company
incurs  costs to service  our  products  in  connection  with  specific  product
performance  issues.  Liabilities for product warranties are based upon expected
future product  performance and durability,  and is estimated largely based upon
historical  experience.  Adjustments  are made to  accruals  as  claim  data and
historical  experience warrant. The changes in product warranty reserves for the
six months ended December 31, 2010, is as follows:

             (amounts in thousands)
             Balance as of July 1, 2010                $320
             Additions                                  251
             Costs incurred                            (221)
             Adjustments                                (18)
                                                       ----
             Balance as of December 31, 2010           $332
                                                       ====

(8) Income Taxes
Income  taxes  for  the  second   quarter  of  fiscal  2011  were  $1.0  million
representing an effective tax rate of 17.0%. This compares to income tax expense
of $1.3 million for the second quarter of fiscal 2010, representing an effective
tax rate of 34.4%.  This decrease  primarily  resulted from the reinstatement of
the Federal Research and Experimentation  credit retroactive to January 1, 2010.
The  effective  tax rate for fiscal  2011 is now  expected  to be  approximately
30.0%.

The Company is subject to income tax examinations for its U.S. federal taxes for
the fiscal years 2009 and 2010,  and for foreign,  state and local taxes for the
fiscal years 2007 through  2010.  One of the  Company's  recent  acquisition  is
currently  undergoing  an  IRS  examination  for a  year  before  the  Company's
ownership.  It is reasonably  possible that the  liability  associated  with the
Company's  unrecognized  tax benefits will increase or decrease  within the next
twelve  months as a result of this  examination  and with the  expiration of the
statutes of  limitations.  At this time an  estimate of the range of  reasonably
possible outcomes cannot be made.

(9)  Long-term Obligation
Borrowings  under a  revolving  credit  note  (Note),  with  Key  Bank  National
Association,  bears interest at the London  inter-bank offer rate (LIBOR),  plus
100 to 425 basis points,  or at the Lender's prime rate, minus (100) to plus 225
basis points,  depending upon the Company's  earnings  before interest and taxes
and  depreciation  and  amortization  (EBITDA)  performance  at the  end of each
quarter as measured by the  formula:  EBITDA  divided by the Current  Portion of
Long-term  Debt plus  interest  expense.  For the six months ended  December 31,
2010,  the weighted  average  interest rate on the  outstanding  borrowings  was
approximately 1.45%. In the six months ended December 31, 2010, the Company paid
$10.0  million on the Note.  The  Company's  indebtedness  and  obligations  are
guaranteed  by three of the  Company's  domestic  subsidiaries,  as well as,  an
assignment of the Company's interest in its foreign subsidiary.

(10)  Earning Per Share
Basic  earnings  per  share is based on the  weighted  average  number of common
shares outstanding.  Diluted earnings per share is based on the weighted average
number of common shares outstanding, as well as dilutive potential common shares
which,  in the Company's  case,  comprise  shares  issuable  under the Company's
Comprehensive  Long-Term  Incentive Plan. The weighted  average number of common
shares  utilized in the  calculation of the diluted  earnings per share does not
include  anti-dilutive shares aggregating 439,000 and 611,000 for the six months
ended  December 31, 2010 and 2009,  respectively.  The treasury  stock method is
used to calculate  dilutive  shares,  which reduces the gross number of dilutive
shares by the number of shares  purchasable  from the  proceeds  of the  options
assumed to be exercised.

                                       10
<PAGE>

                                 ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

The  following  table  sets  forth the  computation  of basic and fully  diluted
earnings per share:

<TABLE>
<CAPTION>
                                                     Three Months Ended              Six Months Ended
                                                         December 31                   December 31
                                                   ----------------------        ----------------------
(amounts in thousands)                               2010           2009           2010           2009
                                                   -------        -------        -------        -------
<S>                                                <C>            <C>            <C>            <C>
Numerator:
Net income                                         $ 4,654        $ 2,522        $ 8,760        $ 5,379
                                                   =======        =======        =======        =======

Denominator:
Denominator for basic earnings per
share outstanding                                   13,961         14,210         13,900         14,163
                                                   =======        =======        =======        =======

Denominator for diluted earnings per share:
   Weighted average shares outstanding              13,961         14,210         13,900         14,163
Common stock options and  restricted stock             759            496            673            564
                                                   -------        -------        -------        -------

Weighted average shares                             14,720         14,706         14,573         14,727
                                                   =======        =======        =======        =======
</TABLE>

(11)  Employee Benefit Plans
Defined Benefit Plan
Components  of net  periodic  pension  cost for the three and six  months  ended
December 31, are as follows:

<TABLE>
<CAPTION>
                                                     Three Months Ended             Six Months Ended
                                                         December 31                   December 31
                                                   ----------------------        ----------------------
                                                     2010          2009            2010           2009
                                                   -------        -------        -------        -------
<S>                                                <C>            <C>            <C>            <C>
(amounts in thousands)
Service cost                                       $    93        $    78        $   186        $   156
Interest cost                                          210            200            420            400
Expected return on plan assets                        (215)          (187)          (430)          (374)
Amortization of the unrecognized loss                  120             83            240            166
                                                   -------        -------        -------        -------
Net periodic benefit cost                          $   208            174        $   416            348
                                                   =======        =======        =======        =======
</TABLE>

Required  contributions  for fiscal 2011 are  approximately  $0.3 million,  $0.1
million has been paid in the six months ended December 31, 2010.

Postretirement Health Benefit Plan
Components  of net  periodic  postretirement  benefit cost for the three and six
months ended December 31, are as follows:

<TABLE>
<CAPTION>
                                                     Three Months Ended                Six Months Ended
                                                         December 31                      December 31
                                                   ----------------------        ----------------------
                                                     2010          2009            2010           2009
                                                   -------        -------        -------        -------
<S>                                                <C>            <C>            <C>            <C>
(amounts in thousands)
Service cost                                       $     9        $    20        $    18        $    40
Interest cost                                           17             40             34             80
Amortization of the unrecognized loss                  (18)             1            (36)             2
Amortization of the prior service cost                  (5)            (5)           (10)           (10)
                                                   -------        -------        -------        -------
Net periodic benefit cost                          $     3        $    56        $     6            112
                                                   =======        =======        =======        =======
</TABLE>


                                       11
<PAGE>

                                 ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

Expected  contributions  for fiscal 2011 are estimated to be approximately  $0.1
million.

(12)  Other Comprehensive Income
Other Comprehensive Income
Comprehensive income consists of the following:

<TABLE>
<CAPTION>
                                                     Three Months Ended             Six Months Ended
                                                         December 30                   December 31
                                                   ----------------------        ----------------------
                                                     2010          2009            2010           2009
                                                   -------        -------        -------        -------
<S>                                                <C>            <C>            <C>            <C>
(amounts in thousands)
Net income                                         $ 4,654        $ 2,522        $ 8,760        $ 5,379

Other comprehensive income:
   Foreign currency translation gain                   147              2            333             16
   Mark to market adjustment                           389             --            389             --
                                                   -------        -------        -------        -------

Comprehensive income                               $ 5,190        $ 2,524        $ 9,482        $ 5,395
                                                   =======        =======        =======        =======
</TABLE>

Accumulated Other Comprehensive Income (Loss)
The cumulative balance of each component of accumulated other comprehensive
income (loss) is as follows:

<TABLE>
<CAPTION>
                                         Foreign           Minimum             Mark to          Accumulated
                                        currency           pension             market              other
                                       translation        liability      available-for-sale   comprehensive
                                       adjustment        adjustment           securities        income (loss)
                                       ----------        ----------      ------------------   ---------------
<S>                                      <C>               <C>                <C>                 <C>
(amounts in thousands)
Balances at June 30, 2009                $ 1,404           $(3,412)           $  (389)            $(2,397)
Current period change                         62              (478)                --                (416)
                                         -------           -------            -------             -------
Balances at June 30, 2010                $ 1,466           $(3,890)           $  (389)            $(2,813)
Current period change                        333                --                389                 722
                                         -------           -------            -------             -------
Balances at December 31, 2010            $ 1,799           $(3,890)           $    --             $(2,091)
                                         =======           =======            =======             =======
</TABLE>

(13) Segment and Related Information

The Company's  two  reportable  segments are the Wireless  Group and the Space &
Defense Group.  These segments have been determined based upon the nature of the
products  and services  offered,  customer  base,  technology,  availability  of
discrete internal financial  information,  homogeneity of products, and delivery
channel,  and are  consistent  with the way the Company  organizes and evaluates
financial information  internally for purposes of making operating decisions and
assessing performance.

The Wireless Group designs,  manufactures,  and markets commercial products used
mainly by the wireless communications market. The Space & Defense Group designs,
manufactures,  and  markets  specialized  products  for the  space  and  defense
electronics  markets.  The Company's  Space & Defense Group  aggregates  certain
operating segments into one reportable  segment,  as the operating segments have
similar products, customers, and margins on products.


                                       12
<PAGE>

                                 ANAREN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

The following table reflects the operating results of the segments consistent
with the Company's internal financial reporting process. The following results
are used in part, by management, both in evaluating the performance of, and in
allocating resources to, each of the segments:

<TABLE>
<CAPTION>
                                                                          Space &
(amounts in thousands)                                   Wireless         Defense     Unallocated      Consolidated
                                                         --------         -------     -----------      ------------
<S>                                                       <C>              <C>          <C>               <C>
Net sales (Three Months Ended):
    December 31, 2010                                     $15,599          $27,844      $    --           $43,443
    December 31, 2009                                      12,383           28,636           --            41,019
Net sales (Six Months Ended):
    December 31, 2010                                      31,124           56,858           --            87,982
    December 31, 2009                                      26,794           54,562           --            81,356
Operating income (Three Months Ended)
    December 31, 2010                                       2,297            3,285          (50)            5,532
    December 31, 2009                                         537            3,683         (326)            3,894
Operating income (Six Months Ended)
    December 31, 2010                                       5,277            6,994         (570)           11,701
    December 31, 2009                                       1,768            6,733         (394)            8,107
Goodwill and intangible assets:
    December 31, 2010                                      30,716           21,276           --            51,992
    June 30, 2010                                          30,716           21,872           --            52,588
</TABLE>


                                       13
<PAGE>

Item 2.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations

The following  Management's  Discussion and Analysis of Financial  Condition and
Results  of  Operations  should  be read in  conjunction  with the  consolidated
financial  statements  and the notes  thereto  appearing  elsewhere in this Form
10-Q. The following condensed discussion,  other than historical facts, contains
forward-looking statements that involve a number of risks and uncertainties. The
Company's  results  could  differ  materially  from those  anticipated  in these
forward-looking  statements as a result of various  factors,  including  factors
described  elsewhere in this Quarterly Report on Form 10-Q and factors described
in the  Company's  Annual Report on Form 10-K for the fiscal year ended June 30,
2010.

Overview
--------
The consolidated  financial  statements  present the financial  condition of the
Company as of December 31, 2010 and June 30, 2010, and the consolidated  results
of  operations  and cash flows of the Company for the three and six months ended
December 31, 2010 and 2009.

The Company designs,  develops and markets  microwave  components and assemblies
for  the  wireless   communications,   satellite   communications   and  defense
electronics  markets.  The  Company's  distinctive  manufacturing  and packaging
techniques enable it to cost-effectively produce compact,  lightweight microwave
products  for  use in  base  stations  and  subscriber  equipment  for  wireless
communications as well as, in satellites and in defense electronics systems. The
Company  sells  its  products  to  leading  wireless  communications   equipment
manufacturers such as Ericsson,  Motorola,  Nokia Siemens Networks,  and Huawei,
and to satellite communications and defense electronics companies such as Boeing
Satellite, ITT, Lockheed Martin, Northrop Grumman and Raytheon.

Net sales  generally  are  recognized  when units are  shipped.  Net sales under
certain long-term  contracts of the Space & Defense Group, many of which provide
for periodic payments, are recognized under the percentage-of-completion  method
based on units of delivery. Estimated manufacturing cost-at-completion for these
contracts are reviewed on a routine  periodic  basis,  and  adjustments are made
periodically to the estimated cost-at-completion based on actual costs incurred,
progress made,  and estimates of the costs required to complete the  contractual
requirements.  When the estimated manufacturing  cost-at-completion  exceeds the
contract value,  the contract is written down to its net realizable  value,  and
the loss  resulting from cost overruns is  immediately  recognized.  To properly
match net sales with costs,  certain  contracts  may have revenue  recognized in
excess of billings (unbilled revenues), and other contracts may have billings in
excess of net sales  recognized  (billings in excess of contract  costs).  Under
long-term  contracts,  the  prerequisites  for billing the customer for periodic
payments generally involve the Company's achievement of contractually  specific,
objective milestones (e.g.,  completion of design, testing, or other engineering
phase,  delivery  of  test  data  or  other  documentation,  or  delivery  of an
engineering model or flight hardware).

The Company operates in the wireless  communications,  satellite  communications
and defense  electronics  markets all of which have been affected by the current
economic  climate and  recession.  The United States defense budget has a direct
impact on the level of funding available for programs that the Company currently
participates in or has targeted for future participation.  We continue to assess
the effect of the 2011 defense  budget on these  programs and, to date have seen
little negative  impact on our  anticipated  Space & Defense Group order rate in
fiscal  2011.  The  current  economic  down  turn has  negatively  impacted  the
worldwide Wireless  infrastructure market as the market has delayed or downsized
system  expansions and upgrades.  Although Wireless Group sales have improved in
the first  half of fiscal  2011 due to strong  demand for  standard  components,
custom  product  sales  continue to decline and are  expected to have an ongoing
negative impact on Wireless Group sales levels in the current fiscal year. While
the Company has limited  short-term  visibility for customer demand,  we believe
that demand has stabilized at current levels and should improve in calendar 2011
as the economy continues to recover.

Third Quarter of Fiscal 2011 Outlook
------------------------------------
For the third  quarter of fiscal 2011, we  anticipate  comparable  sales for the
Wireless  Group and an increase in sales for the Space & Defense Group  compared
to second quarter levels. As a result, we expect net sales to be in the range of
$42 to $46 million.  We expect GAAP net earnings per diluted  share to be in the
range of $0.24 to $0.30,  using an


                                       14
<PAGE>

anticipated tax rate of approximately 30.0% and inclusive of approximately $0.06
per share related to expected  non-cash  equity based  compensation  expense and
intangible amortization.

Results of Operations
---------------------
Net sales for the three months ended  December 31, 2010 were $43.4  million,  up
5.9% from sales of $41.0  million  for the second  quarter of fiscal  2010.  Net
income for the second  quarter of fiscal 2011 was $4.7 million,  or 10.7% of net
sales,  up $2.2 million from net income of $2.5 million in the second quarter of
fiscal 2010.

The following  table sets forth the  percentage  relationships  of certain items
from the Company's condensed  consolidated  statements of income as a percentage
of net sales.

<TABLE>
<CAPTION>
                                                 Three Months Ended              Six Months Ended
                                            Dec. 31, 2010   Dec. 31, 2009    Dec. 31, 2010   Dec. 31, 2009
                                            -------------   -------------    -------------   -------------
<S>                                             <C>             <C>               <C>            <C>
Net Sales                                       100.0%          100.0%            100.0%         100.0%

Cost of Sales                                    62.5%           65.1%             61.4%          64.4%
                                                -----           -----             -----          -----
       Gross profit                              37.5%           34.9%             38.6%          35.6%
                                                -----           -----             -----          -----

Operating Expenses:
   Marketing                                      6.0%            5.5%              5.7%           5.6%
   Research and development                       8.1%            8.6%              8.4%           8.8%
   General and administrative                    10.7%           11.3%             11.2%          11.2%
                                                -----           -----             -----          -----
     Total operating expenses                    24.8%           25.4%             25.3%          25.6%
                                                -----           -----             -----          -----

Operating income                                 12.7%            9.5%             13.3%          10.0%
                                                -----           -----             -----          -----

Other income (expense):
     Interest expense                            (0.2)%          (0.3)%            (0.3)%         (0.4)%
     Other, primarily interest income             0.4 %           0.2 %             0.3 %          0.2 %
                                                -----           -----             -----          -----
     Total other income (expense), net            0.2 %          (0.1)%             0.0 %         (0.2)%
                                                -----           -----             -----          -----

Income before income tax expense                 12.9%            9.4%             13.3%           9.8%
Income tax expense                                2.2%            3.3%              3.3%           3.2%
                                                -----           -----             -----          -----
   Net income                                    10.7%            6.1%             10.0%           6.6%
                                                =====           =====             =====          =====
</TABLE>

The following table summarizes the Company's net sales by operating segments for
the periods indicated. Amounts are in thousands.

<TABLE>
<CAPTION>
                                                 Three Months Ended              Six months Ended
                                            Dec. 31, 2010   Dec. 31, 2009    Dec. 31, 2010   Dec. 31, 2009
                                            -------------   -------------    -------------   -------------
<S>                                            <C>             <C>              <C>             <C>
Wireless                                       $15,599         $12,383          $31,124         $26,794
Space and Defense                               27,844          28,636           56,858          54,562
                                               -------         -------          -------         -------
     Total                                     $43,443         $41,019          $87,982         $81,356
                                               =======         =======          =======         =======
</TABLE>

Three Months Ended December 31, 2010 Compared to Three Months Ended December 31,
--------------------------------------------------------------------------------
2009
----
Net sales.  Net sales were $43.4 million for the second  quarter ended  December
31, 2010,  up 5.9%  compared to $41.0  million for the second  quarter of fiscal
2010. Sales of Wireless Group products rose $3.2 million, or 26.0%, and sales of
Space & Defense Group  products  declined $0.8 million,  or 2.8%, in the current
second quarter compared to the second quarter of fiscal 2010.


                                       15
<PAGE>

The  increase in sales of Wireless  Group  products,  which  consist of standard
components,  ferrite  components  and custom  subassemblies  for use in building
wireless  basestation  and consumer  equipment,  was the result of a substantial
increase  in demand for  standard  Wireless  component  products  in the current
second  quarter  compared to the second  quarter of fiscal 2010.  Sales of these
products  rose $5.1 million in the current  second  quarter over second  quarter
fiscal 2010 levels on the strength of continuing  orders from both European OEMs
and Asian contract manufacturers.  This increase in standard component sales was
partially  offset by a $1.9  million  decline in custom and ferrite  basestation
products in the current quarter compared to the second quarter last fiscal year,
led by a $1.3  million  decline in sales to a major OEM  resulting  from loss of
sales  to low  cost  Asian  vendor  sources  and  decreased  demand  for  second
generation  GSM  equipment.  Demand for  Wireless  Group  products  in the third
quarter of fiscal 2011 is expected to be comparable to first and second  quarter
levels.

Space & Defense Group products  consist of custom  components and assemblies for
commercial  and  military   satellites,   as  well  as  radar,   receiver,   and
countermeasure  subsystems  for the  military.  Sales of Space &  Defense  Group
products  declined  $0.8 million,  or 2.8% in the second  quarter of fiscal 2011
compared  to the second  quarter of the  previous  fiscal  year.  This  decrease
resulted from a decline in sales of military printed wire board products,  which
fell to $3.6 million in the current second  quarter  compared to $5.2 million in
the second  quarter of fiscal 2010 due to production  delays and  inefficiencies
caused by ongoing capacity  expansion and facility  renovations at the Company's
Unicircuit  printed wire board  operation.  Space & Defense  Group product sales
continue to benefit  from the higher  level of business  won by the Company over
the past few fiscal  years which has  resulted  in the Group's  backlog of $74.3
million at December 31, 2010.

Gross Profit.  Cost of sales  consists  primarily of  engineering  design costs,
materials,  material  fabrication  costs,  assembly  costs,  direct and indirect
overhead, and test costs. Gross profit for the second quarter of fiscal 2011 was
$16.3 million,  (37.5% of net sales), up from $14.3 million (34.9% of net sales)
for the same  quarter  of the prior  year.  Gross  profit as a percent  of sales
increased in the second quarter of fiscal 2011 from the second quarter of fiscal
2010 due to  favorable  product  mix in both the  Wireless  and  Space & Defense
Groups.  In the Wireless  Group,  gross  margins were enhanced by a $1.9 million
reduction in sales of lower margin,  high material content custom products which
were  replaced  by $5.1  million of sales of higher  margin  standard  component
products in the current second quarter compared to the same period last year. In
the Space & Defense Group, margins declined slightly due to both the lower group
sales level, a less  favorable  product mix, and some  production  issues due to
ongoing expansion at the Company's Unicircuit  subsidiary.  The Group is focused
on resolving these issues over the third and fourth quarter of fiscal 2011.

Marketing.  Marketing  expenses  consist  mainly of employee  related  expenses,
commissions  paid to sales  representatives,  trade show  expenses,  advertising
expenses and related travel expenses. Marketing expenses were $2.6 million (6.0%
of net sales) for the second  quarter of fiscal 2011,  up $0.4 million from $2.2
million  (5.5% of net sales) for the second  quarter of fiscal  2010.  Marketing
expenses in the current  second  quarter  rose due to higher  personnel  levels,
commission  costs and travel expenses related to the increase in business levels
and additional  advertising  expenditures related to the Anaren Integrated Radio
(AIR) product introduction in the current fiscal year.

Research and Development. Research and development expenses consist of material,
salaries and related  overhead costs of employees  engaged in ongoing  research,
design and  development  activities  associated with new products and technology
development.  Research and  development  expenses were $3.5 million (8.1% of net
sales) in the second  quarter of fiscal 2011,  unchanged from $3.5 million (8.6%
of net sales) for the second  quarter of fiscal 2010.  Research and  development
expenditures are supporting further development of Wireless Group infrastructure
and consumer component  opportunities,  as well as new technology development in
the Space & Defense Group.  The Company expects to continue its current research
and  development  efforts and spending  levels in fiscal 2011,  and is presently
working  on  a  number  of  new  Wireless   Group  and  Space  &  Defense  Group
opportunities.

General and  Administrative.  General  and  administrative  expenses  consist of
employee  related  expenses,  incentive  compensation,   professional  services,
intangible  amortization,  travel related  expenses and other  corporate  costs.
General and  administrative  expenses were $4.6 million (10.7% of net sales) for
the second  quarter of fiscal 2011,  unchanged  from $4.6 million  (11.3% of net
sales) for the second quarter of fiscal 2010.  During the current  quarter minor
increases  in  personnel  costs were  off-set by lower  expenses  related to the
Company  vacant  leased  facility in the United  Kingdom.


                                       16
<PAGE>

Operating  Income.  Operating  income  increased  42.1% in the second quarter of
fiscal  2011 to $5.5  million,  (12.7% of net sales),  compared to $3.9  million
(9.5% of net sales) for the second  quarter of fiscal  2010.  This  increase  in
operating  income was a result of the $2.4 million  increase in sales volume and
the  favorable  product  mix  caused by the rise in sales of  Wireless  standard
components coupled with the decline in sales of Wireless custom assemblies.

On an operating segment basis,  Wireless Group operating income was $2.3 million
(14.7% of group sales) for the second  quarter of fiscal 2011,  up $1.8 million,
from the Group's  operating  income of $0.5 million (4.3% of group sales) in the
second  quarter of fiscal 2010.  The  improvement  in Wireless  Group  operating
income in the second  quarter of fiscal 2011  compared to the second  quarter of
fiscal 2010 was due to the $3.2 million overall increase in Wireless Group sales
and the combined impact of the continuing  decline in low margin custom assembly
sales which fell $1.9 million in the current  quarter and the  increased  demand
for higher margin  standard  component  products  which rose $5.1 million in the
quarter.  This favorable product mix coupled with further yield improvements for
standard  components  served  to  increase  gross  and  operating  margins  10.4
percentage  points in the current second quarter  compared to the second quarter
of last year.

Space & Defense Group  operating  income was $3.3 million (11.8% of Group sales)
in the second quarter of fiscal 2011, down $0.4 million from $3.7 million (12.9%
of net group sales) for the second quarter of fiscal 2010. Operating margins for
this Group decreased in the current second quarter due to the lower sales volume
and the production inefficiencies at the Company's Unicircuit facility resulting
from ongoing  capacity  expansion and equipment  renovation  which effected both
overall sales volume and production yields in the quarter compared to the second
quarter last fiscal year.

Other Income.  Other income  primarily  consists of interest  income received on
invested cash balances and rental  income.  Other income was $0.2 million in the
second quarter of fiscal 2011 compared to $0.1 million for the second quarter of
last  year.  This  increase  was a result  of a  deliberate  lengthening  of the
maturities of the Company's  investment  portfolio  resulting in 50% increase in
average return.  Other income will fluctuate based on short term market interest
rates and the level of investable cash balances.

Interest  Expense.  Interest  expense  consists  mainly of  interest  on Company
borrowings and deferred items.  Interest expense in the second quarter of fiscal
2011 was $0.1 million, unchanged compared to $0.1 million for the second quarter
of  fiscal  2010.  Interest  expense  has  remained  flat due to the  continuing
consistent  and low level of the 90 day London  Inter-Bank  Offer  Rate  (LIBOR)
interest  rate for the second  quarter  of fiscal  2011  compared  to the second
quarter of fiscal  2010.  The  Company's  long-term  obligation  declines by $10
million in the first quarter of each fiscal year. These borrowings bear interest
at the 90 day LIBOR  rate,  plus 100 to 425  basis  points,  depending  upon the
Company's   rolling  twelve  month  earnings   before  interest  and  taxes  and
depreciation and amortization (EBITDA) performance.  The rate is reset quarterly
and for the third quarter of fiscal 2011 is expected to be approximately 1.32%.

Income  Taxes.  Income  taxes for the second  quarter  of fiscal  2011 were $1.0
million (2.2% of net sales),  representing an effective tax rate of 17.0%.  This
compares  to income  tax  expense  of $1.3  million  (3.3% of net sales) for the
second quarter of fiscal 2010, representing an effective tax rate of 34.4%. This
decrease  primarily  resulted from the reinstatement of the Federal Research and
Experimentation  credit retroactive to January 1, 2010. The projected  effective
tax rate for fiscal 2011 is now expected to be approximately  30%. The Company's
effective  tax rate is a direct  result of the  proportion  of federally  exempt
state  municipal bond income and federal tax credits and benefits in relation to
the levels of United States and foreign taxable income or loss.

Six Months Ended December 31, 2010 Compared to Six Months Ended December 31,
----------------------------------------------------------------------------
2009
----
Net sales.  Net sales were $88.0  million for the six months ended  December 31,
2010, up 8.1% compared to $81.4 million for the first six of fiscal 2010.  Sales
of Wireless Group products rose $4.3 million,  or 16.0%,  while sales of Space &
Defense Group products increased $2.3 million, or 4.2%, in the current first six
months compared to the first six months of fiscal 2010.

The increase in sales of Wireless Group products was the result of a substantial
increase in demand for standard Wireless component products in the current first
six months compared to the first six months of fiscal 2010. Sales of

                                       17
<PAGE>

these  products rose $9.0 million in the current first six months over the first
six months of fiscal 2010 levels on the strength of continuing  orders from both
European  OEMs and Asian  contract  manufacturers.  This  increase  in  standard
component  sales was  partially  offset by a $4.7 million  decline in custom and
ferrite  basestation  products in the current  first six months  compared to the
first six months of last fiscal year, led by a $3.5 million  decline in sales to
a major OEM  resulting  from loss of sales to low cost Asian vendor  sources and
decreased demand for second generation GSM equipment.  Demand for Wireless Group
products in the third  quarter of fiscal 2011 is  expected to be  comparable  to
first and second quarter levels.

Sales of Space & Defense Group products rose $2.3 million,  or 4.2% in the first
half of fiscal 2011 compared to the first half of the previous fiscal year. This
increase  resulted  from sales of  counter-improvised  explosive  devices  (IED)
related products  totaling $7.7 million in the current first six months compared
to $2.0  million  in the first six  months of fiscal  2010.  This  increase  was
partially off-set by a decline in sales of military printed wire board products,
which fell $2.8  million in the current  first six months  compared to first six
months of fiscal  2010 due to  production  delays and  inefficiencies  caused by
ongoing capacity expansion and facility  renovations at the Company's Unicircuit
printed wire board operation.

Gross Profit.  Gross profit for the first half of fiscal 2011 was $33.9 million,
(38.6% of net sales),  up from $29.0  million  (35.6% of net sales) for the same
period of the prior year.  Gross  profit as a percent of sales  increased in the
first  half of fiscal  2011 from the  first  half of last year due to  favorable
product mix in the Wireless Group. Wireless Group gross margins were enhanced by
a $4.7 million reduction in sales of lower margin,  high material content custom
products which were replaced by $9.0 million of sales of higher margin  standard
component  products in the  current six months  compared to the same period last
year.  In the Space & Defense  Group,  margins  declined  slightly due to a less
favorable  product  mix  resulting  from the  production  inefficiencies  at the
Unicircuit facility.

Marketing.  Marketing  expenses  were $5.0  million  (5.7% of net sales) for the
first half of fiscal 2011, up $0.4 million from $4.6 million (5.6% of net sales)
for the first half of fiscal 2010.  Marketing  expenses in the current first six
months  rose $0.4  million  from the first six months of last fiscal year due to
higher  personnel  levels,  commission  costs and travel expenses related to the
increase in business levels and additional  advertising  expenditures related to
the new AIR product introduction in the current fiscal year.

Research and  Development.  Research and development  expenses were $7.4 million
(8.4% of net sales) in the first half of fiscal 2011,  up 3.2% from $7.1 million
(8.8% of net sales) for the first half of fiscal 2010.  Research and development
expenditures  are  supporting  further  development  of Wireless  Group consumer
component  opportunities,  as well as new technology  development in the Space &
Defense Group. Research and Development expenditures have increased in the first
six  months of fiscal  2011  versus the first six months of last year due to the
higher level of  opportunities  in the Space & Defense Group and Wireless  Group
marketplaces,  which resulted in the hiring of additional  engineering personnel
to support each Group in the current period. The Company expects to continue its
current research and development efforts and spending levels in fiscal 2011, and
is presently  working on a number of new standard and custom  Wireless Group and
Space & Defense Group opportunities.

General and  Administrative.  General and  administrative  expenses increased to
$9.9 million (11.2% of net sales) for the first six months of fiscal 2011,  from
$9.1 million  (11.2% of net sales) for the first six months of fiscal 2010.  The
increase in general and administrative  expense in the first half of fiscal 2011
compared  to the first half of last year  resulted  from a lease  charge of $0.5
million in the current  first half of fiscal 2011 to recognize  additional  rent
expense related to the Company's vacant facility in Frimley, U.K.  Additionally,
G&A expense rose in the current  quarter as a result of a $0.3 million  increase
in equity based  compensation  expense  related to the Company  returning to its
normal  pattern of granting  restricted  stock in August  this year  compared to
November in fiscal 2010.

Operating  Income.  Operating  income increased 44.4% in the first six months of
fiscal 2011 to $11.7  million,  (13.3% of net sales),  compared to $8.1  million
(10.0% of net sales) for the first six months of fiscal 2010.  This  increase in
the first  half of fiscal  2011 from the first  half of last year was due to the
$6.6 million  increase in sales volume and the  favorable  product mix caused by
the $9.0 million rise in sales of higher  margin  Wireless  standard  components
coupled with the $4.7 million  decline in sales of lower margin  Wireless custom
assemblies.

                                       18
<PAGE>

On an operating segment basis,  Wireless Group operating income was $5.3 million
(17.0% of group sales) for the first half of fiscal 2011, up $3.5 million,  from
the Group's  operating income of $1.8 million (6.6% of group sales) in the first
half of fiscal 2010.  The  increase in Wireless  Group  operating  income in the
first half of fiscal 2011 compared to the first half of fiscal 2010 was a result
of the $4.3 million  overall  increase in Wireless  Group sales and the combined
impact of the continuing decline in low margin custom assembly sales, which fell
$4.7  million in the  current six months,  and the  increased  demand for higher
margin  standard  component  products which rose $9.0 million in the current six
months.

Space & Defense Group  operating  income was $7.0 million (12.3% of Group sales)
in the first half of fiscal 2011,  up $0.3  million from $6.7 million  (12.3% of
net group sales) for the first half of fiscal 2010.  Operating  margins for this
Group were unchanged in the first six month of fiscal 2011 compared to the first
half of fiscal 2010,  while operating  income in dollars  increased $0.3 million
due to the increase in sales volume year over year in the first six months.

Other Income. Other income increased to $0.3 million in the first half of fiscal
2011 compared to $0.2 million for the first half of last year. This increase was
a  result  of a  deliberate  lengthening  of the  maturities  of  the  Company's
investment  portfolio resulting in 50% increase in average return.  Other income
will  fluctuate  based on short  term  market  interest  rates  and the level of
investable cash balances.

Interest  Expense.  Interest  expense in the first half of fiscal  2011 was $0.3
million  compared to $0.3 million for the first half of fiscal 2010. The Company
currently has $30.0 million  outstanding  on this  long-term  obligation.  These
borrowings bear interest at the 90 day LIBOR rate, plus 100 to 425 basis points,
depending upon the Company's rolling twelve month EBITDA  performance.  The rate
is reset  quarterly  and for the third  quarter of fiscal 2011 is expected to be
approximately 1.30%.

Income  Taxes.  Income taxes for the first half of fiscal 2011 were $3.0 million
(3.3% of net sales),  representing an effective tax rate of 25.2%. This compares
to income tax expense of $2.6 million  (3.2% of net sales) for the first half of
fiscal  2010,  representing  an effective  tax rate of 32.8%.  During the second
quarter of fiscal  2011,  the Federal  Research and  Experimentation  credit was
reinstated  retroactive to January 1, 2010. The projected effective tax rate for
fiscal 2011 is  approximately  30.0% compared to an actual effective tax rate of
26.1% for fiscal 2010.  The  Company's  effective tax rate is a direct result of
the proportion of federally  exempt state  municipal bond income and federal tax
credits and  benefits  in  relation  to the levels of United  States and foreign
taxable income or loss.

Critical Accounting Policies
There  have been no  changes  to the  Company's  critical  accounting  policies,
estimates, or judgments from those discussed in the Company's 2010 Annual Report
on Form 10-K.

Liquidity and Capital Resources
-------------------------------
Net cash provided by operations for the first six months of fiscal 2011 was $8.7
million and resulted primarily from net income before depreciation, amortization
and non-cash  equity based  compensation  expense.  The positive  cash flow from
earnings for the six months was further  enhanced by a $2.4 million  decrease in
accounts receivable due to improved collections,  which more than off-set a $3.8
million  increase in inventory,  a $2.4 million  increase in  refundable  income
taxes and a $2.7 million reduction of current liabilities.

Net cash  provided  by  operations  for the first six months of fiscal  2010 was
$10.3  million and resulted  primarily  from the high level of net income before
depreciation  amortization and non-cash equity based compensation expense plus a
$2.1 million decline in inventory.  The positive cash flow from earnings for the
six months was partially off-set by increases in receivables and the pay down of
liabilities totaling $3.3 million.

Net cash used in investing  activities in the first half of fiscal 2011 was $1.8
million and consisted of $3.7 million used to pay for capital  additions  which,
was  partially  off-set by $1.9 million  provided by the maturity of  marketable
debt  and  available-for-sale   securities.   Net  cash  provided  by  investing
activities  in the first half of fiscal 2010 was $8.6  million and  consisted of
$10.8 million provided by the maturity of marketable debt securities,  partially
offset by of $2.2 million used to pay for capital additions.

                                       19
<PAGE>

Net cash used in financing activities in the first six months of fiscal 2011 was
$7.8 million and consisted of $10.0 million used to pay long-term  debt and $0.9
million used to purchase approximately 52,000 treasury shares,  partially offset
by $3.1 million generated by cash receipts and tax benefits from the exercise of
stock options.  Net cash used in financing activities in the first six months of
fiscal  2010  was  $11.1  million  and  consisted  of $9.8  million  used to pay
long-term debt and $4.7 million used to purchase  approximately 284,000 treasury
shares,  partially  offset by $3.4 million  generated  by cash  receipts and tax
benefits from the exercise of stock options.

During  the next  twelve  months,  the  Company  anticipates  that its main cash
requirement will be for capital  expenditures,  possible continued repurchase of
the Company's common stock and the $10.0 million  principal  payment on its line
of credit due in July 2011.  Capital  expenditures  for the  remainder of fiscal
2011 and the first half of fiscal 2012 are expected to be in the range of 4 to 5
percent of sales and will be funded from existing cash and investments.

The Company may  continue to  repurchase  shares of its common stock in the open
market and/or through privately negotiated  transactions under the current Board
authorization,  depending on market conditions. At December 31, 2010, there were
approximately  0.4 million shares  remaining under the current Board  repurchase
authorization.

At December 31, 2010, the Company had approximately  $71.2 million in cash, cash
equivalents,  and marketable securities.  The Company has had positive operating
cash flow for over ten years,  and believes that its cash  requirements  for the
foreseeable  future will be satisfied by currently  invested  cash  balances and
expected cash flows from operations.


Item 3.     Quantitative and Qualitative Disclosures About Market Risk

The following  discusses the Company's  possible exposure to market risk related
to changes in interest rates, equity prices and foreign currency exchange rates.
This discussion  contains  forward-looking  statements that are subject to risks
and  uncertainties.  Results could differ  materially from those  anticipated in
these  forward-looking  statements  as a result of  various  factors,  including
factors described elsewhere in this Quarterly Report.

As of December 31, 2010, the Company had cash,  cash  equivalents and marketable
securities of $71.2 million, all of which consisted of highly liquid investments
in  marketable  debt  securities.  The  marketable  debt  securities  at date of
purchase  normally have maturities  within 3 years, are exposed to interest rate
risk  and  will  decrease  in  value  if  market  interest  rates  increase.   A
hypothetical  decrease in market  interest  rate of 10.0% from December 31, 2010
rates,  or 0.035%,  would have reduced net income by  approximately  $7,000,  or
$.0005 net income per diluted  share for the quarter and would have reduced cash
flow  by  approximately  $7,000  in the  quarter.  Due to the  relatively  short
maturities of the securities,  continuing current unprecedented low market rates
and the Company's  ability to hold those  investments  to maturity,  the Company
does not believe  that an  immediate  decrease  in  interest  rates would have a
significant  effect on its financial  condition or results of  operations.  Over
time,  however,  declines in interest  rate will reduce the  Company's  interest
income.

As of December 31, 2010, the Company had $30.0 million in outstanding debt under
its  revolving  line of  credit  with Key Bank  National  Association.  The line
consists of a $50,000,000  revolving credit note for which principal amounts are
due on August 1, 2011, and on each anniversary date thereafter  through July 31,
2013.  Borrowings under this Note bear interest at LIBOR,  plus 100 to 425 basis
points or at the  Lender's  prime rate,  minus  (100) to plus 225 basis  points,
depending  upon the Company's  EBITDA  performance at the end of each quarter as
measured by the formula: EBITDA divided by the current portion of long-term debt
plus  interest  expense.  For the three  months ended  December  31,  2010,  the
weighted average interest rate on the outstanding borrowings was 1.32%. Interest
expense for these  borrowings is exposed to interest rate risk and will increase
if market  interest rates rise. A hypothetical  increase in market interest rate
of 10.0% from December 31, 2010 rates,  or 0.13%,  would have reduced net income
by approximately $10,000, or $.0007 net income per diluted share for the quarter
and would have reduced cash flow by approximately $10,000 in the quarter. Due to
the Company's  significant cash reserves and historical  positive operating cash
flow, the Company does not believe that an immediate  increase in interest rates
would  have a  significant  effect on its  financial  condition  or  results  of
operations. Over time, however, increases in market interest rates will increase
the Company's interest expense.

                                       20
<PAGE>

Forward-Looking Cautionary Statement

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
"forward-looking  statements"  made by or on behalf of the Company.  We may from
time  to time  make  written  or oral  statements  that  are  "forward-looking,"
including  statements  contained  in this  report  and  other  filings  with the
Securities  and  Exchange  Commission  and in reports to our  shareholders.  All
forward-looking  statements  are made on the  basis of  management's  views  and
assumptions  regarding future events and business performance as of the time the
statements  are made and the Company does not undertake any obligation to update
its disclosure  relating to forward looking  matters.  Actual results may differ
materially from those expressed or implied.  The  uncertainties and risk factors
that could affect our Company,  its  business and actual  results are  described
throughout  this  filing  and  in  our 2010 Annual Report on Form 10-K under the
Item 1A, "Risk Factors."


Item 4.     Controls and Procedures

A.    Disclosure Controls and Procedures
An evaluation of the  effectiveness of the design and operation of the Company's
disclosure  controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the  Securities  Exchange Act of 1934,  as amended  ("Exchange  Act")) was
carried out under the  supervision and with the  participation  of the Company's
management,  including the President and Chief  Executive  Officer and the Chief
Financial Officer ("the Certifying  Officers") as of December 31, 2010. Based on
that evaluation, the Certifying Officers concluded that the Company's disclosure
controls and procedures were effective as of December 31, 2010.

B. Changes in Internal Control Over Financial Reporting
There  were no changes  in the  registrant's  internal  control  over  financial
reporting  during our fiscal quarter to which this Quarterly Report on Form 10-Q
relates that have materially  affected,  or are reasonably  likely to materially
affect, internal control over financial reporting.


PART II     OTHER INFORMATION

Item 1A.    Risk Factors
The Company is exposed to certain risk factors that may affect operations and/or
financial results. The significant factors known to the Company are described in
the Company's most recently filed Annual Report on Form 10-K. There have been no
material changes from the risk factors as previously disclosed in the Company's
Annual Report on Form 10-K.


                                       21
<PAGE>

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities

On November 5, 2007, the Board of Directors increased by an additional 2,000,000
the number of shares that the Company was  authorized  to repurchase in the open
market or by privately negotiated  transactions through its previously announced
stock repurchase program.  The program (originally  announced on March 5, 2001),
which may be suspended at any time without notice,  has no expiration  date. The
following  table  sets  forth  information   regarding  shares  repurchased  and
purchasable under the program during and as of the end of the periods indicated.
On December 31, 2010,  approximately  464,000  shares  remained  authorized  for
purchase, depending on market conditions.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
         Period              Total Number of       Average Price Paid       Total Number of        Maximum Number
                            Shares (or Units)     per Share (or Unit)      Shares (or Units)      (or Approximate
                                Purchased                                Purchased as Part of     Dollar Value) of
                                                                          Publicly Announced      Shares (or Units)
                                                                           Plans or Programs       that May Yet Be
                                                                                                 Purchased Under the
                                                                                                  Plans or Programs
----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                      <C>                   <C>                   <C>
October 2010                                0                                              0                476,582
----------------------------------------------------------------------------------------------------------------------
November 2010                          12,823                   17.91                 12,823                476,582
----------------------------------------------------------------------------------------------------------------------
December 2010                               0                                              0                463,759
----------------------------------------------------------------------------------------------------------------------
Total                                  12,823                   17.91                 12,823                463,759
----------------------------------------------------------------------------------------------------------------------
</TABLE>


Item 6.     Exhibits

            31      Rule 13a-14(a) Certifications

            32      Section 1350 Certifications




                                       22
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                  Anaren, Inc.
                                  ------------
                                  (Registrant)




Date: January 28, 2011            /s/Lawrence A. Sala
                                  ---------------------------------------------
                                  Lawrence A.Sala
                                  President & Chief Executive Officer



Date:  January 28, 2011           /s/George A. Blanton
                                  ---------------------------------------------
                                  George A. Blanton
                                  Sr. Vice President, Chief Financial Officer
                                  and Treasurer


                                       23