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CORRESP
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     CORRESP

Ceragon Networks Ltd.

24 Raoul Wallenberg St.

Tel Aviv, 69719, Israel

Tel: +972-3645--5733

Fax: +972-3-645-5499

June 14, 2006

Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W.

Washington, D.C. 20549

Mail Stop 3561

Attention:  Mr. Larry Spirgel, Assistant Director

         Re:
Ceragon
Networks Ltd. ("Ceragon" or the "Company")
              Form 20-F for fiscal year
ended 12/31/04
       File No. 000-30862

Dear Mr. Spirgel:

Following our response dated August
10, 2005 to your comment letter dated July 12, 2005 and subsequent discussions about
Comment 5, the SEC’s representatives have requested that Ceragon submit additional
explanatory material regarding Comment 5. For your convenience, we have set out the text
of the comment from your letter of July 12, 2005 in bold face, followed by our response.

Comment 5.

Note 10: Taxes on
Income, page F-24

We note on page F-27 that you have
$69.6 million of accumulated losses for Israel income tax purposes as of December 31,
2004. Please tell us in your response letter why you do not have a deferred tax asset
recorded for these accumulated losses.

Response:

Ceragon follows the guidance of FASB
Statement No. 109, Accounting for Income Taxes (Statement 109), in accounting for
deferred taxes. According to paragraph 18 of Statement 109, deferred taxes are measured
using the enacted tax rates expected to apply to taxable income in the periods in which
the deferred tax asset is expected to be realized.

As noted by the SEC staff, as of
December 31, 2004, Ceragon has accumulated losses for Israeli income tax purposes of
approximately $69.6 million, which is available for carryforward and offset against future
taxable income for an indefinite period pursuant to the Israeli Income Tax Ordinance. In
determining the appropriate accounting for this deferred tax asset, Ceragon considered the
tax benefits provided by the Law for the Encouragement of Capital Investments, 1959 (the
Investments Law) to which Ceragon is entitled as detailed below.

Summary of the
Investments Law

The Investments Law provides that a
proposed capital investment in eligible facilities may, upon application to the Investment
Center of the Ministry of Industry, Trade and Labor of the State of Israel, be designated
as an “Approved Enterprise”. Income derived from the Approved Enterprise is
eligible either for (1) reductions in the ordinary tax rates applicable to the Approved
Enterprise pursuant to Section 47 of the Investments Law, or (2) the Alternative Benefits
Route, which provides certain tax exemptions and reduced tax rates pursuant to Section 51
of the Investments Law. The owner of the Approved Enterprise is eligible to elect one of
the two routes of taxation.

It should be noted that
Ceragon’s tax benefits pursuant to the Investments Law were not impacted by the April
1, 2005 amendment to the Investments Law because Ceragon’s Approved Enterprise status
was granted in 1998, 2000 and 2003 pursuant to three separate applications and the April
2005 Investments Law amendments were not retroactive and did not affect Approved
Enterprise programs granted prior to that date. Accordingly, references to the Investments
Law in this response reflect the provisions of the Investments Law prior to the amendment.

Under the Alternative Benefits Route
(Section 51 of the Investments Law), the Approved Enterprise is entitled to a tax
exemption (i.e., an applicable corporate tax rate of 0%) through the end of second or
sixth or tenth year after the Approved Enterprise first reports taxable income (the period
of time depends on the location of the approved Enterprise zone and the percentage of
foreign ownership). It should be noted that determination of when taxable income is
reported is net of all applicable loss carryforwards. In addition, the Alternative
Benefits Route provides a reduced corporate income tax rate of 10-25% for an additional
period (which length varies based on the length of time the Approved Enterprise was
already tax exempt and the percentage of foreign ownership) under Section 47 of the
Investments Law after the tax exempt period under Section 51 of the Investments Law ends,
provided the limitations under Section 45 of the Investments Law have not been reached.

Regarding the time limitation, the
Approved Enterprise is entitled to the reduced tax rates under Section 47 provided that
fourteen years have not yet lapsed from the year in which the approval was granted and
twelve years have not yet lapsed from the year in which it is determined that the
enterprise was activated or the manufacturing commenced. It should be emphasized that the
aforementioned limitation applies only to the reduced tax rates provided under Section 47
and not to the tax exempt period provided under Section 51. Such tax exempt period is not
subject to such limitations.

Ceragon elected the Alternative
Benefits Route under Section 51. Since Ceragon is located in Tel Aviv, it is entitled to a
tax exemption period ending two years after first reporting taxable income. Subsequently,
Ceragon will be entitled to reduced tax rates for an additional period of 5-8 years
(depending on the percentage of foreign ownership in the future taxaxble years), subject
to the limitation described above. Finally, Ceragon is considered a Foreign
Investors’ Company pursuant to Section 47 of the Investments Law. The percentage of
foreign (non-Israeli) ownership of Ceragon in each future taxable year will determine the
specific reduced tax rate (in the range of 10-25%).

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Accounting analysis

The FASB considered whether a
deferred tax asset should ever be recognized for the expected reduction in taxes payable
during a “tax holiday.” In this regard, the FASB considered tax holidays
generally available to all enterprises, as well as unique tax holidays made available in
certain circumstances (paragraphs 183-184 of Statement 109). Because of the practical
problems associated with distinguishing “unique” tax holidays from
“generally available” tax holidays, the FASB concluded to prohibit the
recognition of a deferred tax asset for all “tax holidays.”

In reaching the accounting
conclusions regarding the tax benefits attributable to the Israeli tax holiday, Ceragon
considered the “with and without” approach embedded in the liability method as
discussed in paragraphs 87 through 88 of Statement 109. That is, the tax rate applicable
to Ceragon’s deductible and taxable temporary differences and accumulated NOLs is the
corporate tax rate applicable to Ceragon absent the net operating loss carryforward. As
outlined above, we believe that under Israeli tax laws, the applicable tax rate to all
items of Ceragon’s income and loss is zero from October 1998 (date of approval of
initial Approved Enterprise application) through the end of the second tax year after
which Ceragon first reports taxable income (that is, taxable income after utilization of
all net operating losses). In reaching this conclusion regarding the holiday period,
Ceragon has considered the provision of the Israeli tax law that grants a two year tax
exemption period subsequent to utilization of all net operating loss carryforward (i.e.,
when first reporting taxable income) and concluded that the effective holiday period
includes the period in which the net operating losses will be utilized to fully offset
taxable income. As such, all deferred tax assets and liabilities expected to reverse
during the period the net operating losses are expected to be utilized and for the two tax
years subsequent thereto, will reverse at a zero tax rate.

Although Ceragon is also entitled to
the reduced corporate tax rates subsequent to the tax exemption period, Ceragon expects
that either the 12 or 14 year time limitation of the Investments Law will cause such
benefits to expire prior to utilization. As such, and based on our expectation that all
existing deferred tax assets and liabilities will reverse during the tax holiday, Ceragon
does not anticipate any deferred tax assets or liabilities to be measured at reduced tax
rates of 10-25%.

Our expectation is that all existing
temporary differences and NOLs, as of December 31, 2004 will reverse prior to the end of
the second tax year after taxable income is first reported. Accordingly, Ceragon has
measured all deferred tax assets and liabilities attributable to the Israeli income tax
regime at the Section 51 tax holiday rate of 0% and, therefore, no deferred tax asset (and
related valuation allowance based on Ceragon’s lack of objectively verifiable
positive evidence to overcome the negative evidence attributable to the cumulative losses
in recent years) is disclosed in Ceragon’s consolidated financial statements as of
December 31, 2004 and through the date of this letter.

Sincerely,

/s/ Naftali Idan

Naftali Idan

Executive Vice President and Chief Financial Officer

Ceragon Networks Ltd.

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