<PAGE>

================================================================================

                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 March 31, 2001

                                      or


          [_]  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.
             (Exact name of registrant as specified in its charter)


          Delaware                                      No. 77-0411346
          (State or other jurisdiction of              (I.R.S. Employer
          incorporation or organization)               Identification No.)

                  3469 North First Street, San Jose, CA 95134
              (Address of principal executive offices) (Zip Code)

      Registrant's telephone number, including area code: (408) 433-0606


          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
                                                       -----         _____

          The number of shares of the Registrant's Common Stock outstanding as
of April 30, 2001 was 160,497,074.

================================================================================
<PAGE>

                          OPLINK COMMUNICATIONS, INC.

                                   FORM 10-Q

                                     INDEX


<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
PART I. FINANCIAL INFORMATION
-----------------------------

Item 1.   Financial Statements (unaudited):

     Condensed Consolidated Balance Sheet -
          March 31, 2001 and June 30, 2000                                   3

     Condensed Consolidated Statement of Operations -
          Three and nine months ended March 31, 2001 and 2000                4

     Condensed Consolidated Statement of Cash Flows -
          Nine months ended March 31, 2001 and 2000                          5

     Notes to Condensed Consolidated Financial Statements                    7

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                               11

Item 3.   Quantitative and Qualitative Disclosures About Market Risk        32

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

Item 1.   Legal Proceedings                                                 33

Item 2.   Changes in Securities and Use of Proceeds                         33

Item 3.   Defaults Upon Senior Securities                                   33

Item 4.   Submission of Matters to a Vote of Security Holders               33

Item 5.   Other Information                                                 33

Item 6.   Exhibits and Reports on Form 8-K                                  34

SIGNATURES                                                                  35
</TABLE>

                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                          OPLINK COMMUNICATIONS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                     March 31,         June 30,
                                                                                   ------------------------------
                                                                                       2001              2000
                                                                                   --------------     -----------
ASSETS                                                                              (Unaudited)          (1)
<S>                                                                                <C>                <C>
Current assets:
    Cash and cash equivalents                                                          $ 264,603        $ 26,665
    Accounts receivable, net                                                              21,740          10,100
    Inventories                                                                           24,787          11,308
    Prepaid expenses                                                                       5,035           3,974
    Deferred tax assets                                                                    4,990           1,080
                                                                                   -------------      ----------
       Total current assets                                                              321,155          53,127
Property and equipment, net                                                               76,557          21,270
Intangible assets                                                                         16,481          20,600
Other assets                                                                               1,606             935
                                                                                   -------------      ----------
       Total assets                                                                    $ 415,799        $ 95,932
                                                                                   =============      ==========

LIABILITIES, CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                                    $ 24,273        $ 15,188
    Accrued liabilities                                                                   17,343           6,767
    Current portion of capital lease obligations                                           2,867             419
    Borrowings under the line of credit                                                    1,148             135
                                                                                   -------------      ----------
       Total current liabilities                                                          45,631          22,509

Capital lease obligations, non current                                                     4,475           1,267
Deferred tax liability                                                                     2,958           2,958
                                                                                   -------------      ----------
       Total liabilities                                                                  53,064          26,734
                                                                                   -------------      ----------

Convertible preferred stock                                                                    -          58,373
                                                                                   -------------      ----------

Contingencies (Note 7)

Stockholders' equity:
    Common stock                                                                             158              24
    Additional paid-in capital                                                           469,255          61,253
    Deferred stock compensation                                                          (23,193)        (17,986)
    Accumulated deficit                                                                  (83,485)        (32,466)
                                                                                   -------------      ----------
       Total stockholders' equity                                                        362,735          10,825
                                                                                   -------------      ----------
            Total liabilities, convertible preferred stock
                and stockholders' equity                                               $ 415,799        $ 95,932
                                                                                   =============      ==========
</TABLE>

(1) The June 30, 2000 consolidated balance sheet has been derived from audited
financial statements at that date.

The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                       3
<PAGE>

                          OPLINK COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                   Three Months Ended                  Nine Months Ended
                                                                     March 31,                          March 31,
                                                            ----------------------------      ------------------------------
                                                                2001             2000             2001              2000
                                                            -----------      -----------      ------------      ------------
                                                                    (Unaudited)                        (Unaudited)
<S>                                                         <C>              <C>              <C>               <C>
Revenues                                                      $ 36,042          $ 9,412         $ 111,560          $ 20,661
Cost of revenues:
     Cost of revenues                                           45,465            8,824           100,981            17,420
     Non-cash compensation expense                               1,173            1,124             4,062             1,627
                                                            -----------      -----------      ------------      ------------
       Total cost of revenues                                   46,638            9,948           105,043            19,047
                                                            -----------      -----------      ------------      ------------

Gross profit (loss)                                            (10,596)            (536)            6,517             1,614
                                                            -----------      -----------      ------------      ------------

Operating expenses:
     Research and development:
       Research and development                                  4,888              855            13,523             1,362
       Non-cash compensation expense                             1,030              364             3,784               849
                                                            -----------      -----------      ------------      ------------
         Total research and development                          5,918            1,219            17,307             2,211
                                                            -----------      -----------      ------------      ------------

     Sales and marketing:
       Sales and marketing                                       2,955              600            17,312             1,392
       Non-cash compensation expense                               893              557             2,156               758
                                                            -----------      -----------      ------------      ------------
         Total sales and marketing                               3,848            1,157            19,468             2,150
                                                            -----------      -----------      ------------      ------------

     General and administrative:
       General and administrative                                4,777              928            11,152             2,259
       Non-cash compensation expense                             1,926            1,004            13,629             2,008
                                                            -----------      -----------      ------------      ------------
         Total general and administrative                        6,703            1,932            24,781             4,267
                                                            -----------      -----------      ------------      ------------

     Amortization of goodwill                                      984                -             2,950                 -
                                                            -----------      -----------      ------------      ------------
            Total operating expenses                            17,453            4,308            64,506             8,628
                                                            -----------      -----------      ------------      ------------

Loss from operations                                           (28,049)          (4,844)          (57,989)           (7,014)
Interest and other income, net                                   2,820              262             6,970               320
                                                            -----------      -----------      ------------      ------------

Net loss                                                     $ (25,229)        $ (4,582)        $ (51,019)         $ (6,694)
                                                            ===========      ===========      ============      ============

Basic and diluted net loss per share                           $ (0.16)         $ (1.03)          $ (0.45)          $ (2.11)
                                                            ===========      ===========      ============      ============

Basic and diluted weighted average shares outstanding          157,668            4,457           112,481             3,178
                                                            ===========      ===========      ============      ============
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       4
<PAGE>

                          OPLINK COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                               March 31,
                                                                                    -----------------------------
                                                                                         2001            2000
                                                                                    -------------    ------------
<S>                                                                                 <C>              <C>
Cash flows from operating activities:
    Net loss                                                                           $ (51,019)       $ (6,694)
    Adjustments to reconcile net loss to net cash
      used in operating activities:
         Depreciation and amortization of property and equipment                           5,988             702
         Amortization of goodwill and intangible assets                                    4,119               -
         Amortization of deferred compensation                                            23,631           5,242
         Deferred tax assets                                                              (3,910)              -
         Sales and marketing expense related to the convertible
            note payable to Cisco Systems                                                  8,824               -
         Interest expense related to the convertible note
            payable to Cisco Systems                                                         471               -
         Loss on disposal of property and equipment                                          801               -
         Donation of shares of common stock                                                  100               -
         Change in assets and liabilities:
            Accounts receivable                                                          (11,640)         (2,686)
            Inventories                                                                  (13,479)         (5,881)
            Prepaid expenses                                                              (1,061)         (4,272)
            Other assets                                                                    (671)           (134)
            Accounts payable                                                               9,085            (273)
            Accrued liabilities                                                           10,612           1,681
                                                                                    -------------    ------------
               Net cash used in operating activities                                     (18,149)        (12,315)
                                                                                    -------------    ------------

Cash flows from investing activities:
    Purchase of property and equipment                                                   (54,926)         (4,835)
                                                                                    -------------    ------------
               Net cash used in investing activities                                     (54,926)         (4,835)
                                                                                    -------------    ------------

Cash flows from financing activities:
    Proceeds from issuance of convertible preferred stock                                      -          46,290
    Proceeds from issuance of common stock upon the
      initial public offering                                                            261,014               -
    Proceeds from issuance of common stock upon the
      exercise of options, net of repurchases                                                480             413
    Proceeds from issuance of convertible note payable                                    50,000               -
    Proceeds from borrowings under line of credit                                          1,013             135
    Repayment of capital lease obligations                                                (1,494)            (72)
                                                                                    -------------    ------------
               Net cash provided by financing activities                                 311,013          46,766
                                                                                    -------------    ------------

Net increase in cash and cash equivalents                                                237,938          29,616

Cash and cash equivalents, beginning of year                                              26,665           4,757
                                                                                    -------------    ------------

Cash and cash equivalents, end of period                                               $ 264,603        $ 34,373
                                                                                    =============    ============
</TABLE>

                           (Continued on next page)

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       5
<PAGE>

                          OPLINK COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)

                        (CONTINUED FROM PREVIOUS PAGE)


<TABLE>
<CAPTION>
                                                                                                Nine Months Ended
                                                                                                     March 31,
                                                                                            ---------------------------
                                                                                               2001            2000
                                                                                            -----------     -----------
<S>                                                                                         <C>             <C>
Supplemental disclosures of cash flow information:
    Cash paid during the period for interest expense                                           $   412         $    22
                                                                                            ===========     ===========
    Cash paid during the period for income taxes                                               $ 4,990         $     -
                                                                                            ===========     ===========

Supplemental non-cash investing and financing activities:
    Property and equipment acquired under capital lease                                        $ 7,150         $ 1,420
                                                                                            ===========     ===========
    Deferred compensation related to common stock
      option grants to employees                                                               $29,516         $10,081
                                                                                            ===========     ===========
    Repurchase of common stock                                                                 $    60         $     -
                                                                                            ===========     ===========
    Common stock bonus                                                                         $    36         $     -
                                                                                            ===========     ===========
    Conversion of convertible preferred stock                                                  $58,373         $     -
                                                                                            ===========     ===========
    Conversion of convertible note payable and related interest to Cisco Systems               $50,471         $     -
                                                                                            ===========     ===========
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       6
<PAGE>

                          OPLINK COMMUNICATIONS, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1. Description of Business. Oplink Communications, Inc. ("Oplink" or the
   -----------------------
"Company") designs, manufactures and markets fiber optic components and
integrated optical modules that increase the performance of optical networks.
The Company provides a broad line of products to communications equipment
suppliers to enable bandwidth creation and management within an optical network.
The Company was incorporated in September 1995 and began shipping its products
for sale in 1996. In April 1999, the Company established manufacturing
operations in China. In April 2000, the Company acquired Telelight Communication
Inc., a designer and manufacturer of passive fiber optic components in
Sunnyvale, California and China. The Company has manufacturing operations in San
Jose, California and Beijing, Chengdu, Fuzhou, Shanghai and Zhuhai, China. The
Company has expanded and plans to continue to expand its manufacturing capacity
as its business grows. The Company is currently expanding its facilities in
Shanghai and Zhuhai. The Company conducts its business within one business
segment and has no organizational structure dictated by product, service line,
geography or customer type.

2. Basis of Presentation. The condensed consolidated financial statements
   ---------------------
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to such rules and regulations. The
financial statements presented herein have been prepared by management, without
audit by independent accountants who do not express an opinion thereon, and
should be read in conjunction with the consolidated financial statements and
notes thereto for the fiscal year ended June 30, 2000 included in the Company's
Registration Statement on Form S-1 declared effective by the SEC on October 3,
2000.

     The unaudited condensed consolidated statement of operations data reflects
a reclassification to allocate the non-cash compensation expense related to the
issuance of stock options from a single-line presentation within operating
expenses to the individual amounts related to cost of revenues, research and
development, sales and marketing, and general and administrative expenses.

     In the opinion of the management, these unaudited financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position of the Company at March 31,
2001, the results of its operations for the three and nine-month periods ended
March 31, 2001 and 2000 and its cash flows for the nine-month periods ended
March 31, 2001 and 2000. The results of operations for the periods presented are
not necessarily indicative of those that may be expected for the full year.

3. Net Loss Per Share. The Company computes net loss per share in accordance
   ------------------
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," and SEC Staff Accounting Bulletin ("SAB") No. 98. Under the provisions
of SFAS No. 128 and SAB No. 98, basic net loss per share is computed by dividing
the net loss for the period by the weighted average number of shares of common
stock outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
and common equivalent shares outstanding during the period, if dilutive.
Potentially dilutive common equivalent shares are composed of preference shares,
warrants and the incremental common shares issuable upon the exercise of stock
options. The following is a

                                       7
<PAGE>

reconciliation of the numerators and denominators of the Basic and Diluted net
loss per share computations for the periods presented (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                                         Three Months Ended                Nine Months Ended
                                                                             March 31,                         March 31,
                                                                        2001             2000            2001             2000
                                                                   ---------------   -------------   -------------    --------------
<S>                                                                <C>               <C>             <C>              <C>
Numerator:
     Net loss attributable to holders of Common Stock                   $ (25,229)        $(4,582)       $(51,019)         $ (6,694)
                                                                   ===============   =============   =============    ==============
Denominator:
     Weighted average shares outstanding                                  157,668           4,457         112,481             3,178
                                                                   ---------------   -------------   -------------    --------------
Denominator for basic and diluted calculations                            157,668           4,457         112,481             3,178
                                                                   ===============   =============   =============    ==============

     Basic and diluted net loss per share                               $   (0.16)        $ (1.03)       $  (0.45)         $  (2.11)
                                                                   ===============   =============   =============    ==============

Antidilutive securities including options, warrants,
     preferred shares and shares per convertible note payable
     not included in net loss per share calculation                        18,474         125,509          57,071           113,331
                                                                   ===============   =============   =============    ==============
</TABLE>

4. Inventories.  Inventories are stated at the lower of cost (first-in, first-
   -----------
out) or market. Inventories consist of (in thousands):

                                         March 31,          June 30,
                                            2001              2000
                                        -------------     -------------

          Inventories:
               Raw materials                $ 15,299           $ 6,995
               Work-in-process                 8,376             3,038
               Finished goods                  1,112             1,275
                                        -------------     -------------

                                            $ 24,787           $11,308
                                        -------------     -------------

5. Recent Accounting Pronouncements. In June 1998, the Financial Accounting
   --------------------------------
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
No. 133 requires that all derivatives be recognized at fair value in the
statement of financial position, and that the corresponding gains or losses be
reported either in the statement of operations or as a component of
comprehensive income (loss), depending on the type of hedging relationship that
exists.

   In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000. The adoption of SFAS No. 133
on July 1, 2000 did not have a material impact on the Company's financial
position, results of operations or cash flows.

   In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") 101,
"Revenue Recognition in Financial Statements," which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. The Company will be required to adopt SAB 101 in the
fourth quarter of fiscal 2001. The Company does not expect the adoption

                                       8
<PAGE>

of SAB 101 to have a material impact on the Company's financial position,
results of operations or cash flows.

   In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting
for Certain Transactions Involving Stock Compensation, an Interpretation of
Opinion No. 25" for (a) the definition of employee for purposes of applying
Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various modifications
to the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. FIN 44
became effective July 1, 2000, but certain conclusions cover specific events
that occur after either December 15, 1998, or January 12, 2000. The adoption of
FIN 44 did not have a material impact on the Company's financial position,
results of operations or cash flows.

   In August 2000, the Emerging Issues Task Force ("EITF") released issue No.
00-10, "Accounting for Shipping and Handling Fees and Costs." EITF 00-10
addresses the income statement classification of amounts billed to a customer
for shipping and handling costs as well as the classification of amounts
incurred for shipping and handling costs. The EITF concluded that amounts billed
to customers in sales transactions related to shipping and handling should be
classified as revenue, and any costs incurred should be classified as cost of
goods sold or, in general, as operating expense. If shipping and handling costs
incurred are not included in cost of goods sold, the amount of such costs and
the line item on the statement of operations which includes these costs should
be disclosed. The Company does not expect the adoption of EITF 00-10 to have a
material impact on its financial position, results of operations or cash flows.

6. Initial Public Offering. On October 10, 2000, the Company sold 15,755,000
   -----------------------
shares of common stock in an underwritten initial public offering, including
2,055,000 shares of common stock issued pursuant to the exercise of the
underwriter's over-allotment option, resulting in net proceeds to the Company of
approximately $263.7 million, before offering expenses of approximately $2.7
million. Simultaneously with the closing of the public offering, 110,103,344
shares of convertible preferred stock were converted to shares of common stock
on a one-for-one-basis. In addition, the note payable to Cisco Systems, Inc. was
converted into 3,298,773 shares of common stock at a conversion price of $15.30
per share, or 85% of the public offering price of $18.00 per share. The discount
feature of this convertible note payable resulted in a charge of $8.8 million,
recorded as sales and marketing expense in the quarter ended December 31, 2000.

7. Contingencies. In November 1999, a lawsuit was filed by E-TEK Dynamics
   -------------
against the Company alleging patent infringement related to the manufacture and
sale of fiber optic products which generated a significant amount of the
Company's revenues for the quarter ended March 31, 2001 and a majority of the
Company's revenues for each of the quarters ended June 30, September 30 and
December 31, 2000, and the year ended June 30, 2000. On February 9, 2001, the
Court granted our motion to amend our answer to include, among other matters, a
counter-claim against E-TEK Dynamics. The counter-claim alleges that E-TEK
Dynamics infringes one of our patents relating to fiber optic couplers based on
E-TEK's manufacture and sale of DWDM products. We seek an award for damages and
injunctive relief.

   In June 2000, a lawsuit was filed and served against the Company and
Telelight Communication Inc., a wholly owned subsidiary, alleging patent
infringement and trademark claims relating to the manufacture of and offer to
sell fiber optic interleaver products.

   In both lawsuits, the plaintiffs are seeking unspecified damages and
injunctive relief. An unfavorable ruling in these matters could have a material
adverse effect on the Company's financial condition and results of operations.
The Company, with the assistance of its legal counsel, intends to vigorously
defend its position in both matters. However, because of the considerable
uncertainties that exist, the impact, if any, on the Company cannot now be
reasonably estimated based on facts currently available to management.

                                       9
<PAGE>

Accordingly, the Company has determined that it would be inappropriate to book
an accrual with respect to these litigation matters in the consolidated
financial statements.

8. Fiscal Period. On January 1, 2001, the Company adopted a fiscal year which
   -------------
ends on the Sunday closest to June 30. Interim fiscal quarters will end on the
Sunday closest to each calendar quarter end. For presentation purposes, the
Company will present each fiscal year as if it ended on June 30. The Company
will present each of the fiscal quarters as if it ended on the last day of each
calendar quarter. Fiscal year 2001 consists of 52 weeks.

9. Notes Receivable. In March 2001 and April 2001, the Company recorded
   ----------------
promissory notes from two executive officers in the amount of $160,000 and
$3,657,500, respectively, secured each by an escrow comprising all of the shares
of the Company's common stock covered by the stock options granted to each
executive officer. The notes bear interest at 8.5% and 8.0%, respectively, per
annum. The promissory note in the amount of $160,000 is due in March 2002. The
promissory note in the amount of $3,657,500 is due in April 2006 or upon demand
by a majority of the Board of Directors of the Company, whichever is earlier.
The notes are offset against common stock during the applicable periods for
financial statement presentation.

                                       10
<PAGE>

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

   This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including, without limitation, statements regarding our expectations,
beliefs, intentions or future strategies that are signified by the words
"expect", "anticipate", "intend", "believe", or similar language. All
forward-looking statements included in this document are based on information
available to us on the date hereof, and we assume no obligation to update any
such forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. In evaluating our business,
you should carefully consider the information set forth below under the caption
"Risk Factors." We caution you that our businesses and financial performance are
subject to substantial risks and uncertainties.

Overview

   We design, manufacture and market fiber optic components and integrated
optical modules that increase the performance of optical networks. We provide a
broad line of products to communications equipment suppliers to enable bandwidth
creation and management within an optical network. We were incorporated in
September 1995 and began shipping product for sale in the second half of 1996.
In April 1999, we established manufacturing operations in China. In April 2000,
we acquired Telelight Communication Inc. ("Telelight"), a designer and
manufacturer of fiber optic components with operations in Sunnyvale, California
and China. We have manufacturing operations in San Jose, California and Beijing,
Chengdu, Fuzhou, Shanghai and Zhuhai, China. We have expanded and plan to
continue to expand our manufacturing capacity as our business grows. We are
currently expanding our facilities in Shanghai and Zhuhai.

   We generate revenues from the sale of fiber optic components and integrated
optical modules. To date, we have developed over 20 types of primary components.
In addition, we have integrated these components through various combinations
and are able to provide over 100 customized solutions to our customers. Our
products are generally categorized into the following four major groups:
wavelength expansion; optical amplification; wavelength performance monitoring
and protection; and optical switching. A majority of our revenues are derived
from our wavelength expansion products, in particular, dense wavelength division
multiplexers, or DWDMs, and multiplexers used primarily in optical
amplification. However, revenues derived from our optical amplification and
optical switching products have increased as a percentage of total revenues for
the nine months ended March 31, 2001 compared to the comparable period of the
prior year, and we currently anticipate that such revenues will continue to
increase as a percentage of total revenues.

   We depend upon a small number of customers for a substantial portion of our
revenues. Our top five customers together, although not the same five customers,
accounted for 64.2% and 65.9% in the three months and nine months ended March
31, 2001, respectively. We account for Agere Systems Inc. ("Agere") as a
separate customer from Lucent Technologies ("Lucent"). Agere was a subsidiary of
Lucent until early March 2001 when Agere completed its initial public offering.
Agere, Lucent and Corning Incorporated each accounted for revenues greater than
10% for the three months ended March 31, 2001, and Agere, Lucent, Nortel
Networks Corporation and Sycamore Networks each accounted for revenues greater
than 10% for the nine months ended March 31, 2001. We expect that we will
continue to depend upon a small number of customers, although potentially not
the same customers, for a substantial portion of our revenues.

   Our condensed consolidated statement of operations data reflects a
reclassification to allocate the non-cash compensation expense related to the
issuance of stock options from a single-line presentation within operating
expenses to the individual amounts related to cost of revenues, research and
development, sales and marketing, and general and administrative expenses.

                                       11
<PAGE>

   On October 10, 2000, we sold 15,755,000 shares of common stock in an
underwritten initial public offering, including 2,055,000 shares of common stock
issued pursuant to the exercise of the underwriter's over-allotment option,
resulting in net proceeds of approximately $263.7 million, before offering
expenses of approximately $2.7 million. Simultaneously with the closing of the
public offering, 110,103,344 shares of convertible preferred stock were
converted to shares of common stock on a one-for-one-basis. In addition, the
note payable to Cisco Systems, Inc. was converted into 3,298,773 shares of
common stock at a conversion price of $15.30 per share, or 85% of the public
offering price of $18.00 per share. The discount feature of this convertible
note payable resulted in a charge of $8.8 million, recorded as sales and
marketing expense in the quarter ended December 31, 2000.

Results of Operations

   Revenues. Revenues increased $26.6 million, or 283%, from $9.4 million for
the three months ended March 31, 2000 to $36.0 million for the three months
ended March 31, 2001. Revenues increased $90.9 million, or 440%, from $20.7
million for the nine months ended March 31, 2000 to $111.6 million for the nine
months ended March 31, 2001. These increases were primarily due to increased
shipments of our existing wavelength expansion products, optical amplification
products and optical switching products to existing and new customers, and to a
lesser extent shipments of new products. We expect our revenues for the fourth
quarter of fiscal 2001 to decrease approximately 17% from revenues achieved
during the third quarter of fiscal 2001.

   Gross Profit (Loss). Gross profit (loss), excluding non-cash compensation
expense, decreased $10.0 million, or 1703%, from a gross profit of $0.6 million
for the three months ended March 31, 2000 to a gross loss of $(9.4) million for
the three months ended March 31, 2001. This resulted in a decrease in gross
margin from 6.2% to (26.1)%. Gross profit, excluding non-cash compensation
expense, increased $7.3 million, or 226%, from $3.2 million for the nine months
ended March 31, 2000 to $10.6 million for the nine months ended March 31, 2001.
This resulted in a decrease in gross margin from 15.7% to 9.5%. The decreases in
our gross margin were primarily due to a $19.4 million provision for excess
inventory recorded in the three month period ended March 31, 2001, high
manufacturing costs relative to our production volume, manufacturing
inefficiencies associated with the expansion of our manufacturing capacity and
low yields in China due to our expansion. These decreases were partially offset
by yield improvements in our domestic manufacturing operations and the cost
benefits of manufacturing in China. Manufacturing overhead costs, excluding
non-cash compensation expense, associated with the expansion of our
manufacturing operations both domestically and internationally increased $6.6
million and $16.2 million for the three months and nine months ended March 31,
2001, respectively, compared to the same periods in the prior fiscal year. The
provision for excess inventory reflects the recent significant downturn in
customer demand. In response to this downturn, we are focusing on transitioning
a majority of our manufacturing to China in the fourth quarter of fiscal 2001.
We cannot assure you that this transition will result in improved gross margins
due to the cost benefits of manufacturing in China. We are continuing to
implement programs both domestically and internationally to further improve
yields for our products. We cannot assure you that these programs will continue
to be successful in increasing our gross margin. Gross profit (loss), including
non-cash compensation expense, decreased $10.1 million, or 1877%, from $(0.5)
million for the three months ended March 31, 2000 to $(10.6) million for the
three months ended March 31, 2001. This resulted in a decrease in gross margin
from (5.7)% to (29.4)%. Gross profit, including non-cash compensation expense,
increased $4.9 million, or 304%, from $1.6 million for the nine months ended
March 31, 2000 to $6.5 million for the nine months ended March 31, 2001. This
resulted in a decrease in gross margin from 7.8% to 5.8%. We expect our gross
margin, excluding the provision for excess inventory and non-cash compensation,
of 27.7% to remain relatively flat as a percentage of revenues, for the next
fiscal quarter.



                                       12
<PAGE>

    Research and Development. Research and development expenses, excluding
non-cash compensation expense, increased $4.0 million, or 472%, from $855,000
for the three months ended March 31, 2000 to $4.9 million for the three months
ended March 31, 2001. Research and development expenses, excluding non-cash
compensation expense, increased $12.2 million, or 893%, from $1.4 million for
the nine months ended March 31, 2000 to $13.5 million for the nine months ended
March 31, 2001. The increase in research and development expenses was primarily
due to costs associated with the substantial increase in personnel and
personnel-related costs, an increase in prototype expenses for the design and
development of new products as well as significant improvements to existing
products, depreciation expense and an increase in occupancy costs due to
expansion of facilities. Research and development expenses, including non-cash
compensation expense, increased $4.7 million, or 385%, from $1.2 million for the
three months ended March 31, 2000 to $5.9 million for the three months ended
March 31, 2001. Research and development expenses, including non-cash
compensation expense, increased $15.1 million, or 683%, from $2.2 million for
the nine months ended March 31, 2000 to $17.3 million for the nine months ended
March 31, 2001. We expect our research and development expenses to remain
relatively flat in dollar amount and increase as a percentage of revenues for
the next fiscal quarter as we continue to develop new products and improve
existing products.

    Sales and Marketing. Sales and marketing expenses, excluding non-cash
compensation expense, increased $2.4 million, or 393%, from $600,000 for the
three months ended March 31, 2000 to $3.0 million for the three months ended
March 31, 2001. Sales and marketing expenses, excluding a one-time charge of
$8.8 million related to the discount feature of the convertible note payable to
Cisco Systems and non-cash compensation expense, increased $7.1 million, or
510%, from $1.4 million for the nine months ended March 31, 2000 to $8.5 million
for the nine months ended March 31, 2001. The increases in sales and marketing
expenses were primarily due to costs associated with the substantial increase in
sales and marketing personnel and personnel-related costs, commissions to our
internal and external sales representatives, and tradeshow, advertising and
other customer-related costs. Sales and marketing expenses, including non-cash
compensation expense, increased $2.7 million, or 233%, from $1.2 million for the
three months ended March 31, 2000 to $3.8 million for the three months ended
March 31, 2001. Sales and marketing expenses, including the Cisco Systems
conversion charge and non-cash compensation expense, increased $17.3 million, or
805%, from $2.2 million for the nine months ended March 31, 2000 to $19.5
million for the nine months ended March 31, 2001. We expect our sales and
marketing expenses to remain relatively flat in dollar amount and increase as a
percentage of revenues for the next fiscal quarter.

    General and Administrative. General and administrative expenses, excluding
non-cash compensation expense, increased $3.8 million, or 415%, from $928,000
for the three months ended March 31, 2000 to $4.8 million for the three months
ended March 31, 2001. General and administrative expenses, excluding non-cash
compensation expense, increased $8.9 million, or 394%, from $2.3 million for the
nine months ended March 31, 2000 to $11.2 million for the nine months ended
March 31, 2001. The increases in general and administrative expenses were
primarily due to costs associated with the substantial increase in personnel and
personnel-related costs, start up costs in China, occupancy costs, legal fees
and costs associated with the reporting requirements of a public company.
General and administrative expenses, including non-cash compensation expense,
increased $4.8 million, or 247%, from $1.9 million for the three months ended
March 31, 2000 to $6.7 million for the three months ended March 31, 2001.
General and administrative expenses, including non-cash compensation expense,
increased $20.5 million, or 481%, from $4.3 million for the nine months ended
March 31, 2000 to $24.8 million for the nine months ended March 31, 2001. We
expect our general and administrative expenses to remain relatively flat in
dollar amount and increase as a percentage of revenues for the next fiscal
quarter as we establish the infrastructure to support our growing operations and
due to the reporting requirements imposed on a public company.

                                       13
<PAGE>

    Non-cash Compensation Expense. Through December 31, 2000, we had recorded an
aggregate of $68.8 million in deferred non-cash compensation. Non-cash
compensation expense increased $2.0 million, or 65%, from $3.0 million for the
three months ended March 31, 2000 to $5.0 million for the three months ended
March 31, 2001. Non-cash compensation expense increased $18.4 million, or 351%,
from $5.2 million for the nine months ended March 31, 2000 to $23.6 million for
the nine months ended March 31, 2001.

    Amortization of Goodwill. Amortization of goodwill of $1.0 million and $3.0
million for the three months and nine months ended March 31, 2001, respectively,
represents charges incurred as a result of our acquisition of Telelight in April
2000.

    Interest and Other Income, Net. Interest and other income, net increased
$2.6 million from $262,000 for the three months ended March 31, 2000 to $2.8
million for the three months ended March 31, 2001. Interest and other income,
net increased $6.7 million from $320,000 for the nine months ended March 31,
2000 to $7.0 million for the nine months ended March 31, 2001. The increases in
interest income are due to larger cash balances from the proceeds of our initial
public offering in October 2000, preferred stock financing in February 2000 and
convertible note payable to Cisco Systems in August 2000 offset by the loss on
disposal of assets and interest expense on the convertible note payable to Cisco
Systems.

    Provision for Income Taxes. We have deferred tax assets of $5.0 million as
of March 31, 2001. In assessing the realizability of deferred tax assets,
management records a valuation allowance to the extent we do not have a
carryback right. The deferred tax assets are equal to the amount of income tax
expected to be paid during fiscal 2001, which is related to a tax liability
incurred during fiscal 2000 and fiscal 2001.

Liquidity and Capital Resources

    Since our inception, we have financed our operations primarily through
issuances of equity, which totaled approximately $319.4 million in aggregate net
proceeds through March 31, 2001. In August 2000, we received $50.0 million in
connection with the issuance to Cisco Systems of a convertible promissory note
which automatically converted into 3,298,773 shares of common stock upon the
closing of our initial public offering in October 2000. Our initial public
offering resulted in net proceeds of approximately $263.7 million, before
offering expenses of approximately $2.7 million. As of March 31, 2001, we had
cash and cash equivalents of $264.6 million and working capital of $275.5
million.

    Our operating activities used cash of $18.1 million in the nine months ended
March 31, 2001. Cash used in operating activities was primarily attributable to
a net loss incurred during the first three quarters of fiscal 2001 of $51.0
million, increases in accounts receivable of $11.6 million, inventories of $13.5
million, prepaid expenses of $1.1 million, deferred tax assets of $3.9 million
and other assets of $671,000. These amounts were partially offset by increases
in accounts payable of $9.1 million, accrued liabilities of $10.6 million, and
depreciation and amortization expense of $10.1 million, non-cash compensation
expense of $23.6 million, selling and marketing expenses related to the discount
feature of the convertible note payable to Cisco Systems of $8.8 million, loss
on disposal of assets of $801,000 and interest expense related to the
convertible note payable to Cisco Systems of $471,000.

    Our investing activities used cash of $54.9 million in the nine months ended
March 31, 2001 due to the purchase of property and equipment. During the
remaining 9 months of calendar 2001, we expect to use approximately $50.0
million for the expansion of our manufacturing facilities worldwide. We expect
to use cash generated from our initial public offering for these expenditures.

                                       14
<PAGE>

    Our financing activities provided cash of $311.0 million in the nine months
ended March 31, 2001 primarily from net proceeds from our initial public
offering of $263.7 million, proceeds from the convertible promissory note
payable to Cisco Systems of $50.0 million, proceeds from the issuance of common
stock of $480,000 and borrowings under our line of credit of $1.0 million
partially offset by expenses from our initial public offering of $2.7 million
and our repayment of lease obligations of $1.5 million.

    Our principal source of liquidity at March 31, 2001 consisted of $264.6
million in cash and cash equivalents. We believe that our current cash and cash
equivalent balances and any cash generated from operations, will be sufficient
to meet our operating and capital requirements for at least the next 12 months.
However, it is possible that we may require additional financing within this
period. The factors described above and elsewhere in this report will affect our
future capital requirements and the adequacy of our available funds. In
addition, even if we raise sufficient funds to meet our anticipated cash needs
during the next 12 months, we may need to raise additional funds beyond this
time. We may use cash and cash equivalents from time to time to fund our
acquisition of businesses and technologies. We may be required to raise funds
through public or private financings, strategic relationships or other
arrangements. We cannot assure you that such funding, if needed, will be
available on terms attractive to us, or at all. Furthermore, any additional
equity financing may be dilutive to stockholders, and debt financing, if
available, may involve restrictive covenants. Our failure to raise capital when
needed could harm our ability to pursue our business strategy and achieve and
maintain profitability.

Recent Accounting Pronouncements

    In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS No. 133 requires that all derivatives
be recognized at fair value in the statement of financial position, and that the
corresponding gains or losses be reported either in the statement of operations
or as a component of comprehensive income (loss), depending on the type of
hedging relationship that exists.

    In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000. The adoption of SFAS No. 133
on July 1, 2000 did not have a material impact on our financial position,
results of operations or cash flows.

    In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements," which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. We will be required to adopt SAB 101 in the fourth quarter
of fiscal 2001. We do not expect the adoption of SAB 101 to have a material
impact on our financial position, results of operations or cash flows.

    In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting
for Certain Transactions Involving Stock Compensation, an Interpretation of
Opinion No. 25" for (a) the definition of employee for purposes of applying
Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various modifications
to the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. FIN 44
is effective July 1, 2000, but certain conclusions cover specific

                                       15
<PAGE>

events that occur after either December 15, 1998, or January 12, 2000. The
adoption of FIN 44 did not have a material impact on our financial position,
results of operations or cash flows.

    In August 2000, the Emerging Issues Task Force ("EITF") released issue No.
00-10, "Accounting for Shipping and Handling Fees and Costs." EITF 00-10
addresses the income statement classification of amounts billed to a customer
for shipping and handling costs as well as the classification of amounts
incurred for shipping and handling costs. The EITF concluded that amounts billed
to customers in sales transactions related to shipping and handling should be
classified as revenue, and any costs incurred should be classified as cost of
goods sold or, in general, as operating expense. If shipping and handling costs
incurred are not included in cost of goods sold, the amount of such costs and
the line item on the statement of operations which includes these costs should
be disclosed. We do not expect the adoption of EITF 00-10 to have a material
impact on our financial position, results of operations or cash flows.

Risk Factors

WE HAVE INCURRED SIGNIFICANT LOSSES, AND OUR FAILURE TO INCREASE OUR REVENUES
COULD PREVENT US FROM ACHIEVING PROFITABILITY.

    We have incurred significant losses since our inception in 1995 and expect
to incur losses in the future. We incurred net losses of $24.9 million for the
year ended June 30, 2000 and $51.0 million for the nine months ended March 31,
2001. We have not achieved profitability on a quarterly basis. As of March 31,
2001, we had an accumulated deficit of $83.5 million. We will need to generate
significantly greater revenues while containing costs and operating expenses to
achieve profitability. We expect our revenues for the fourth quarter of fiscal
2001 will decrease approximately 17% from revenues achieved during the third
quarter of fiscal 2001. Our revenues may not grow in future quarters, and we may
never generate sufficient revenues to achieve profitability.

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.

    We depend upon a small number of customers for a substantial portion of our
revenues. Our top five customers together, although not the same five customers,
accounted for 64.2% and 65.9% in the three months and nine months ended March
31, 2001, respectively. We account for Agere Systems Inc. ("Agere") as a
separate customer from Lucent Technologies ("Lucent"). Agere was a subsidiary of
Lucent until early March 2001 when Agere completed its initial public offering.
Agere, Lucent and Corning Incorporated each accounted for revenues greater than
10% for the three months ended March 31, 2001, and Agere, Lucent, Nortel
Networks Corporation and Sycamore Networks each accounted for revenues greater
than 10% for the nine months ended March 31, 2001. We expect that we will
continue to depend upon a small number of customers, although potentially not
the same customers, for a substantial portion of our revenues.

    Our revenues generated from these customers, individually or in the
aggregate, may not reach or exceed historic levels in any future period. For
example, we may not be the sole source of supply to our customers, and they may
choose to purchase products from other vendors. Furthermore, the businesses of
our existing customers are experiencing a downturn, which is resulting, in some
instances, in significantly decreased sales to these customers and harming our
results of operations. Loss or cancellations of orders from, or any further
downturn in the business of, any of our customers could harm our business. Our
dependence on a

                                       16
<PAGE>

small number of customers may increase if the optical components industry and
our target markets continue to consolidate.

BECAUSE WE DID NOT COMMENCE SALES OF OUR PRODUCTS UNTIL LATE 1996 AND ONLY
RECENTLY BEGAN SELLING OUR PRODUCTS IN LARGE VOLUME, WE MAY BE UNABLE TO
ACCURATELY FORECAST OUR REVENUES, AND OUR QUARTERLY REVENUES AND OPERATING
RESULTS MAY CONTINUE TO FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER.

    We did not commence sales of our products until late 1996 and only recently
began selling our products in large volume. As a result, it is difficult to
forecast our revenues accurately. Moreover, our revenues, expenses and operating
results have varied significantly from quarter to quarter in the past and may
continue to fluctuate significantly in the future. The factors, many of which
are more fully discussed in other risk factors, that are likely to cause these
variations include, among others:

    - economic downturn of the fiber optic industry;

    - economic conditions specific to the communications and related industries
      and the development and size of the markets for our products;

    - fluctuations in demand for, and sales of, our products;

    - cancellations of orders and shipment rescheduling;

    - our ability to significantly expand our manufacturing capacity at our
      facilities in San Jose, California and China;

    - the availability of raw materials used in our products and increases in
      the price of these raw materials;

    - the ability of our manufacturing operations in China to timely produce and
      deliver products and components in the quantity and of the quality we
      require;

    - our ability to achieve acceptable production yields;

    - the practice of communication equipment suppliers to sporadically place
      large orders with short lead times;

    - the mix of products and the average selling prices of the products we
      sell;

    - competitive factors, including introductions of new products and product
      enhancements by competitors, entry of new competitors into the optical
      networking components market and pricing pressures;

    - our ability to develop, introduce, manufacture and ship new and enhanced
      optical networking products in a timely manner without defects; and

    - costs associated with and the outcomes of any intellectual property or
      other litigation to which we are, or may become, a party.

                                       17
<PAGE>

    Due to the factors noted above and other risks discussed in this section, we
believe that quarter-to-quarter comparisons of our operating results will not be
meaningful. You should not rely on our results for one quarter as any indication
of our future performance. Quarterly variations in our operations could result
in significant volatility in our stock price and the market price for our common
stock might fall. It is likely that, in future quarters, our operating results
may be below the expectations of securities analysts or investors. If this
occurs, the price of our common stock is likely to decrease.

BECAUSE A HIGH PERCENTAGE OF OUR EXPENSES IS FIXED IN THE SHORT TERM, OUR
OPERATING RESULTS ARE LIKELY TO BE HARMED IF WE EXPERIENCE DELAYS IN GENERATING
AND RECOGNIZING REVENUES.

    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. As a result, if we
experience delays in generating and recognizing revenues, our quarterly
operating results are likely to be harmed. For example, we experienced such
delays in the third quarter of fiscal 2001, and our loss from operations
increased 45.8% from the immediately preceding quarter. As we expand our
manufacturing capacity, we will incur expenses in one quarter relating to the
expansion that may not result in off-setting revenues until a subsequent
quarter. New product introductions can also result in a mismatching of research
and development expenses and sales and marketing expenses that are incurred in
one quarter with revenues that are not recognized until a subsequent quarter
when the new product is introduced. If growth in our revenues does not exceed
the increase in our expenses, our results of operations will be harmed.

IF WE FAIL TO EFFECTIVELY MONITOR OUR MANUFACTURING CAPACITY, WE MAY NOT BE ABLE
TO DELIVER SUFFICIENT QUANTITIES OF PRODUCTS TO OUR CUSTOMERS IN A TIMELY
MANNER, WHICH WOULD HARM OUR OPERATING RESULTS.

    We manufacture all of our products in our facilities in San Jose, California
and Beijing, Chengdu, Fuzhou, Shanghai and Zhuhai, China and currently are
expanding our manufacturing capacity at our Shanghai and Zhuhai facilities. We
must devote significant resources to expand our manufacturing capacity in China,
and our planned expansion will be expensive, will require management's time and
may disrupt our operations. Additional risks associated with increasing
manufacturing capacity include:

    - a lack of availability of qualified management and manufacturing
      personnel;

    - difficulties in achieving adequate yields from new manufacturing lines;

    - inability to quickly implement an adequate set of financial controls to
      track levels of inventory;

    - our failure to acquire additional facilities in desirable locations on
      commercially reasonable terms; and

    - our inability to procure the necessary raw materials and equipment.

    Communications equipment suppliers typically require that their vendors
commit to provide specified quantities of products over a given period of time.
We could be unable to pursue many large orders if we do not have sufficient
manufacturing capacity to enable us to commit to provide customers with
specified quantities of products. If we are unable to commit to deliver
sufficient quantities of our products to satisfy a customer's anticipated needs,
we will lose the order and the opportunity for significant sales to that
customer

                                       18
<PAGE>

for a lengthy period of time. Furthermore, if we fail to fulfill orders to which
we have committed, we will lose revenue opportunities and our customer
relationships may be harmed.

IF WE FAIL TO EFFECTIVELY MANAGE OUR OPERATIONS, INCLUDING ANY REDUCTIONS OR
INCREASES IN THE NUMBER OF OUR EMPLOYEES, OUR OPERATING RESULTS COULD BE HARMED.

    Primarily as a result of the recent economic downturn and slowdown in
capital spending, particularly in the communications industry, we recently
implemented a number of cost-cutting measures, including a reduction in our
workforce. The impact of these cost-cutting measures, combined with the
challenges of managing our geographically-dispersed operations, has placed, and
will continue to place, a significant strain on our management systems and
resources. In addition, our ability to effectively manage our operations will be
challenged to the extent that we begin expanding our workforce. We expect that
we will need to continue to improve our financial and managerial controls,
reporting systems and procedures, and will need to continue to train and manage
our workforce worldwide. Any failure to effectively manage our operations could
harm our operating results.

IF WE FAIL TO EFFECTIVELY MANAGE OUR INVENTORY LEVELS, OUR OPERATING RESULTS
COULD BE HARMED.

    Because we experience long lead times for raw materials and are often
required to purchase significant amounts of raw materials far in advance of
product shipments, we may not effectively manage our inventory levels, which
could harm our operating results. For example, in the three month period ended
March 31, 2001, we recorded a $19.4 million provision for excess inventory due
to the downturn in the fiber optics industry and our gross margin (loss)
decreased from 28.5% for the three months ended December 31, 2000 to (29.4)% for
the three months ended March 31, 2001. If we underestimate our requirements, we
may have inadequate inventory, which could result in delays in shipments and
loss of customers. If we purchase raw materials in anticipation of orders that
do not materialize, we will have to carry or write off excess inventory and our
gross margins will decline. Even if we receive these orders, the additional
manufacturing capacity that we add to meet customer requirements may be
underutilized in a subsequent quarter. We are implementing a new automated
manufacturing management system to replace our current system that tracks most
of our data, including some inventory levels, manually. The conversion from the
current system used in San Jose is anticipated to take place in the fourth
quarter of fiscal 2001. Failure to effectively transition to this new system
could harm our results. The current limitations of our manufacturing management
systems increase the risk that we may fail to effectively manage our inventory.
In this regard, we experienced significant increases in provisions for excess
and obsolete inventory, which harmed our gross margins, through calendar 2000
and the first quarter of calendar 2001. As we grow, we will need to implement
new systems, which we may fail to do on a timely basis. The risks associated
with managing our inventory are increased by the fact that we ship products to
two of our largest customers, Lucent and Agere, on a consignment basis, such
that we carry the shipped products as inventory until Lucent or Agere accepts
the products for use.

BECAUSE WE DEPEND ON THIRD PARTIES TO SUPPLY SOME OF OUR RAW MATERIALS AND
EQUIPMENT, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT QUANTITIES OF THESE MATERIALS
AND EQUIPMENT, WHICH COULD LIMIT OUR ABILITY TO FILL CUSTOMER ORDERS AND HARM
OUR OPERATING RESULTS.

    We depend on third parties to supply the raw materials and equipment we use
to manufacture our products. To be competitive, we must obtain from our
suppliers, on a timely basis, sufficient quantities of

                                       19
<PAGE>

raw materials at acceptable prices. We obtain most of our critical raw materials
from a single or limited number of suppliers and generally do not have long-term
supply contracts with them. As a result, our suppliers could terminate the
supply of a particular material at any time without penalty. Difficulties in
obtaining raw materials in the future may limit our product shipments.

    Some of our raw material suppliers are single sources, and finding
alternative sources may involve significant expense and delay, if these sources
can be found at all. For example, all of our GRIN lenses, which are incorporated
into substantially all of our products, are obtained from Nippon Sheet Glass,
the sole supplier worldwide of GRIN lenses. Our failure to obtain these
materials or other single or limited-source raw materials could delay or reduce
our product shipments, which could result in lost orders, increase our costs,
reduce our control over quality and delivery schedules and require us to
redesign our products. In this regard, we experienced difficulties in obtaining
GRIN lenses through calendar 2000. If a significant supplier became unable or
unwilling to continue to manufacture or ship materials in required volumes, we
would have to identify and qualify an acceptable replacement. A material delay
or reduction in shipments, any need to identify and qualify replacement
suppliers or any significant increase in our need for raw materials that cannot
be met on acceptable terms could harm our business.

    We also depend on a limited number of manufacturers and vendors that make
and sell the complex equipment we use in our manufacturing process. In periods
of high market demand, the lead times from order to delivery of this equipment
could be as long as six months. Delays in the delivery of this equipment or
increases in the cost of this equipment could harm our operating results.

OUR MARKETS ARE HIGHLY COMPETITIVE, AND IF WE ARE UNABLE TO COMPETE SUCCESSFULLY
OUR REVENUES COULD DECLINE, WHICH WOULD HARM OUR OPERATING RESULTS.

    The market for fiber optic components is intensely competitive. We believe
that our principal competitors are the major manufacturers of optical components
and modules, including vendors selling to third parties and business divisions
within communications equipment suppliers. Our principal competitors in the
components market include Avanex Corporation, Corning, DiCon Fiberoptics,
Furukawa Electrical, New Focus, Nortel, Sumitomo, Tyco Electronics and JDS
Uniphase, which recently acquired E-TEK Dynamics and SDL. We believe that we
primarily compete with diversified suppliers, such as Corning, JDS Uniphase and
Nortel, for the majority of our product line and to a lesser extent with niche
players that offer more limited product lines. Competitors in any portion of our
business may also rapidly become competitors in other portions of our business.
In addition, our industry has recently experienced significant consolidation,
and we anticipate that further consolidation will occur. This consolidation has
further increased competition.

    Many of our current and potential competitors have significantly greater
financial, technical, marketing, purchasing, manufacturing and other resources
than we do. As a result, these competitors may be able to respond more quickly
to new or emerging technologies and to changes in customer requirements, to
devote greater resources to the development, promotion and sale of products, or
to deliver competitive products at lower prices.

    Several of our existing and potential customers are also current and
potential competitors of ours. JDS Uniphase, for example, generated 10.6% and
5.2% of our revenues for the year ended June 30, 2000 and the nine months ended
March 31, 2001, respectively. These companies may develop or acquire additional
competitive products or technologies in the future and thereby reduce or cease
their purchases from us. In light of the consolidation in the optical networking
industry, we also believe that the size of the optical component and module
suppliers will become increasingly important to our current and potential
customers

                                       20
<PAGE>

in the future. We may not be able to compete successfully with existing or new
competitors, and the competitive pressures we face may result in lower prices
for our products, loss of market share, or reduced gross margins, any of which
could harm our business.

    New technologies are emerging due to increased competition and customer
demand. The introduction of new products incorporating new technologies or the
emergence of new industry standards could make our existing products
noncompetitive. For example, new technologies are being developed in the design
of wavelength division multiplexers that compete with the thin film filters that
we incorporate in our products. These technologies include arrayed waveguide
grating, or AWG, and fiber bragg grating, or FBG. If our competitors adopt new
technologies before we do, we could lose market share and our business would
suffer.

A MAJORITY OF OUR MANUFACTURING OPERATIONS ARE LOCATED IN CHINA, WHICH EXPOSES
US TO THE RISK THAT OUR FAILURE TO COMPLY WITH THE LAWS AND REGULATIONS OF
CHINA, OR EVENTS IN THAT COUNTRY, WILL DISRUPT OUR OPERATIONS.

    A majority of our manufacturing operations are located in China and are
subject to the laws and regulations of China. We anticipate that a greater
portion of our manufacturing operations will be located in China in the near
future. Our operations in China may be adversely affected by changes in the laws
and regulations of China, such as those relating to taxation, import and export
tariffs, environmental regulations, land use rights, property and other matters.
China's central or local government may impose new, stricter regulations or
interpretations of existing regulations which would require additional
expenditures. China's economy differs from the economies of many countries in
terms of structure, government involvement, level of development, growth rate,
capital reinvestment, allocation of resources, self-sufficiency and rate of
inflation, among others. Our results of operations and financial condition may
be harmed by changes in the political, economic or social conditions in China.

    In addition, events out of our control in China, such as political unrest,
war, labor strikes and work stoppages, could disrupt our operations. There
currently is political tension between the United States and China, which could
lead to a breakdown in trade relations. For example, the recent incident
involving a collision between a U.S. plane and a Chinese plane increased the
existing political tension. There is also significant tension between China and
Taiwan, which could result in hostilities. Additionally, China has stepped up
its condemnation of the United States' pledge of military support to Taiwan,
which could lead to hostilities. If hostilities or other events cause a
disruption in our operations, it would be difficult for us to establish
manufacturing operations at an alternative location on comparable terms.

    Our operations in China also expose us to the following general risks
associated with international operations:

    - 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;

    - fluctuations in the value of currencies; and

                                       21
<PAGE>

    - economic instability.

OUR WAVELENGTH EXPANSION PRODUCTS HAVE ACCOUNTED FOR A MAJORITY OF OUR REVENUES,
AND OUR REVENUES COULD BE HARMED IF THE PRICE OF OR DEMAND FOR THESE PRODUCTS
DECLINES OR IF THESE PRODUCTS FAIL TO ACHIEVE BROADER MARKET ACCEPTANCE.

    Although we currently offer a broad spectrum of products, sales of our
wavelength expansion products accounted for a majority of our revenues in the
nine months ended March 31, 2001. These products include, among others, dense
wavelength division multiplexers, or DWDMs and multiplexers, used primarily in
optical amplification. These products accounted for 56.7% of our revenues in the
nine months ended March 31, 2001. We believe that our future growth and a
significant portion of our future revenues will depend on the commercial success
of our wavelength expansion products. Customers that have purchased wavelength
expansion products may not continue to purchase these products from us. Any
decline in the price of, or demand for, our wavelength expansion products, or
their failure to achieve broader market acceptance, could harm our revenues.

THE OPTICAL NETWORKING COMPONENT INDUSTRY IS EXPERIENCING DECLINING AVERAGE
SELLING PRICES, WHICH COULD CAUSE OUR GROSS MARGINS TO DECLINE AND HARM OUR
OPERATING RESULTS.

    The optical networking component industry is experiencing declining average
selling prices, or ASPs, as a result of increasing competition and greater unit
volumes as communications service providers continue to deploy fiber optic
networks. We anticipate that ASPs will continue to decrease in the future in
response to product introductions by competitors, price pressures from
significant customers and greater manufacturing efficiencies achieved through
increased automation in the manufacturing process. These ASP declines have
contributed and may continue to contribute to a decline in our gross margins,
which could harm our results of operations.

OUR FAILURE TO ACHIEVE ACCEPTABLE MANUFACTURING YIELDS IN A COST-EFFECTIVE
MANNER COULD DELAY PRODUCT SHIPMENTS TO OUR CUSTOMERS AND HARM OUR OPERATING
RESULTS.

    Because manufacturing our products involves complex and precise processes
and the majority of our manufacturing costs are relatively fixed, manufacturing
yields are critical to our results of operations. Lower than expected
manufacturing yields could delay product shipments and harm our operating
results. Factors that affect our manufacturing yields include the quality of raw
materials used to make our products, quality of workmanship and our
manufacturing processes. Our or our suppliers' inadvertent use of defective
materials could significantly reduce our manufacturing yields. Furthermore,
because of the large labor component in and complexity of the manufacturing
process, quality of workmanship is critical to achieving acceptable yields. We
cannot assure you that we will be able to hire and train a sufficient number of
qualified personnel to cost-effectively produce our products with the quality
and in the quantities required by our customers. Changes in our manufacturing
processes or those of our suppliers could also impact our yields. In some cases,
existing manufacturing techniques, which involve substantial manual labor, may
not allow us to cost-effectively meet our manufacturing yield goals so that we
maintain acceptable gross margins while meeting the cost targets of our
customers. We will need to develop new manufacturing processes and techniques
that will involve higher levels of automation in order to increase our gross
margins and help achieve the targeted cost levels of our customers. We may not
achieve manufacturing cost levels that will allow us to achieve acceptable gross
margins or fully satisfy customer demands.

                                       22
<PAGE>

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.

    Our products are deployed in large and complex optical networks and must be
compatible with other system components. Our products can only be fully tested
for reliability when deployed in networks for long periods of time. Our
customers may discover errors, defects or incompatibilities in our products
after they have been fully deployed and operated under peak stress conditions.
Our products may also have errors, defects or incompatibilities that are not
found until after a system upgrade is installed. Errors, defects,
incompatibilities or other problems with our products could result in:

    - 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;

    - legal actions by our customers; and

    - increased insurance costs.

    If any of these occur, our operating results could be harmed.

IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, OUR ABILITY TO SUCCEED
WILL BE HARMED.

    Our ability to compete successfully and achieve future growth will depend,
in part, on our ability to protect our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. However,
the steps we have taken may not prevent the misappropriation of our intellectual
property, particularly in foreign countries, such as China, where the laws may
not protect our proprietary rights as fully as in the United States. We
currently hold 18 patents and have 30 pending patent applications in the United
States. We cannot assure you that patents will be issued from pending or future
applications or that, if patents are issued, they will not be challenged,
invalidated or circumvented. Rights granted under these patents may not provide
us with meaningful protection or any commercial advantage. If we are unable to
protect our proprietary technology, our ability to succeed will be harmed. We
may in the future initiate claims or litigation against third parties for
infringement of our proprietary rights. These claims could result in costly
litigation and the diversion of our technical and management personnel.

                                       23
<PAGE>

WE ARE CURRENTLY DEFENDANTS IN TWO PATENT DISPUTES AND MAY BE INVOLVED IN OTHER
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.

    Participants in the communications and optical components markets in which
we sell our products have experienced frequent litigation regarding patent and
other intellectual property rights. Numerous patents in these industries are
held by others, including our competitors and academic institutions. We have no
means of knowing that a patent application has been filed in the United States
until the patent is issued. Optical component suppliers may seek to gain a
competitive advantage or other third parties may seek an economic return on
their intellectual property portfolios by making infringement claims against us.

    In November 1999, E-TEK Dynamics filed a lawsuit against us in the United
States District Court for the Northern District of California alleging
infringement of E-TEK's patent relating to fiber optic couplers based on our
manufacture and sale of our DWDM products. E-TEK seeks an award for damages and
injunctive relief. These products generated a majority of our revenues for the
year ended June 30, 2000 and the nine months ended March 31, 2001. An adverse
ruling in this matter would materially adversely affect our financial condition.
JDS Uniphase, which accounted for 10.6% and 5.2% of our revenues for the year
ended June 30, 2000 and the nine months ended March 31, 2001, respectively,
recently acquired E-TEK. On February 9, 2001, the Court granted our motion to
amend our answer to include, among other matters, a counter-claim against E-TEK
Dynamics. The counter-claim alleges that E-TEK Dynamics infringes one of our
patents relating to fiber optic couplers based on E-TEK's manufacture and sale
of DWDM products. We seek an award for damages and injunctive relief. While we
do not currently believe that the E-TEK lawsuit will materially harm our
supplier relationship with JDS Uniphase, primarily because the products we sell
to JDS Uniphase are not subjects of the lawsuit, the ultimate impact of the
lawsuit on our business cannot be determined at this time. In addition, in June
2000, Chorum Technologies, Inc. filed a lawsuit against us and our wholly-owned
subsidiary, Telelight Communication Inc., in the United States District Court
for the Northern District of Texas alleging, among other things, infringement of
two U.S. patents allegedly owned by Chorum relating to fiber optical
interleaving, based on our manufacture of and offer to sell various fiber optic
interleaver products. Chorum seeks an award for damages and injunctive relief.

    Defending these lawsuits, and any additional litigation to which we may
become a party in the future as a result of alleged infringement of others'
intellectual property, will likely be costly and time consuming and will divert
the efforts and attention of our management and technical personnel. Patent
litigation is highly complex and can extend for a protracted period of time,
which can substantially increase the cost of litigation. Accordingly, the
expenses and diversion of resources associated with either of these matters, or
any other intellectual property litigation to which we may become a party, could
seriously harm our business and financial condition. Any intellectual property
litigation also could invalidate our proprietary rights and force us to do one
or more of the following:

    - 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.

                                       24
<PAGE>

    Any of these actions could result in a substantial reduction in our revenue
and could result in losses over an extended period of time.

    IF WE ARE UNABLE TO DEVELOP NEW PRODUCTS AND PRODUCT ENHANCEMENTS THAT
ACHIEVE MARKET ACCEPTANCE, SALES OF OUR PRODUCTS COULD DECLINE, WHICH WOULD HARM
OUR OPERATING RESULTS.

    The communications industry is characterized by rapid technological changes,
frequent new product introductions, changes in customer requirements and
evolving industry standards. As a result, our products could quickly become
obsolete as new technologies are introduced and incorporated into new and
improved products. Our future success depends on our ability to anticipate
market needs and to develop products that address those needs. Our failure to
predict market needs accurately or to develop new products or product
enhancements in a timely manner will harm market acceptance and sales of our
products. In this regard, we are currently developing bandwidth creation
products as well as bandwidth management products. If the development of these
products or any other future products takes longer than we anticipate, or if we
are unable to develop and introduce these products to market, our revenues could
suffer and we may not gain market share. Even if we are able to develop and
commercially introduce these new products, the new products may not achieve
widespread market acceptance.

WE DEPEND ON THE CONTINUED GROWTH AND SUCCESS OF THE COMMUNICATIONS INDUSTRY,
WHICH IS EXPERIENCING AN ECONOMIC DOWNTURN, AS WELL AS RAPID CONSOLIDATION AND
REALIGNMENT AND MAY NOT CONTINUE TO DEMAND FIBER OPTIC PRODUCTS AT HISTORICAL
RATES, THEREBY REDUCING DEMAND FOR OUR PRODUCTS AND HARMING OUR OPERATING
RESULTS.

    We depend on the continued growth and success of the communications
industry, including the continued growth of the Internet as a widely-used medium
for commerce and communication and the continuing demand for increased bandwidth
over communications networks. As a result of recent unfavorable economic
conditions and reduced capital spending in the communications industry, our
growth rate may be significantly lower than our historical quarterly growth
rate. For example, during the third quarter of fiscal 2001, revenues decreased
16.7% from the immediately preceding quarter primarily due to the economic
downturn in the communications industry. Additionally, we anticipate a further
decrease in revenues of approximately 17% in the fourth quarter of fiscal 2001.
Furthermore, the rate at which communications service providers and other fiber
optic network users have built new fiber optic networks or installed new systems
in their existing fiber optic networks has fluctuated in the past and these
fluctuations may continue in the future. These fluctuations may result in
reduced demand from historical rates for new or upgraded fiber optic systems
that utilize our products and, therefore, may result in reduced demand for our
products.

    The communications industry is also experiencing rapid consolidation and
realignment, as industry participants seek to capitalize on the rapidly changing
competitive landscape developing around the Internet and new communications
technologies such as fiber optic and wireless communications networks. As the
communications industry consolidates and realigns to accommodate technological
and other developments, our customers may consolidate or align with other
entities in a manner that harms our business.

BECAUSE NONE OF OUR CUSTOMERS ARE OBLIGATED TO PURCHASE OUR PRODUCTS, THEY MAY
AND DO CANCEL OR DEFER THEIR PURCHASES ON SHORT NOTICE AND AT ANY TIME, WHICH
COULD HARM OUR OPERATING RESULTS.

                                       25
<PAGE>

    We do not have contracts with our customers that provide any assurance of
future sales, and sales are typically made pursuant to individual purchase
orders, often with extremely short lead times. Accordingly, our customers:

    - may and do stop purchasing our products at any time without penalty;

    - are free to purchase products from our competitors;

    - are not required to make minimum purchases; and

    - may and do cancel orders that they place with us.

    Sales to any single customer may vary significantly from quarter to quarter.
Our customers generally do not place purchase orders far in advance. In
addition, our customer purchase orders have varied significantly from quarter to
quarter. This means that customers who account for a significant portion of our
revenues in one quarter may not place any orders in the succeeding quarter,
which makes it difficult to forecast revenue in future periods. Moreover, our
expense levels are based in part on our expectations of future revenue, and we
may be unable to adjust costs in a timely manner in response to further revenue
shortfalls. This can result in significant quarterly fluctuations in our
operating results.

OUR REVENUES AND RESULTS OF OPERATIONS MAY BE HARMED IF WE FAIL TO INCREASE THE
VOLUME OF ORDERS, WHICH WE RECEIVE AND FILL ON A SHORT-TERM BASIS.

    Historically, a substantial portion of our net revenues in any fiscal period
has been derived from orders in backlog. Our customers can generally cancel,
reschedule or delay these orders without obligation to us. As a result, we
cannot rely on orders in backlog as a reliable and consistent source of future
revenue. If any of our customers did in fact cancel or delay these orders, and
we were not able to replace them with new orders for product to be supplied on a
short-term basis, our results of operations could be harmed. For example, during
the third quarter of fiscal 2001, our customers both delayed and cancelled some
orders in backlog resulting in a 16.7% decrease in revenues from the second
quarter of fiscal 2001, and we believe revenue will decrease approximately an
additional 17% in the fourth quarter of fiscal 2001.

OUR LENGTHY AND VARIABLE QUALIFICATION AND SALES CYCLE MAKES IT DIFFICULT TO
PREDICT THE TIMING OF A SALE OR WHETHER A SALE WILL BE MADE, WHICH MAY HARM OUR
OPERATING RESULTS.

    Our customers typically expend significant efforts in evaluating and
qualifying our products and manufacturing process prior to placing an order.
This evaluation and qualification process frequently results in a lengthy sales
cycle, typically ranging from nine to twelve months and sometimes longer. While
our customers are evaluating our products and before they place an order with
us, we may incur substantial sales, marketing, research and development
expenses, expend significant management efforts, increase manufacturing capacity
and order long lead-time supplies. Even after this evaluation process, it is
possible a potential customer will not purchase our products. In addition,
product purchases are frequently subject to unplanned processing and other
delays, particularly with respect to larger customers for which our products
represent a very small percentage of their overall purchase activity. Long sales
cycles may cause our revenues and operating results to vary significantly and
unexpectedly from quarter to quarter, which could cause volatility in our stock
price.

                                       26
<PAGE>

WE DEPEND ON KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET, AND IF WE ARE UNABLE TO HIRE ADDITIONAL PERSONNEL, OUR ABILITY
TO SELL OUR PRODUCTS COULD BE HARMED.

    Our future success depends upon the continued services of our executive
officers, particularly Joseph Y. Liu, our Chief Executive Officer, Frederick R.
Fromm, our President, Haiguang Lu, our Senior Vice President, Worldwide
Manufacturing Operations, and other key engineering, finance, sales, marketing,
manufacturing and support personnel. In addition, we depend substantially upon
the continued services of key management personnel at our Chinese subsidiaries.
None of our officers or key employees is bound by an employment agreement for
any specific term, and these personnel may terminate their employment at any
time. In addition, we do not have "key person" life insurance policies covering
any of our employees.

    Our ability to continue to attract and retain highly-skilled personnel will
be a critical factor in determining whether we will be successful in the future.
Competition for highly-skilled personnel is intense, especially in the San
Francisco Bay area. We may not be successful in attracting, assimilating or
retaining qualified personnel to fulfill our current or future needs. In
addition, many of the members of our management team have recently joined our
company. Mr. Bruce Horn, our Chief Financial Officer, joined us in April 2000,
Mr. Frederick R. Fromm, our President, joined us in July 2000, Messrs. Jeff
Friedman, our General Counsel, and Daryl Eigen, our Vice President of Sales and
Marketing, joined us in August 2000, and Mr. Kenneth Brizel, our Senior Vice
President of Strategy and Business Development, joined us in October 2000. If
our new management team does not work effectively together, it could seriously
harm our business.

BECAUSE SOME OF OUR THIRD-PARTY SALES REPRESENTATIVES AND DISTRIBUTORS CARRY
PRODUCTS OF ONE OR MORE OF OUR COMPETITORS, THEY MAY NOT RECOMMEND OUR PRODUCTS
OVER COMPETITORS' PRODUCTS.

    A majority of our revenues are derived from sales through our domestic and
international sales representatives and distributors. Our sales representatives
and distributors are independent organizations that generally have exclusive
geographic territories and generally are compensated on a commission basis. We
are currently migrating some of our larger customers to direct sales and are
increasing our direct sales and marketing staff. We expect that we will continue
to rely on our independent sales representatives and distributors to market,
sell and support many of our products for a substantial portion of our revenues.
Some of our third-party sales representatives and distributors carry products of
one or more of our competitors. As a result, these sales representatives and
distributors may not recommend our products over competitors' products.

IF WE DO NOT EXPAND OUR SALES ORGANIZATION, WE MAY FACE DIFFICULTIES IN
INCREASING MARKET AWARENESS AND SALES OF OUR PRODUCTS, WHICH COULD PREVENT US
FROM ACHIEVING AND MAINTAINING PROFITABILITY.

    We currently have a small sales force. We will need to hire additional
qualified sales personnel domestically and internationally to increase market
awareness and sales of our products. Competition for qualified sales personnel
in our industry is intense and we might not be able to hire and train the kind
and number of sales personnel we need to be successful. If we are unable to
expand our sales organization, we may not be able to increase market awareness
or sales of our products, which could prevent us from achieving and maintaining
profitability.

BECAUSE SOME OF OUR OPERATIONS ARE LOCATED IN AN AREA EXPERIENCING POWER
SHORTAGES, WE FACE THE RISK OF POWER LOSS, WHICH COULD HARM OUR OPERATIONS.

                                       27
<PAGE>

    A substantial portion of our operations are located in San Jose, California.
California is in the midst of a power crisis and has recently experienced
significant power shortages. Sustained or frequent power failures could disrupt
our operations, which would limit our ability to supply our products to our
customers in sufficient quantities on a timely basis, harming our customer
relationships.

BECAUSE SOME OF OUR OPERATIONS ARE LOCATED IN ACTIVE EARTHQUAKE FAULT ZONES, WE
FACE THE RISK THAT A LARGE EARTHQUAKE COULD HARM OUR OPERATIONS.

    A substantial portion of our operations are located in San Jose, California,
an active earthquake fault zone. This region has experienced large earthquakes
in the past and may likely experience them in the future. A large earthquake in
the San Jose area could disrupt our operations for an extended period of time,
which would limit our ability to supply our products to our customers in
sufficient quantities on a timely basis, harming our customer relationships.

OUR FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS COULD SUBJECT US TO
LIABILITY.

    Our failure to comply with a variety of federal, state and local laws and
regulations in the United States and China could subject us to criminal, civil
and administrative penalties. Our products are subject to U.S. export control
laws and regulations that regulate the export of products and disclosure of
technical information to foreign countries and citizens. In some instances,
these laws and regulations may require licenses for the export of products to,
and disclosure of technology in, some countries, including China, and disclosure
of technology to foreign citizens. In July 2000, we filed two applications to
obtain commodity classifications confirming that we may export our products and
disclose our technologies to foreign countries, including China, and citizens,
including Chinese nationals, without export licenses. We recently received
commodity classifications from the United States Department of Commerce that
allow us to export our current products and disclose our current technologies
without export licenses. Additionally, as a result of these commodity
classifications, we have been notified that we will not be required to obtain a
license to disclose our technology to a specified employee with respect to whom
the Department of Commerce had initiated an inquiry. As we develop and
commercialize new products and technologies, and as the list of products and
technologies subject to U.S. export controls changes, we may be required to
obtain export licenses or other approvals with respect to those products and
technologies. We cannot predict whether these licenses and approvals will be
required and, if so, whether they will be granted. The failure to obtain any
required license or approval could harm our business.

    We employ a number of foreign nationals in our U.S. operations and as a
result we are subject to various laws related to the status of those employees
with the Immigration and Naturalization Service. Our failure to comply with the
forgoing laws or any other laws and regulations could subject us to liability.

    In addition, we are subject to laws relating to the storage, use, discharge
and disposal of toxic or otherwise hazardous or regulated chemicals or materials
used in our manufacturing processes. While we believe that we are currently in
compliance in all material respects with these laws and regulations, if we fail
to store, use, discharge or dispose of hazardous materials appropriately, we
could be subject to substantial liability or could be required to suspend or
adversely modify our manufacturing operations. In addition, we could be required
to pay for the cleanup of our properties if they are found to be contaminated,
even if we are not responsible for the contamination.

                                       28
<PAGE>

BECAUSE THE OPTICAL COMPONENTS INDUSTRY IS CAPITAL INTENSIVE, OUR BUSINESS MAY
BE HARMED IF WE ARE UNABLE TO RAISE ANY NEEDED ADDITIONAL CAPITAL.

    The optical components industry is capital intensive, and expansion of our
manufacturing facilities, the development and marketing of new products and the
hiring and retention of personnel will require a significant commitment of
resources. Furthermore, we may continue to incur significant operating losses if
the market for optical networking components develops at a slower pace than we
anticipate, or if we fail to establish significant market share and achieve a
significantly increased level of revenue. If cash from available sources is
insufficient for these purposes, or if additional cash is used for acquisitions
or other unanticipated uses, we may need to raise additional capital. Additional
capital may not be available on terms favorable to us, or at all. If we are
unable to raise additional capital when we require it, our business could be
harmed. In addition, any additional issuance of equity or equity-related
securities to raise capital will be dilutive to our stockholders.

BECAUSE THE OPTICAL COMPONENTS INDUSTRY IS EVOLVING RAPIDLY AND HIGHLY
COMPETITIVE, OUR STRATEGY INVOLVES ACQUIRING OTHER BUSINESSES AND TECHNOLOGIES
TO GROW OUR BUSINESS. IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE ACQUIRED
BUSINESSES OR TECHNOLOGIES, OUR OPERATING RESULTS MAY BE HARMED.

    The optical components industry is evolving rapidly and is highly
competitive. Accordingly, we have pursued and expect to continue to pursue
acquisitions of businesses and technologies, or the establishment of joint
venture arrangements, that could expand our business. The negotiation of
potential acquisitions or joint ventures, as well as the integration of an
acquired or jointly developed business or technology, could cause diversion of
management's time and other resources or disrupt our operations. Future
acquisitions could result in:

    - additional operating expenses without additional revenues;

    - potential dilutive issuances of equity securities;

    - the incurrence of debt and contingent liabilities;

    - amortization of goodwill and other intangibles;

    - research and development write-offs; and

    - other acquisition-related expenses.

    Furthermore, we may not be able to successfully integrate acquired
businesses or joint ventures with our operations, and we may not receive the
intended benefits of any future acquisition or joint venture.

                                       29
<PAGE>

RISKS RELATED TO OUR COMMON STOCK

THERE MAY BE SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK BY OUR
STOCKHOLDERS AND THESE SALES COULD CAUSE OUR STOCK PRICE TO DECLINE.

    At March 31, 2001, our current stockholders held 183,467,734 shares of our
common stock and potentially dilutive common stock equivalents. Potentially
dilutive common stock equivalents are options to purchase an aggregate of
25,366,770 shares. Our executive officers, directors and stockholders holding an
aggregate of 142,345,964 shares of our common stock, or 90.0% of our total
outstanding shares as of March 31, 2001, had executed lock-up agreements that
prevented them from selling or otherwise disposing of our common stock for a
period of 180 days from October 3, 2000, the date of our initial public
offering. These lock-up agreements expired on April 2, 2001. These restricted
securities may be sold in the future without registration under the Securities
Act to the extent permitted under Rule 144, Rule 701 or another exemption under
the Securities Act. In addition, Cisco Systems and the former holders of
preferred stock are entitled to registration of their shares of common stock and
the shares of common stock issued upon conversion of their preferred stock under
certain circumstances.

    Sales of a substantial number of shares of our common stock could cause our
stock price to fall. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional stock or debt in the
future at a price that we deem appropriate.

INSIDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER US AFTER OUR OFFERING
AND COULD DELAY A CHANGE IN OUR CORPORATE CONTROL, WHICH MAY NEGATIVELY AFFECT
YOUR INVESTMENT.

    Our current executive officers, directors and their affiliates own, in the
aggregate, as of March 31, 2001, approximately 26.2% of our outstanding shares.
As a result, these persons and/or entities acting together will be able to
substantially influence the outcome of all matters requiring approval by our
stockholders, including the election of directors and approval of significant
corporate transactions. This ability may have the effect of delaying a change in
control, which may be favored by our other stockholders.

BECAUSE OF THE EARLY STAGE OF OUR BUSINESS AND THE RAPID CHANGES TAKING PLACE IN
THE FIBER OPTICS INDUSTRY, WE EXPECT TO EXPERIENCE SIGNIFICANT VOLATILITY IN OUR
STOCK PRICE, WHICH COULD CAUSE YOU TO LOSE ALL OR PART OF YOUR INVESTMENT.

    Because of the early stage of our business and the rapid changes taking
place in the fiber optics industry, we expect the market price of our common
stock to fluctuate significantly. For example, the market price of our common
stock has fluctuated from a high of $24.56 to a low of $3.63 during the third
quarter of fiscal 2001. These fluctuations may occur in response to a number of
factors, some of which are beyond our control, including:

    - preannouncement of financial results;

    - quarterly variations in our operating results;

    - changes in financial estimates by securities analysts and our failure to
      meet any estimates;

                                       30
<PAGE>

    - changes in market values of comparable companies;

    - announcements by us or our competitors of new products or of significant
      acquisitions, strategic partnerships or joint ventures;

    - any loss by us of a major customer;

    - the outcome of, and costs associated with, any litigation to which we are
      or may become a party;

    - additions or departures of key management or engineering personnel; and

    - future sales of our common stock.

    The price of our securities may also be affected by general economic and
market conditions, and the cost of operations in our product markets. While we
cannot predict the individual effect that these factors may have on the price or
our securities, these factors, either individually or in the aggregate, could
result in significant variations in price during any given period of time. There
can be no assurance that these factors will not have an adverse effect on the
trading prices of our common stock.

PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY HAVE ANTI-TAKEOVER
EFFECTS THAT COULD PREVENT ANY CHANGE IN CONTROL, WHICH COULD NEGATIVELY AFFECT
YOUR INVESTMENT.

    Provisions of Delaware law and of our certificate of incorporation and
bylaws could make it more difficult for a third party to acquire us, even if
doing so would be beneficial to our stockholders. These provisions permit us to:

    - 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.

    Any of the foregoing provisions could limit the price that certain investors
might be willing to pay in the future for shares of our common stock.

                                       31
<PAGE>

Item 3.  Quantitative and Qualitative Disclosure about Market Risk

    We are exposed to market risk related to fluctuations in interest rates and
in foreign currency exchange rates:

    Interest Rate Exposure. The primary objective of our investment activities
    ----------------------
is to preserve principal while maximizing the income we receive from our
investments without significantly increasing risk. Some of the securities that
we may invest in may be subject to market risk. To minimize this risk, we
maintain our portfolio of cash equivalents and short-term investments in a
variety of securities, including commercial paper, money market funds,
government and non-government debt securities and certificates of deposit. As of
March 31, 2001, all of our investments were in money market funds, certificates
of deposits or high quality commercial paper.

    Foreign Currency Exchange Rate Exposure. We operate primarily in the United
    ---------------------------------------
States, and all sales to date have been made in U.S. dollars. Accordingly, we
currently have no material exposure to foreign currency rate fluctuations.

    We expect our international revenues and expenses to be denominated
predominately in U.S. dollars. Certain expenses from our China operations are
incurred in the Chinese Renminbi. Our China operations will expand in the future
and account for a larger portion of our worldwide manufacturing. We anticipate
that we will experience the risks of fluctuating currencies due to this
expansion and may choose to engage in currency hedging activities to reduce
these risks.

                                       32
<PAGE>

PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings

    The information required by this Item is disclosed in Note 7 of Notes to
Consolidated Financial Statements set forth in Item 1 of Part I, above. The text
of such Note is hereby incorporated herein by reference. See also "Risk Factors
- We are currently defendants in two patent disputes and may be involved in
other 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."

Item 2.  Changes in Securities and Use of Proceeds

    (a)  Not applicable

    (b)  Not applicable

    (c)  Not applicable

    (d)  On October 3, 2000, the SEC declared effective the Company's
         Registration Statement on Form S-1. Pursuant to this Registration
         Statement, the Company completed an initial public offering of
         15,755,000 shares of common stock, including the over-allotment shares,
         at an initial public offering price of $18.00 per share (the
         "Offering"). The Company incurred expenses of approximately $22.6
         million, of which $19.9 million represented underwriting discounts and
         commissions and $2.7 million represented other related expenses. The
         net offering proceeds to the Company after total expenses were $261.0
         million.

         Proceeds are invested in cash, cash equivalents, or short-term
         investments consisting of highly liquid money market funds, commercial
         paper, government/federal notes and bonds and certificates of deposit.
         The use of these proceeds does not represent a material change in the
         use of proceeds described in the prospectus.

         Upon the closing of the Company's initial public offering on October
         10, 2000, all outstanding preferred stock converted into common stock.

Item 3.  Defaults Upon Senior Securities

     None

Item 4.  Submission of Matters to a Vote of Security Holders

     None

Item 5.  Other Information

     None

                                       33
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

    (a)  Exhibits

         01.1  Promissory Note from Joseph Y. Liu to the Company in the amount
               of $3,657,500 dated April 3, 2001.

         01.2  Promissory Note from Daryl J. Eigen to the Company in the amount
               of $160,000 dated March 27, 2001.

    (b)  Reports on Form 8-K

         None

                                       34
<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.

                                  OPLINK COMMUNICATIONS, INC.
                                  (Registrant)


DATE: May 15, 2001                By: /s/ Bruce Horn
                                     ---------------
                                  Bruce Horn
                                  Chief Financial Officer
                                  (for Registrant and as Principal Financial and
                                  Accounting Officer)

                                       35