##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 30, 2008
 or
 o
    
    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 000-31581
 OPLINK COMMUNICATIONS, INC.
  Delaware
    
    No. 77-0411346(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 (Address of principal executive offices) (Zip Code)
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited):
    
    
    3Condensed Consolidated Balance Sheets  March 31, 2008 and June 30, 2007
    
    
    3Condensed Consolidated Statements of Operations  Three and nine months ended March
31, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows  Nine months ended March 31, 2008
and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4.
    
    Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    42Item 1A.
    
    Risk Factors
    
    
    44Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    61Item 3.
    
    Defaults Upon Senior Securities
    
    
    61Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    61Item 5.
    
    Other Information
    
    
    61Item 6.
    
    Exhibits
    
    
    62SIGNATURES
    
    
    63EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1- FINANCIAL STATEMENTS
 OPLINK COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and per share data)
(Unaudited)
 March 31,
    
    
    June 30,2008
    
    
    2007ASSETS
    
    
    
    
    
    
    (1)Current assets:Cash and cash equivalents
    
    $
    86,434
    
    
    $
    111,600Short-term investments
    
    
    46,876
    
    
    
    73,300Accounts receivable, net
    
    
    33,300
    
    
    
    34,795Inventories, net
    
    
    25,630
    
    
    
    35,427Net assets held for sale
    
    
    
    
    
    
    22,200Prepaid expenses and other current assets
    
    
    4,377
    
    
    
    6,412Total current assets
    
    
    196,617
    
    
    
    283,734Long-term investments
    
    
    5,000
    
    
    
    42,978Property, plant and equipment, net
    
    
    34,087
    
    
    
    28,907Goodwill and intangible assets, net
    
    
    24,606
    
    
    
    7,421Other assets
    
    
    1,975
    
    
    
    5,349Total assets
    
    $
    262,285
    
    
    $
    368,389LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    10,849
    
    
    $
    14,604Accrued liabilities
    
    
    14,177
    
    
    
    13,820Accrued transitional costs for contract manufacturing
    
    
    503
    
    
    
    1,234Accrued restructuring
    
    
    1,445
    
    
    
    Total current liabilities
    
    
    26,974
    
    
    
    29,658Non-current liabilities
    
    
    223
    
    
    
    207Total liabilities
    
    
    27,197
    
    
    
    29,865Contingencies (Note 17)Minority interest
    
    
    
    
    
    
    68,749Stockholders equity:Common stock, $0.001 par value, 34,000,000 shares
authorized; 20,641,259 and 23,167,521 shares issued and outstanding
as of March 31, 2008 and June 30, 2007, respectively
    
    
    21
    
    
    
    23Additional paid-in capital
    
    
    447,350
    
    
    
    478,615Accumulated other comprehensive income
    
    
    6,425
    
    
    
    3,112Accumulated deficit
    
    
    (218,708
    )
    
    
    (211,975
    )Total stockholders equity
    
    
    235,088
    
    
    
    269,775Total liabilities, minority interest and stockholders equity
    
    $
    262,285
    
    
    $
    368,389
 
 (1)
    
    The condensed consolidated balance sheet at June 30, 2007 has been derived from the audited
consolidated financial statements at that date. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 3




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OPLINK COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    40,836
    
    
    $
    27,620
    
    
    $
    138,930
    
    
    $
    70,287Cost of revenues:Cost of revenues
    
    
    37,464
    
    
    
    20,515
    
    
    
    112,499
    
    
    
    50,503Stock compensation expense
    
    
    103
    
    
    
    69
    
    
    
    346
    
    
    
    209Total cost of revenues
    
    
    37,567
    
    
    
    20,584
    
    
    
    112,845
    
    
    
    50,712Gross profit
    
    
    3,269
    
    
    
    7,036
    
    
    
    26,085
    
    
    
    19,575Operating expenses:Research and development:Research and development
    
    
    3,325
    
    
    
    1,364
    
    
    
    11,367
    
    
    
    4,364Stock compensation expense
    
    
    245
    
    
    
    123
    
    
    
    767
    
    
    
    396Total research and development
    
    
    3,570
    
    
    
    1,487
    
    
    
    12,134
    
    
    
    4,760Sales and marketing:Sales and marketing
    
    
    2,461
    
    
    
    1,461
    
    
    
    8,104
    
    
    
    4,123Stock compensation expense
    
    
    247
    
    
    
    162
    
    
    
    735
    
    
    
    490Total sales and marketing
    
    
    2,708
    
    
    
    1,623
    
    
    
    8,839
    
    
    
    4,613General and administrative:General and administrative
    
    
    3,141
    
    
    
    1,464
    
    
    
    11,159
    
    
    
    4,735Stock compensation expense
    
    
    693
    
    
    
    641
    
    
    
    4,714
    
    
    
    2,080Total general and administrative
    
    
    3,834
    
    
    
    2,105
    
    
    
    15,873
    
    
    
    6,815Transitional costs for contract manufacturing
    
    
    547
    
    
    
    
    
    
    
    1,834
    
    
    
    Merger fees
    
    
    (371
    )
    
    
    
    
    
    
    5,618
    
    
    
    Impairment charges and other costs
    
    
    69
    
    
    
    
    
    
    
    695
    
    
    
    Amortization of intangible and other assets
    
    
    433
    
    
    
    35
    
    
    
    1,100
    
    
    
    105Total operating expenses
    
    
    10,790
    
    
    
    5,250
    
    
    
    46,093
    
    
    
    16,293(Loss) income from operations
    
    
    (7,521
    )
    
    
    1,786
    
    
    
    (20,008
    )
    
    
    3,282Interest and other income, net
    
    
    1,513
    
    
    
    2,504
    
    
    
    6,665
    
    
    
    6,988Gain (loss) on sale of assets
    
    
    2,433
    
    
    
    (8
    )
    
    
    2,393
    
    
    
    (8
    )(Loss) income before minority interest and provision for income taxes
    
    
    (3,575
    )
    
    
    4,282
    
    
    
    (10,950
    )
    
    
    10,262Minority interest in loss of consolidated subsidiaries
    
    
    
    
    
    
    7
    
    
    
    5,891
    
    
    
    28Provision for income taxes
    
    
    365
    
    
    
    10
    
    
    
    908
    
    
    
    125Net (loss) income
    
    $
    (3,940
    )
    
    $
    4,279
    
    
    $
    (5,967
    )
    
    $
    10,165Net (loss) income per share:Basic
    
    $
    (0.19
    )
    
    $
    0.19
    
    
    $
    (0.27
    )
    
    $
    0.46Diluted
    
    $
    (0.19
    )
    
    $
    0.19
    
    
    $
    (0.27
    )
    
    $
    0.44Shares used in per share calculation:Basic
    
    
    20,633
    
    
    
    22,202
    
    
    
    21,811
    
    
    
    21,920Diluted
    
    
    20,633
    
    
    
    23,011
    
    
    
    21,811
    
    
    
    22,886
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OPLINK COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Nine Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (5,967
    )
    
    $
    10,165Adjustments to reconcile net (loss) income to
net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    5,466
    
    
    
    3,582Amortization of intangible and other assets
    
    
    2,381
    
    
    
    277Provision for excess and obsolete inventory
    
    
    6,383
    
    
    
    Impairment charges and other costs
    
    
    695
    
    
    
    Stock compensation expense
    
    
    6,562
    
    
    
    3,175Amortization of (discount) premium on investments
    
    
    (513
    )
    
    
    163(Gain) loss on sale or disposal of assets
    
    
    (2,393
    )
    
    
    8Minority interest in loss of consolidated subsidiaries
    
    
    (5,891
    )
    
    
    Other
    
    
    2
    
    
    
    (78
    )Change in assets and liabilities:Accounts receivable
    
    
    2,405
    
    
    
    (7,860
    )Inventories
    
    
    (331
    )
    
    
    (3,583
    )Prepaid expenses and other current assets
    
    
    2,470
    
    
    
    (2,535
    )Other assets
    
    
    41
    
    
    
    669Accounts payable
    
    
    (4,081
    )
    
    
    3,661Accrued liabilities
    
    
    (3,656
    )
    
    
    378Net cash provided by operating activities
    
    
    3,573
    
    
    
    8,022Cash flows from investing activities:Purchases of available-for-sale investments
    
    
    (123,618
    )
    
    
    (39,802
    )Sales and maturities of available-for-sale investments
    
    
    107,392
    
    
    
    30,068Purchases of held-to-maturity investments
    
    
    (5,000
    )
    
    
    (46,990
    )Maturities of held-to-maturity investments
    
    
    86,400
    
    
    
    65,540Proceeds from sales of property and equipment
    
    
    27,338
    
    
    
    9Purchases of property and equipment
    
    
    (6,934
    )
    
    
    (1,635
    )Sales of equity investments
    
    
    5,000
    
    
    
    Purchases of equity investments
    
    
    (400
    )
    
    
    Acquisition of businesses, net of cash acquired
    
    
    (81,445
    )
    
    
    (500
    )Net cash provided by investing activities
    
    
    8,733
    
    
    
    6,690Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    2,514
    
    
    
    7,516Repurchase of common stock
    
    
    (40,000
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (37,486
    )
    
    
    7,516Effect of exchange rate changes on cash and cash equivalents
    
    
    14
    
    
    
    30Net (decrease) increase in cash and cash equivalents
    
    
    (25,166
    )
    
    
    22,258Cash and cash equivalents, beginning of period
    
    
    111,600
    
    
    
    7,856Cash and cash equivalents, end of period
    
    $
    86,434
    
    
    $
    30,114
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OPLINK COMMUNICATIONS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1. Description of Business.
  .
  Basis of Presentation
 6




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Net (Loss) Income Per Share
 7




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Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Net (loss) income
    
    $
    (3,940
    )
    
    $
    4,279
    
    
    $
    (5,967
    )
    
    $
    10,165Denominator:Weighted average shares outstanding  basic
    
    
    20,633
    
    
    
    22,202
    
    
    
    21,811
    
    
    
    21,920Effect of dilutive potential common shares
    
    
    
    
    
    
    809
    
    
    
    
    
    
    
    966Weighted average shares outstanding  diluted
    
    
    20,633
    
    
    
    23,011
    
    
    
    21,811
    
    
    
    22,886Net (loss) income per share  basic
    
    $
    (0.19
    )
    
    $
    0.19
    
    
    $
    (0.27
    )
    
    $
    0.46Net (loss) income per share  diluted
    
    $
    (0.19
    )
    
    $
    0.19
    
    
    $
    (0.27
    )
    
    $
    0.44Stock options not included in net
(loss) income per share calculation
    
    
    3,875
    
    
    
    1,719
    
    
    
    3,875
    
    
    
    1,712
 Comprehensive (Loss) Income.
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net (loss) income
    
    $
    (3,940
    )
    
    $
    4,279
    
    
    $
    (5,967
    )
    
    $
    10,165Change in unrealized gain on investments
    
    
    275
    
    
    
    25
    
    
    
    99
    
    
    
    55Change in cumulative translation adjustments
    
    
    1,643
    
    
    
    528
    
    
    
    3,214
    
    
    
    1,310Total comprehensive (loss) income
    
    $
    (2,022
    )
    
    $
    4,832
    
    
    $
    (2,654
    )
    
    $
    11,530
 Short-Term and Long-Term Investments.
  8




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March 31, 2008Gross
    
    
    GrossCarrying
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedValue
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueShort-term investments:Corporate securities
    
    $
    46,876
    
    
    $
    46,788
    
    
    $
    143
    
    
    $
    (9
    )
    
    $
    46,922Total short-term investments
    
    
    46,876
    
    
    
    46,788
    
    
    
    143
    
    
    
    (9
    )
    
    
    46,922Long-term investments:United States government agencies
    
    
    5,000
    
    
    
    5,000
    
    
    
    3
    
    
    
    
    
    
    
    5,003Total long-term investments
    
    
    5,000
    
    
    
    5,000
    
    
    
    3
    
    
    
    
    
    
    
    5,003Total investments
    
    $
    51,876
    
    
    $
    51,788
    
    
    $
    146
    
    
    $
    (9
    )
    
    $
    51,925
 June 30, 2007Gross
    
    
    GrossCarrying
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedValue
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueShort-term investments:Certificates of deposit
    
    $
    75
    
    
    $
    75
    
    
    $
    
    
    
    $
    
    
    
    $
    75Obligations of states and political subdivisions
    
    
    79
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    79Corporate securities
    
    
    16,152
    
    
    
    16,165
    
    
    
    
    
    
    
    (24
    )
    
    
    16,141United States government agencies
    
    
    56,994
    
    
    
    56,996
    
    
    
    
    
    
    
    (94
    )
    
    
    56,902Total short-term investments
    
    
    73,300
    
    
    
    73,315
    
    
    
    
    
    
    
    (118
    )
    
    
    73,197Long-term investments:Corporate securities
    
    
    7,438
    
    
    
    7,438
    
    
    
    
    
    
    
    (30
    )
    
    
    7,408United States government agencies
    
    
    35,540
    
    
    
    35,536
    
    
    
    6
    
    
    
    (32
    )
    
    
    35,510Total long-term investments
    
    
    42,978
    
    
    
    42,974
    
    
    
    6
    
    
    
    (62
    )
    
    
    42,918Total investments
    
    $
    116,278
    
    
    $
    116,289
    
    
    $
    6
    
    
    $
    (180
    )
    
    $
    116,115
  March 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:Corporate securities
    
    $
    40,443
    
    
    $
    97
    
    
    $
    (9
    )
    
    $
    40,531Total available-for-sale investments
    
    
    40,443
    
    
    
    97
    
    
    
    (9
    )
    
    
    40,531Held-to-maturity investments:Corporate securities
    
    
    6,345
    
    
    
    46
    
    
    
    
    
    
    
    6,391United States government agencies
    
    
    5,000
    
    
    
    3
    
    
    
    
    
    
    
    5,003Total held-to-maturity investments
    
    
    11,345
    
    
    
    49
    
    
    
    
    
    
    
    11,394Total investments
    
    $
    51,788
    
    
    $
    146
    
    
    $
    (9
    )
    
    $
    51,925
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June 30, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:Certificates of deposit
    
    $
    75
    
    
    $
    
    
    
    $
    
    
    
    $
    75Obligations of states and political subdivisions
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    79Corporate securities
    
    
    10,932
    
    
    
    
    
    
    
    (13
    )
    
    
    10,919United States government agencies
    
    
    12,536
    
    
    
    6
    
    
    
    (4
    )
    
    
    12,538Total available-for-sale investments
    
    
    23,622
    
    
    
    6
    
    
    
    (17
    )
    
    
    23,611Held-to-maturity investments:Corporate securities
    
    
    12,671
    
    
    
    
    
    
    
    (41
    )
    
    
    12,630United States government agencies
    
    
    79,996
    
    
    
    
    
    
    
    (122
    )
    
    
    79,874Total held-to-maturity investments
    
    
    92,667
    
    
    
    
    
    
    
    (163
    )
    
    
    92,504Total investments
    
    $
    116,289
    
    
    $
    6
    
    
    $
    (180
    )
    
    $
    116,115
  March 31, 2008In Loss Position
    
    
    In Loss Position< 12 months
    
    
    12 months and longer
    
    
    Total In Loss PositionGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesAvailable-for-sale investments:Corporate securities
    
    $
    13,988
    
    
    $
    (9
    )
    
    $
    
    
    
    $
    
    
    
    $
    13,988
    
    
    $
    (9
    )Total available-for-sale investments
    
    
    13,988
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    13,988
    
    
    
    (9
    )Held-to-maturity investments:Corporate securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    United States government agencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total held-to-maturity investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total investments
in loss position
    
    $
    13,988
    
    
    $
    (9
    )
    
    $
    
    
    
    $
    
    
    
    $
    13,988
    
    
    $
    (9
    )
  10




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##### Table of Contents



March 31, 2008
    
    

    June 30, 2007Amortized
    
    
    Estimated
    
    
    Amortized
    
    
    EstimatedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueAvailable-for-sale investments:Due in one year or less
    
    $
    40,443
    
    
    $
    40,531
    
    
    $
    13,087
    
    
    $
    13,072Due in one year to five years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due in five years to ten years
    
    
    
    
    
    
    
    
    
    
    1,133
    
    
    
    1,133Due after ten years
    
    
    
    
    
    
    
    
    
    
    9,402
    
    
    
    9,406Total available-for-sale investments
    
    
    40,443
    
    
    
    40,531
    
    
    
    23,622
    
    
    
    23,611Held-to-maturity investments:Due in one year or less
    
    
    6,345
    
    
    
    6,391
    
    
    
    60,229
    
    
    
    60,126Due in one year to five years
    
    
    5,000
    
    
    
    5,003
    
    
    
    32,438
    
    
    
    32,378Total held-to-maturity investments
    
    
    11,345
    
    
    
    11,394
    
    
    
    92,667
    
    
    
    92,504Total investments
    
    $
    51,788
    
    
    $
    51,925
    
    
    $
    116,289
    
    
    $
    116,115
 Acquisition of OCP
   Net working capital
    
    $
    87,235Net fixed assets
    
    
    3,696Other net assets
    
    
    2,951Identifiable intangible assets
    
    
    9,012Total purchase price
    
    $
    102,894
  11




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##### Table of Contents



Cash
    
    $
    79,379Fair value of assumed vested stock options
    
    
    910Transaction costs
    
    
    1,406Total purchase price
    
    $
    81,695
    Net working capital
    
    $
    47,346Net fixed assets
    
    
    5,946Other net assets
    
    
    11,299Identifiable intangible assets
    
    
    6,692Goodwill
    
    
    10,412Total purchase price
    
    $
    81,695
  12




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net Revenues
    
    $
    40,836
    
    
    $
    44,011
    
    
    $
    138,930
    
    
    $
    122,836Net loss
    
    $
    (3,940
    )
    
    $
    (13,404
    )
    
    $
    (11,313
    )
    
    $
    (14,625
    )Net loss per shareBasic
    
    $
    (0.19
    )
    
    $
    (0.58
    )
    
    $
    (0.52
    )
    
    $
    (0.64
    )Diluted
    
    $
    (0.19
    )
    
    $
    (0.58
    )
    
    $
    (0.52
    )
    
    $
    (0.64
    )Shares used in per share calculationsBasic
    
    
    20,633
    
    
    
    23,059
    
    
    
    21,811
    
    
    
    22,777Diluted
    
    
    20,633
    
    
    
    23,059
    
    
    
    21,811
    
    
    
    22,777
  Accrued Transitional Costs for Contract Manufacturing.
 Consolidation ofWorkforce
    
    
    Excess FacilitiesReduction
    
    
    and Other Charges
    
    
    TotalLiability assumed from OCP acquisition in June 2007
    
    $
    1,232
    
    
    $
    
    
    
    $
    1,232Additional charge in June 2007
    
    
    216
    
    
    
    
    
    
    
    216June payments
    
    
    (214
    )
    
    
    
    
    
    
    (214
    )Balance at June 30, 2007
    
    
    1,234
    
    
    
    
    
    
    
    1,234Additional charge in September 2007
    
    
    248
    
    
    
    507
    
    
    
    755September payments
    
    
    (304
    )
    
    
    (507
    )
    
    
    (811
    )Balance at September 30, 2007
    
    
    1,178
    
    
    
    
    
    
    
    1,178Additional charge in December 2007
    
    
    305
    
    
    
    227
    
    
    
    532December payments
    
    
    (841
    )
    
    
    (227
    )
    
    
    (1,068
    )Balance at December 31, 2007
    
    
    642
    
    
    
    
    
    
    
    642Additional charge in March 2008
    
    
    
    
    
    
    547
    
    
    
    547March payments
    
    
    (139
    )
    
    
    (547
    )
    
    
    (686
    )Balance at March 31, 2008
    
    $
    503
    
    
    $
    
    
    
    $
    503
 13




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##### Table of Contents



.
 8. Accrued Restructuring.
    March 31,2008Accrued RestructuringSeverance benefits
    
    $
    1,155Other acquisition related costs
    
    
    290Total restructuring accruals
    
    
    1,445Less: current portion
    
    
    1,445Non-current portion
    
    $
    
 14




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2008Accrued restructuring beginning balance
    
    $
    2,500
    
    
    $
    Additions
    
    
    
    
    
    
    3,183Cash payments
    
    
    (1,055
    )
    
    
    (1,738
    )Accrued restructuring ending balance
    
    $
    1,445
    
    
    $
    1,445
 Inventories
 March 31,
    
    
    June 30,2008
    
    
    2007Inventories:Raw materials
    
    $
    12,628
    
    
    $
    21,156Work-in-process
    
    
    8,469
    
    
    
    10,159Finished goods
    
    
    4,533
    
    
    
    4,112Total
    
    $
    25,630
    
    
    $
    35,427
 Net Assets Held for Sale and Other Assets
   Goodwill and Intangible Assets, Net.
 15




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##### Table of Contents



EstimatedUseful Life
    
    
    Gross
    
    
    AccumulatedMarch 31, 2008
    
    (in Years)
    
    
    Amount
    
    
    Amortization
    
    
    NetTechnology
    
    
    4
    
    
    $
    8,673
    
    
    $
    1,193
    
    
    $
    7,480Trade name
    
    
    6
    
    
    
    1,595
    
    
    
    142
    
    
    
    1,453Customer relationships
    
    
    3-4
    
    
    
    5,481
    
    
    
    802
    
    
    
    4,679Backlog
    
    
    1
    
    
    
    97
    
    
    
    90
    
    
    
    7Total
    
    
    
    
    
    $
    15,846
    
    
    $
    2,227
    
    
    $
    13,619
 EstimatedUseful Life
    
    
    Gross
    
    
    AccumulatedJune 30, 2007
    
    (in Years)
    
    
    Amount
    
    
    Amortization
    
    
    NetPatents
    
    
    5
    
    
    $
    400
    
    
    $
    373
    
    
    $
    27Technology
    
    
    3-6.5
    
    
    
    5,216
    
    
    
    1,040
    
    
    
    4,176Trade name
    
    
    3-6
    
    
    
    570
    
    
    
    97
    
    
    
    473Customer relationships
    
    
    3-4
    
    
    
    2,380
    
    
    
    252
    
    
    
    2,128Backlog
    
    
    1
    
    
    
    52
    
    
    
    9
    
    
    
    43Total
    
    
    
    
    
    $
    8,618
    
    
    $
    1,771
    
    
    $
    6,847
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,Reported as:
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of revenues
    
    $
    543
    
    
    $
    57
    
    
    $
    1,281
    
    
    $
    172Operating expenses
    
    
    433
    
    
    
    35
    
    
    
    1,100
    
    
    
    105Total
    
    $
    976
    
    
    $
    92
    
    
    $
    2,381
    
    
    $
    277
  Fiscal years ending June 30,
    
    Amount2008
    
    $
    9602009
    
    
    3,8122010
    
    
    3,7822011
    
    
    3,6772012
    
    
    1,066After 2012
    
    
    322$
    13,619
  16




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##### Table of Contents

\

Accrued Liabilities.
 March 31,
    
    
    June 30,2008
    
    
    2007Accrued liabilities:Payroll and related expenses
    
    $
    3,027
    
    
    $
    5,876Income tax payable
    
    
    1,842
    
    
    
    311Accrued professional fees
    
    
    1,186
    
    
    
    1,195Accrued sales return
    
    
    582
    
    
    
    562Accrued sales commission
    
    
    484
    
    
    
    778Accrued warranty
    
    
    410
    
    
    
    445Advance deposits from customers
    
    
    145
    
    
    
    433Acquisition costs
    
    
    128
    
    
    
    620Accrued merger fees
    
    
    
    
    
    
    329Other
    
    
    6,373
    
    
    
    3,271$
    14,177
    
    
    $
    13,820
 Product Warranties.
  17




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Balance at the beginning of the period
    
    $
    412
    
    
    $
    400
    
    
    $
    445
    
    
    $
    405Accruals for warranties issued during the period
    
    
    17
    
    
    
    68
    
    
    
    117
    
    
    
    157Accruals related to pre-existing warranties
including expirations and changes in estimates
    
    
    23
    
    
    
    (18
    )
    
    
    (44
    )
    
    
    25Cost of warranty repair
    
    
    (42
    )
    
    
    (20
    )
    
    
    (108
    )
    
    
    (157
    )Balance at the end of the period
    
    $
    410
    
    
    $
    430
    
    
    $
    410
    
    
    $
    430
 Stock Compensation. .
  Three Months Ended March 31,
    
    
    Nine Months Ended March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock compensation expense by type of award:Employee stock options
    
    $
    1,116
    
    
    $
    952
    
    
    $
    5,862
    
    
    $
    2,976Restricted stock awards
    
    
    
    
    
    
    
    
    
    
    266
    
    
    
    Employee stock purchase plan
    
    
    172
    
    
    
    43
    
    
    
    434
    
    
    
    199Total stock compensation expense
    
    
    1,288
    
    
    
    995
    
    
    
    6,562
    
    
    
    3,175Tax effect on stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net effect on net (loss) income
    
    $
    1,288
    
    
    $
    995
    
    
    $
    6,562
    
    
    $
    3,175Effect on net (loss) income per share:Basic
    
    $
    (0.06
    )
    
    $
    (0.04
    )
    
    $
    (0.30
    )
    
    $
    (0.14
    )Diluted
    
    $
    (0.06
    )
    
    $
    (0.04
    )
    
    $
    (0.30
    )
    
    $
    (0.14
    )
 Stock Compensation Expense
   18




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##### Table of Contents



Valuation Assumptions
  Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Risk-free interest rate
    
    
    2.54
    %
    
    
    4.77
    %
    
    
    3.57
    %
    
    
    4.77
    %Expected term
    
    4.6 years
    
    4.6 years
    
    4.5 years
    
    4.7 yearsExpected dividends
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    48
    %
    
    
    47
    %
    
    
    45
    %
    
    
    48
    %
  Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Risk-free interest rate
    
    
    N/A
    (1)
    
    NA
    
    
    3.86
    %
    
    
    4.95
    %Expected term
    
    
    N/A
    
    
    NA
    
    1.1 years
    
    1.3 yearsExpected dividends
    
    
    N/A
    
    
    NA
    
    
    0.00
    %
    
    
    0.00
    %Volatility
    
    
    N/A
    
    
    NA
    
    
    46
    %
    
    
    48
    %
 
 (1)
    
    No purchase rights were granted under the Companys employee stock purchase plan during three
months ended March 31, 2008 and 2007.  19




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##### Table of Contents



Equity Incentive Program
   WeightedNumber of
    
    
    AverageShares Available
    
    
    Options
    
    
    Exercisefor Grant
    
    
    Outstanding
    
    
    PriceBalance, June 30, 2007
    
    
    4,211,451
    
    
    
    3,449,236
    
    
    $
    16.31Additional options and awards authorized
    
    
    598,413
    
    
    
    
    
    
    
    Options and awards granted
    
    
    (949,366)
    *
    
    
    929,632
    
    
    
    12.80Converted from OCP options
    
    
    (594,679)
    **
    
    
    594,679
    
    
    
    28.35Options exercised
    
    
    
    
    
    
    (170,125
    )
    
    
    11.86Options canceled
    
    
    928,765
    
    
    
    (928,765
    )
    
    
    23.60Options expired
    
    
    (288,007)
    ***
    
    
    
    
    
    
    Balance, March 31, 2008
    
    
    3,906,577
    
    
    
    3,874,657
    
    
    $
    15.83
 
 *
    
    The number of options and awards granted in the nine months ended March 31, 2008 include
19,734 stock awards.**
    
    In connection with the acquisition of OCP, Oplink assumed 5,420,687 outstanding stock options
issued pursuant to OCPs stock option plans and converted them into 594,679 options to
purchase shares of Oplink common stock pursuant to conversion terms stated in the merger
agreement.***
    
    In accordance with previous OCP stock option plans that have now terminated, OCP stock
options that were granted and subsequently cancelled are not available for future grant. 20




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##### Table of Contents



Options Outstanding
    
    
    Options Vested and Exercisableat March 31, 2008
    
    
    at March 31, 2008Weighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    Weighted
    
    
    Aggregate
    
    
    
    
    
    
    Remaining
    
    
    Weighted
    
    
    AggregateContractual
    
    
    Average
    
    
    Intrinsic
    
    
    
    
    
    
    Contractual
    
    
    Average
    
    
    IntrinsicRange of Exercise
    
    Number
    
    
    Life
    
    
    Exercise
    
    
    Value
    
    
    Number
    
    
    Life
    
    
    Exercise
    
    
    ValuePrice
    
    Outstanding
    
    
    (in Years)
    
    
    Price
    
    
    (in thousands)
    
    
    Outstanding
    
    
    (in Years)
    
    
    Price
    
    
    (in thousands)$0.0001 - $2.00
    
    
    18,564
    
    
    
    0.7
    
    
    $
    1.01
    
    
    $
    142
    
    
    
    18,564
    
    
    
    0.7
    
    
    $
    1.01
    
    
    $
    142$3.0001 - $5.00
    
    
    488,034
    
    
    
    4.4
    
    
    
    4.60
    
    
    
    1,977
    
    
    
    488,034
    
    
    
    4.4
    
    
    
    4.60
    
    
    
    1,977$5.0001 - $10.00
    
    
    410,456
    
    
    
    4.5
    
    
    
    6.01
    
    
    
    1,096
    
    
    
    410,456
    
    
    
    4.5
    
    
    
    6.01
    
    
    
    1,096$10.0001 - $11.00
    
    
    171,209
    
    
    
    7.1
    
    
    
    10.13
    
    
    
    
    
    
    
    110,800
    
    
    
    7.1
    
    
    
    10.12
    
    
    
    $11.0000 - $13.00
    
    
    464,370
    
    
    
    9.1
    
    
    
    12.20
    
    
    
    
    
    
    
    78,249
    
    
    
    6.8
    
    
    
    12.48
    
    
    
    $13.0001 - $15.00
    
    
    707,463
    
    
    
    8.5
    
    
    
    13.52
    
    
    
    
    
    
    
    165,157
    
    
    
    6.2
    
    
    
    13.81
    
    
    
    $15.0001 - $17.00
    
    
    97,873
    
    
    
    8.6
    
    
    
    16.93
    
    
    
    
    
    
    
    34,812
    
    
    
    8.4
    
    
    
    16.86
    
    
    
    $17.0001 - $19.00
    
    
    433,987
    
    
    
    6.8
    
    
    
    18.00
    
    
    
    
    
    
    
    245,063
    
    
    
    5.6
    
    
    
    18.01
    
    
    
    $19.0001 - $20.00
    
    
    103,953
    
    
    
    7.8
    
    
    
    19.62
    
    
    
    
    
    
    
    48,291
    
    
    
    7.1
    
    
    
    19.52
    
    
    
    $20.0001 - $21.00
    
    
    762,732
    
    
    
    8.2
    
    
    
    20.24
    
    
    
    
    
    
    
    331,611
    
    
    
    8.2
    
    
    
    20.24
    
    
    
    $21.0001 - $37.00
    
    
    112,310
    
    
    
    4.4
    
    
    
    29.10
    
    
    
    
    
    
    
    108,286
    
    
    
    4.3
    
    
    
    29.14
    
    
    
    $40.0001 - $158.00
    
    
    103,706
    
    
    
    2.6
    
    
    
    90.98
    
    
    
    
    
    
    
    103,706
    
    
    
    2.6
    
    
    
    90.98
    
    
    
    3,874,657
    
    
    
    7.0
    
    
    $
    15.83
    
    
    $
    3,215
    
    
    
    2,143,029
    
    
    
    5.5
    
    
    $
    16.03
    
    
    $
    3,215Vested and expected
to vest
    
    
    3,586,535
    
    
    
    6.5
    
    
    $
    15.84
    
    
    $
    3,214
    Employee Stock Purchase Plan
  21




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##### Table of Contents



Repurchase of Common Stock
   Recent Accounting Pronouncements
  22




---



##### Table of Contents



step acquisition
  
  Contingencies In re Oplink Communications,
Inc. Initial Public Offering Securities Litigation
 23




---



##### Table of Contents



24




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##### Table of Contents



25




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##### Table of Contents



Segment Reporting.
  Three Months
    
    
    Nine MonthsEnded March 31,
    
    
    Ended March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:United States
    
    $
    17,213
    
    
    $
    15,627
    
    
    $
    60,104
    
    
    $
    32,617Europe
    
    
    5,030
    
    
    
    5,297
    
    
    
    18,589
    
    
    
    16,192Asia
    
    
    14,777
    
    
    
    4,943
    
    
    
    47,034
    
    
    
    17,247Canada
    
    
    3,816
    
    
    
    1,753
    
    
    
    13,203
    
    
    
    4,231Totals
    
    $
    40,836
    
    
    $
    27,620
    
    
    $
    138,930
    
    
    $
    70,287
  March 31,
    
    
    June 30,2008
    
    
    2007United States
    
    $
    12,044
    
    
    $
    7,223Asia
    
    
    22,043
    
    
    
    21,385Europe
    
    
    
    
    
    
    299Totals
    
    $
    34,087
    
    
    $
    28,907
 Accounting for Uncertainty in Income Taxes. Accounting for Uncertainty
in Income Taxes  an interpretation of FASB Statement No. 109. Recognition Measurement
  26




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##### Table of Contents



ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-looking statements
   Overview
   27




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##### Table of Contents



.
     Use of Estimates and Critical Accounting Policies
  28




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
    
    revenue recognition and product returns;
    
    warranty obligations;
    
    allowance for doubtful accounts;
    
    excess and obsolete inventory;
    
    long-lived asset valuation;
    
    business combinations;
    
    deferred taxes;
    
    stock compensation;
    
    loss contingencies
   Results of Operations
 Revenues
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    Percentage
    
    March 31,
    
    
    
    
    
    Percentage2008
    
    2007
    
    Change
    
    Change
    
    2008
    
    2007
    
    Change
    
    ChangeRevenues
    
    $
    40,836
    
    
    $
    27,620
    
    
    $
    13,216
    
    
    
    47.8
    %
    
    $
    138,930
    
    
    $
    70,287
    
    
    $
    68,643
    
    
    
    97.7
    %
 29




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##### Table of Contents



Gross Profit
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    Percentage
    
    March 31,
    
    
    
    
    
    Percentage2008
    
    2007
    
    Change
    
    Change
    
    2008
    
    2007
    
    Change
    
    ChangeGross profit
    
    $
    3,269
    
    
    $
    7,036
    
    
    $
    (3,767
    )
    
    
    -53.5
    %
    
    $
    26,085
    
    
    $
    19,575
    
    
    $
    6,510
    
    
    
    33.3
    %Gross profit margin
    
    
    8.0
    %
    
    
    25.5
    %
    
    
    
    
    
    
    
    
    
    
    18.8
    %
    
    
    27.9
    %
  30




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Research and Development
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    Percentage
    
    March 31,
    
    
    
    
    
    Percentage2008
    
    2007
    
    Change
    
    Change
    
    2008
    
    2007
    
    Change
    
    ChangeResearch and development
    
    $
    3,570
    
    
    $
    1,487
    
    
    $
    2,083
    
    
    
    140.1
    %
    
    $
    12,134
    
    
    $
    4,760
    
    
    $
    7,374
    
    
    
    154.9
    %
  31




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##### Table of Contents



Sales and Marketing
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    Percentage
    
    March 31,
    
    
    
    
    
    Percentage2008
    
    2007
    
    Change
    
    Change
    
    2008
    
    2007
    
    Change
    
    ChangeSales and marketing
    
    $
    2,708
    
    
    $
    1,623
    
    
    $
    1,085
    
    
    
    66.9
    %
    
    $
    8,839
    
    
    $
    4,613
    
    
    $
    4,226
    
    
    
    91.6
    %
   General and Administrative
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    Percentage
    
    March 31,
    
    
    
    
    
    Percentage2008
    
    2007
    
    Change
    
    Change
    
    2008
    
    2007
    
    Change
    
    ChangeGeneral and
administrative
    
    $
    3,834
    
    
    $
    2,105
    
    
    $
    1,729
    
    
    
    82.1
    %
    
    $
    15,873
    
    
    $
    6,815
    
    
    $
    9,058
    
    
    
    132.9
    %
 32




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##### Table of Contents



Stock Compensation Expense
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    Percentage
    
    March 31,
    
    
    
    
    
    Percentage2008
    
    2007
    
    Change
    
    Change
    
    2008
    
    2007
    
    Change
    
    ChangeStock compensation
expense
    
    $
    1,288
    
    
    $
    995
    
    
    $
    293
    
    
    
    29.4
    %
    
    $
    6,562
    
    
    $
    3,175
    
    
    $
    3,387
    
    
    
    106.7
    %
   .
 33




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##### Table of Contents



Transitional Costs for Contract Manufacturing
  Consolidation ofWorkforce
    
    
    Excess FacilitiesReduction
    
    
    and Other Charges
    
    
    TotalLiability assumed from OCP acquisition in June 2007
    
    $
    1,232
    
    
    $
    
    
    
    $
    1,232Additional charge in June 2007
    
    
    216
    
    
    
    
    
    
    
    216June payments
    
    
    (214
    )
    
    
    
    
    
    
    (214
    )Balance at June 30, 2007
    
    
    1,234
    
    
    
    
    
    
    
    1,234Additional charge in September 2007
    
    
    248
    
    
    
    507
    
    
    
    755September payments
    
    
    (304
    )
    
    
    (507
    )
    
    
    (811
    )Balance at September 30, 2007
    
    
    1,178
    
    
    
    
    
    
    
    1,178Additional charge in December 2007
    
    
    305
    
    
    
    227
    
    
    
    532December payments
    
    
    (841
    )
    
    
    (227
    )
    
    
    (1,068
    )Balance at December 31, 2007
    
    
    642
    
    
    
    
    
    
    
    642Additional charge in March 2008
    
    
    
    
    
    
    547
    
    
    
    547March payments
    
    
    (139
    )
    
    
    (547
    )
    
    
    (686
    )Balance at March 31, 2008
    
    $
    503
    
    
    $
    
    
    
    $
    503
  .
 Impairment Charges and Other Costs
  34




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Merger Fees
  Amortization of Intangible and Other Assets
  Interest and Other Income, Net
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    Percentage
    
    March 31,
    
    
    
    
    
    Percentage2008
    
    2007
    
    Change
    
    Change
    
    2008
    
    2007
    
    Change
    
    ChangeInterest and other
income, net
    
    $
    1,513
    
    
    $
    2,504
    
    
    $
    (991
    )
    
    
    -39.6
    %
    
    $
    6,665
    
    
    $
    6,988
    
    
    $
    (323
    )
    
    
    -4.6
    %
  35




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Gain (Loss) on Sale of Assets
  Minority Interest
   Provision for Income Taxes
  Liquidity and Capital Resources
  Nine Months Ended March 31, 2008
  36




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.
 37




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Nine Months Ended March 31, 2007
        .
 38




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Contractual Obligations
  Contractual Obligations Due by PeriodTotal
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    4-5 yearsContractual ObligationsPurchase obligations
    
    $
    17,074
    
    
    $
    15,305
    
    
    $
    1,717
    
    
    $
    52Operating leases
    
    
    894
    
    
    
    590
    
    
    
    180
    
    
    
    124Total
    
    $
    17,968
    
    
    $
    15,895
    
    
    $
    1,897
    
    
    $
    176
 Recent Accounting Pronouncements
   step acquisition
  39




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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Exposure
   40




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Carrying
    
    
    Average Rate
    
    
    Carrying
    
    
    Average RateValue at
    
    
    of Return at
    
    
    Value at
    
    
    of Return atMarch 31,
    
    
    March 31,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2008
    
    
    2007
    
    
    2007(Annualized)
    
    
    
    
    
    
    (Annualized)Investment Securities:Cash equivalents  variable rate
    
    $
    49,107
    
    
    
    1.9
    %
    
    $
    12,289
    
    
    
    5.2
    %Cash equivalents  fixed rate
    
    
    23,967
    
    
    
    1.9
    %
    
    
    4,137
    
    
    
    5.3
    %Short-term investments  variable rate
    
    
    7,992
    
    
    
    3.2
    %
    
    
    154
    
    
    
    2.2
    %Short-term investments  fixed rate
    
    
    38,884
    
    
    
    4.8
    %
    
    
    73,146
    
    
    
    5.0
    %Long-term investments  fixed rate
    
    
    5,000
    
    
    
    4.2
    %
    
    
    42,978
    
    
    
    8.1
    %Total
    
    $
    124,950
    
    
    
    
    
    
    $
    132,704
 2009
    
    2010
    
    2011 and after
    
    Total
    
    Fair ValueLong-term investments  fixed rate
    
    $
    5,000
    
    
    $
    
    
    
    $
    
    
    
    $
    5,000
    
    
    $
    5,003Average interest rate
    
    
    4.2
    %
    
    
    
    
    
    
    
    
    
    
    4.2
    %
    
    
    
 Foreign Currency Exchange Rate Exposure
   
 ITEM 4  CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control over Financial Reporting.
 41




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PART II. OTHER INFORMATION
 
 ITEM 1- LEGAL PROCEEDINGS
 In re Oplink Communications, Inc. Initial Public
Offering Securities Litigation
    42




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43




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Item 1ARisk Factors
  We have incurred significant losses in the past, and if we are unable to continue to increase our
revenues while controlling our costs and operating expenses, we may be unable to sustain our
profitability.
   Our quarterly revenues and operating results may fluctuate significantly from quarter to quarter,
which may cause our stock price to drop.
  
    
    fluctuations in demand for, and sales of, our products;
    
    declines in the average selling prices of our products;
 44




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##### Table of Contents




    
    fluctuations in the mix of products sold during a quarter (for example, the percentage of
total sales represented by lower margin products such as our ROADM products);
    
    competitive factors in the fiber optic components and subsystems market, including
introductions of new products, new technologies and product enhancements by competitors,
consolidation of competitors, customers and service provider end users and pricing
pressures;
    
    the ability of our manufacturing operations in China to timely produce and deliver
products in the quantity and of the quality our customers require;
    
    our inability to cut costs quickly in the event of market or demand downturns, due to the
fact that a high percentage of our expenses, including those related to manufacturing,
engineering, research and development, sales and marketing and general and administrative
functions, is fixed in the short term;
    
    the availability of materials and components used in our products or increases in the
prices of these materials;
    
    our ability to develop, introduce, manufacture and ship new and enhanced optical
networking products in a timely manner and in production quantities without defects or other
quality issues; and
    
    costs associated with, and the outcomes of, any intellectual property or other litigation
to which we may be a party.
 Our recent acquisition of Optical Communication Products (OCP) may prove unfavorable to us and
our stockholders, because we may not realize expected benefits or synergies.
    45




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We depend on the growth and success of the communications industry, which is subject to severe
fluctuations in economic activity.
     We expect volatility in our stock price, which could cause you to lose all or part of your
investment.
  
    
    quarterly variations in our operating results;
    
    changes in financial estimates by securities analysts and our failure to meet estimates;
    
    changes in market values of comparable companies;
    
    announcements by our competitors or us of new products or of significant acquisitions,
strategic partnerships or joint ventures;
    
    any loss by us of a major customer;
 46




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##### Table of Contents




    
    economic fluctuations in the market for optical communications products, or in the
telecommunications industry generally;
    
    the outcome of, and costs associated with, any litigation to which we are or may become a
party;
    
    departures of key management or engineering personnel; and
    
    future sales of our common stock.
 The optical networking component industry is experiencing declining average selling prices, which
could cause our gross margins to decline and harm our operating results.
  Our ROADM Optical Switching and Routing product has accounted for a significant portion of our
revenues for recent periods. We have recently experienced declines in both unit shipments and ASPs
of our ROADM products as a result of increased competition, and we expect this trend to continue.
    47




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If our customers do not approve our manufacturing processes and qualify our products, we will lose
significant customer sales and opportunities.
    We depend upon a small number of customers for a substantial portion of our revenues, and any
decrease in revenues from, or loss of, these customers without a corresponding increase in revenues
from other customers would harm our operating results.
  ,
  48




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Our markets are highly competitive, some of our customers are also our competitors, and our other
customers may choose to purchase our competitors products rather than our products or develop
internal capabilities to produce their own fiber optic modules.
     Because we depend on third parties to supply some of our raw materials and components, we may not
be able to obtain sufficient quantities of these materials, which could limit our ability to fill
customer orders and harm our operating results.
  49




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If we are unable develop new products and product enhancements that achieve market acceptance, our
revenues could decline, which would harm our operating results.
     50




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##### Table of Contents



If we are unable to successfully integrate acquired businesses or technologies, our operating
results may be harmed. The recent acquisition of OCP is our largest acquisition ever and may
substantially challenge Oplinks management infrastructure.
  
    
    additional operating expenses without additional revenues;
    
    potential dilutive issuances of equity securities;
    
    the incurrence of debt and contingent liabilities;
    
    intangible asset write-offs;
    
    research and development write-offs;
    
    other acquisition-related expenses; and
    
    cannibalization of product lines leading to revenue attrition.
  
    
    problems assimilating the purchased operations, technologies or products;
    
    unanticipated costs associated with the acquisition;
    
    diversion of managements attention from our core business;
    
    adverse effects on existing business relationships with suppliers and customers;
    
    risks associated with entering markets in which we have no or limited prior experience; and
    
    potential loss of key employees of purchased organizations.
  51




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If we fail to effectively manage our manufacturing capability, produce products that meet our
customers quality requirements and achieve acceptable production yields in China, we may not be
able to deliver sufficient quantities of products that meet all of our customers order
requirements in a timely manner, which would harm our operating results.
     
    
    our ability to procure the necessary raw materials and equipment on a timely basis;
    
    a potential lack of availability of qualified management and manufacturing personnel;
    
    our ability to maintain quality;
    
    our ability to effectively manage headcount, particularly if we undertake to expand our
manufacturing operations;
    
    vulnerability of telecommunications networks in East Asia to natural disasters, such as
the recent earthquake that damaged several undersea fiber-optic cables responsible for
Internet and telephone connections with parts of China; and
 52




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##### Table of Contents




    
    our ability to quickly and efficiently implement an adequate set of financial controls to
effectively track and control inventory levels and inventory mix and to accurately predict
inventory requirements.
  If we fail to predict our manufacturing requirements accurately, we could incur additional carrying
costs and have excess and obsolete inventory or we could experience manufacturing delays, which
could cause us to lose orders or customers.
  Our products may have defects that are not detected until full deployment of a customers
equipment, which could result in a loss of customers, damage to our reputation and substantial
costs.
  
    
    loss of customers;
    
    loss of or delay in revenues;
    
    loss of market share;
    
    damage to our brand and reputation;
    
    inability to attract new customers or achieve market acceptance;
    
    diversion of development resources;
    
    increased service and warranty costs;
 53




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##### Table of Contents




    
    legal actions by our customers; and
    
    increased insurance costs.
 Because none of our customers are obligated to purchase our products, they may cancel or defer
their purchases at any time and on short notice, which could harm our operating results.
  
    
    may stop purchasing our products or defer their purchases on short notice;
    
    are free to purchase products from our competitors;
    
    are not required to make minimum purchases; and
    
    may cancel orders that they place with us.
  We depend on key personnel to manage our business effectively in a rapidly changing market, and if
we are unable to retain our key employees and hire additional personnel, our ability to sell our
products could be harmed.
 .
   54




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We are exposed to currency rate fluctuations and exchange controls that could adversely impact our
operating results.
   If our liability for U.S. and foreign taxes is greater than we have anticipated and reserved for,
our operating results may suffer.
  If tax benefits available to our subsidiaries located in China are reduced or repealed or our China
subsidiaries fail to meet the requirements for utilizing such tax benefits, our financial condition
and operating results could suffer.
  If we are unable to protect our proprietary technology, our ability to succeed will be harmed.
  55




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##### Table of Contents



We may be involved in intellectual property disputes in the future, which will divert managements
attention and could cause us to incur significant costs and prevent us from selling or using the
challenged technology.
   
    
    obtain from the owner of the infringed intellectual property right a license to sell or
use the relevant technology, which license may not be available on reasonable terms, or at
all;
    
    stop selling, incorporating or using our products that use the challenged intellectual
property;
    
    pay substantial money damages; or
    
    redesign the products that use the technology.
  56




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Our failure to comply with governmental regulations could subject us to liability. New laws could
be enacted that increase the risks and costs to Oplink. A new labor contract law has been enacted
in China.
      57




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##### Table of Contents



Failure to maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could impair the reliability of our financial statements, cause us to
delay filing our periodic reports with the SEC, harm our reputation and adversely affect our stock
price.
    Changes in existing financial accounting standards or practices may adversely affect our results of
operations.
  58




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Disruption to commercial activities in the United States or in other countries, particularly in
China and Taiwan, may adversely impact our results of operations, our ability to raise capital or
our future growth.
  
    
    disruptions to commercial activities or damage to our facilities as a result of natural
disasters, political unrest, war, terrorism, labor strikes, and work stoppages;
    
    disruptions of telecommunications networks due to natural disasters;
    
    difficulties and costs of staffing and managing foreign operations with personnel who
have expertise in optical network technology;
    
    unexpected changes in regulatory or certification requirements for optical systems or
networks;
    
    disruptions in the transportation of our products and other risks related to the
infrastructure of foreign countries;
    
    economic instability;
    
    any future outbreak of severe acute respiratory syndrome, avian influenza and other
epidemics or illnesses; and
    
    power shortages at our manufacturing facilities in China, which may lead to production
delays.
    59




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Provisions of our charter documents and Delaware law and other arrangements may have anti-takeover
effects that could prevent any change in control, which could negatively affect your investment.
  
    
    issue preferred stock with rights senior to those of the common stock without any further
vote or action by the stockholders;
    
    provide for a classified board of directors;
    
    eliminate the right of the stockholders to call a special meeting of stockholders;
    
    eliminate the right of stockholders to act by written consent; and
    
    impose various procedural and other requirements, which could make it difficult for
stockholders to effect certain corporate actions.
  60




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ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3  DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5  OTHER INFORMATION
  61




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ITEM 6  EXHIBITS
 Exhibit Index
 Exhibit No.
    
    Description3.1(1)
    
    Amended and Restated Certificate of Incorporation of the
Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Designation of Series A Junior Participating
Preferred Stock.3.4(3)
    
    Certificate of Amendment to Amended and Restated Certificate
of Incorporation of the Registrant.31.1
    
    Certification of Chief Executive Officer Required under Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer Required under Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer Required under Rule
13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of
1934, as amended, and Section 1350 of Chapter 63 of Title 18
of the United States Code (18 U.S.C. Section 1350).32.2*
    
    Certification of Chief Financial Officer Required under Rule
13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of
1934, as amended, and 18 U.S.C. Section 1350.
 
 (1)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1/A, No.
333-41506, as filed on October 3, 2000.(2)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on March 22, 2002
and incorporated herein by reference.(3)
    
    Previously filed as an Exhibit to the Registrants Quarterly Report on Form 10-Q filed on
November 14, 2006 and incorporated herein by reference.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompanies this Quarterly Report on
Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed
filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended. 62




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##### Table of Contents



SIGNATURES
  OPLINK COMMUNICATIONS, INC.
(Registrant)DATE: May 9, 2008
    By:
    /s/ Shirley YinShirley YinChief Financial Officer
(Principal Financial and Accounting Officer) 63




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EXHIBIT INDEX
 Exhibit No.
    
    Description3.1(1)
    
    Amended and Restated Certificate of Incorporation of the
Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Designation of Series A Junior Participating
Preferred Stock.3.4(3)
    
    Certificate of Amendment to Amended and Restated Certificate
of Incorporation of the Registrant.31.1
    
    Certification of Chief Executive Officer Required under Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer Required under Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer Required under Rule
13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of
1934, as amended, and Section 1350 of Chapter 63 of Title 18
of the United States Code (18 U.S.C. Section 1350).32.2*
    
    Certification of Chief Financial Officer Required under Rule
13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of
1934, as amended, and 18 U.S.C. Section 1350.
 
 (1)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1/A, No.
333-41506, as filed on October 3, 2000.(2)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on March 22, 2002
and incorporated herein by reference.(3)
    
    Previously filed as an Exhibit to the Registrants Quarterly Report on Form 10-Q filed on
November 14, 2006 and incorporated herein by reference.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompanies this Quarterly Report on
Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed
filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended.