##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-31581
 OPLINK COMMUNICATIONS, INC.
  Delaware(State or other jurisdiction of 
incorporation or organization)
    
    No. 77-0411346(I.R.S. Employer
Identification No.)
 (Address of principal executive offices) (Zip Code)
  þ o
  o þ o
 o þ




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##### 



OPLINK COMMUNICATIONS, INC.
  
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited):Condensed Consolidated Balance Sheets  September 30, 2007 and June 30, 2007
    
    
    3Condensed Consolidated Statements of Operations  Three months ended September 30, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows  Three months ended September 30, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4.
    
    Controls and Procedures
    
    
    37PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    37Item 1A.
    
    Risk Factors
    
    
    39Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    65Item 3.
    
    Defaults Upon Senior Securities
    
    
    65Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    65Item 5.
    
    Other Information
    
    
    65Item 6.
    
    Exhibits
    
    
    65SIGNATURES
    
    
    66EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1- FINANCIAL STATEMENTS
 
 OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 September 30,
    
    
    June 30,2007
    
    
    2007(1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    119,453
    
    
    $
    111,600Short-term investments
    
    
    51,171
    
    
    
    73,300Accounts receivable, net
    
    
    36,057
    
    
    
    34,795Inventories, net
    
    
    36,839
    
    
    
    35,427Net assets held for sales
    
    
    22,200
    
    
    
    22,200Prepaid expenses and other current assets
    
    
    6,647
    
    
    
    6,412Total current assets
    
    
    272,367
    
    
    
    283,734Long-term investments
    
    
    66,219
    
    
    
    42,978Property, plant and equipment, net
    
    
    28,202
    
    
    
    28,907Goodwill and intangible assets, net
    
    
    6,881
    
    
    
    7,421Other assets
    
    
    752
    
    
    
    5,349Total assets
    
    $
    374,421
    
    
    $
    368,389LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    18,660
    
    
    $
    14,604Accrued liabilities
    
    
    15,204
    
    
    
    13,820Accrued transitional costs for contract manufacturing
    
    
    1,178
    
    
    
    1,234Total current liabilities
    
    
    35,042
    
    
    
    29,658Non-current liabilities
    
    
    208
    
    
    
    207Total liabilities
    
    
    35,250
    
    
    
    29,865Commitments and contingencies (Note 15)Minority interest
    
    
    66,265
    
    
    
    68,749Stockholders equity:Common stock, $0.001 par value, 34,000,000 shares
authorized; 23,200,344 and 23,167,521 shares issued and outstanding
as of September 30, 2007 and June 30, 2007, respectively
    
    
    23
    
    
    
    23Additional paid-in capital
    
    
    480,579
    
    
    
    478,615Accumulated other comprehensive income
    
    
    3,720
    
    
    
    3,112Accumulated deficit
    
    
    (211,416
    )
    
    
    (211,975
    )Total stockholders equity
    
    
    272,906
    
    
    
    269,775Total liabilities and stockholders equity
    
    $
    374,421
    
    
    $
    368,389
 
 (1)
    
    The condensed consolidated balance sheet at June 30, 2007 has been derived from the audited
consolidated financial statements at that date. The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
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OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
 Three Months EndedSeptember 30,2007
    
    
    2006Revenues
    
    $
    49,151
    
    
    $
    19,714Cost of revenues:Cost of revenues
    
    
    37,194
    
    
    
    13,491Stock compensation expense
    
    
    129
    
    
    
    65Total cost of revenues
    
    
    37,323
    
    
    
    13,556Gross profit
    
    
    11,828
    
    
    
    6,158Operating expenses:Research and development:Research and development
    
    
    4,432
    
    
    
    1,571Stock compensation expense
    
    
    266
    
    
    
    129Total research and development
    
    
    4,698
    
    
    
    1,700Sales and marketing:Sales and marketing
    
    
    2,880
    
    
    
    1,382Stock compensation expense
    
    
    249
    
    
    
    158Total sales and marketing
    
    
    3,129
    
    
    
    1,540General and administrative:General and administrative
    
    
    4,404
    
    
    
    1,499Stock compensation expense
    
    
    1,102
    
    
    
    722Total general and administrative
    
    
    5,506
    
    
    
    2,221Transitional costs for contract manufacturing
    
    
    755
    
    
    
    Merger fees
    
    
    1,421
    
    
    
    Amortization of intangible assets
    
    
    266
    
    
    
    35Total operating expenses
    
    
    15,775
    
    
    
    5,496(Loss) income from operations
    
    
    (3,947
    )
    
    
    662Interest and other income, net
    
    
    3,059
    
    
    
    2,161(Loss) gain on sale of assets
    
    
    (37
    )
    
    
    2(Loss) income before minority interest and provision for income taxes
    
    
    (925
    )
    
    
    2,825Minority interest in loss of consolidated subsidiaries
    
    
    2,484
    
    
    
    12Provision for income taxes
    
    
    (234
    )
    
    
    (82
    )Net income
    
    $
    1,325
    
    
    $
    2,755Net income per share:Basic
    
    $
    0.06
    
    
    $
    0.13Diluted
    
    $
    0.06
    
    
    $
    0.12Shares used in per share calculation:Basic
    
    
    23,182
    
    
    
    21,557Diluted
    
    
    23,792
    
    
    
    22,552
 The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
 4




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OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    1,325
    
    
    $
    2,755Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    1,895
    
    
    
    1,173Amortization of intangible and other assets
    
    
    540
    
    
    
    93Stock compensation expense
    
    
    1,746
    
    
    
    1,074Amortization of (discount) premium on investments
    
    
    (55
    )
    
    
    82Loss (gain) on sale or disposal of assets
    
    
    37
    
    
    
    (2
    )Transitional costs of contract manufacturing
    
    
    755
    
    
    
    Minority interest in loss of consolidated subsidiaries
    
    
    (2,484
    )
    
    
    (12
    )Other
    
    
    93
    
    
    
    (1
    )Change in assets and liabilities:Accounts receivable
    
    
    (1,172
    )
    
    
    (2,899
    )Inventories
    
    
    (1,275
    )
    
    
    (2,494
    )Prepaid expenses and other current assets
    
    
    (135
    )
    
    
    (1,846
    )Other assets
    
    
    
    
    
    
    313Accounts payable
    
    
    3,991
    
    
    
    3,637Accrued liabilities
    
    
    556
    
    
    
    130Net cash provided by operating activities
    
    
    5,817
    
    
    
    2,003Cash flows from investing activities:Purchases of available-for-sale investments
    
    
    (36,038
    )
    
    
    (15,112
    )Sales and maturities of available-for-sale investments
    
    
    10,056
    
    
    
    12,198Purchases of held-to-maturity investments
    
    
    
    
    
    
    (16,990
    )Maturities of held-to-maturity investments
    
    
    25,000
    
    
    
    22,540Proceeds from sales of property and equipment
    
    
    2
    
    
    
    9Purchases of property and equipment
    
    
    (1,073
    )
    
    
    (312
    )Sales of equity investments
    
    
    5,000
    
    
    
    Purchases of equity investments
    
    
    (400
    )
    
    
    Acquisition of businesses, net of cash acquired
    
    
    (699
    )
    
    
    Net cash provided by investing activities
    
    
    1,848
    
    
    
    2,333Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    218
    
    
    
    1,606Net cash provided by financing activities
    
    
    218
    
    
    
    1,606Effect of exchange rate changes on cash and cash equivalents
    
    
    (30
    )
    
    
    Net increase in cash and cash equivalents
    
    
    7,853
    
    
    
    5,942Cash and cash equivalents, beginning of period
    
    
    111,600
    
    
    
    7,856Cash and cash equivalents, end of period
    
    $
    119,453
    
    
    $
    13,798
 The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
 5




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OPLINK COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Description of Business.
   Basis of Presentation
 6




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Net Income Per Share
 Three Months EndedSeptember 30,2007
    
    
    2006Numerator:Net income
    
    $
    1,325
    
    
    $
    2,755Denominator:Weighted average shares outstanding  basic
    
    
    23,182
    
    
    
    21,557Effect of dilutive potential common shares
    
    
    610
    
    
    
    995Weighted average shares outstanding  diluted
    
    
    23,792
    
    
    
    22,552Net income per share  basic
    
    $
    0.06
    
    
    $
    0.13Net income per share  diluted
    
    $
    0.06
    
    
    $
    0.12Antidilutive stock options not included in net
income per share calculation
    
    
    2,603
    
    
    
    1,595
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Comprehensive Income.
  Three Months EndedSeptember 30,2007
    
    
    2006Net income
    
    $
    1,325
    
    
    $
    2,755Unrealized gain on investments
    
    
    75
    
    
    
    37Change in cumulative translation adjustments
    
    
    533
    
    
    
    176Total comprehensive income
    
    $
    1,933
    
    
    $
    2,968
 Short-Term and Long-Term Investments.
  September 30, 2007Gross
    
    
    GrossCarrying
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedValue
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueShort-term investments:Certificates of deposit
    
    $
    76
    
    
    $
    76
    
    
    $
    
    
    
    $
    
    
    
    $
    76Obligations of states and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate securities
    
    
    14,176
    
    
    
    14,171
    
    
    
    18
    
    
    
    
    
    
    
    14,189United States government agencies
    
    
    36,919
    
    
    
    36,904
    
    
    
    17
    
    
    
    (6
    )
    
    
    36,915Total short-term investments
    
    
    51,171
    
    
    
    51,151
    
    
    
    35
    
    
    
    (6
    )
    
    
    51,180Long-term investments:Obligations of states and political subdivisions
    
    
    507
    
    
    
    509
    
    
    
    
    
    
    
    (3
    )
    
    
    506Corporate securities
    
    
    13,315
    
    
    
    13,315
    
    
    
    43
    
    
    
    (19
    )
    
    
    13,339United States government agencies
    
    
    52,397
    
    
    
    52,351
    
    
    
    189
    
    
    
    (116
    )
    
    
    52,424Total long-term investments
    
    
    66,219
    
    
    
    66,175
    
    
    
    232
    
    
    
    (138
    )
    
    
    66,269Total investments
    
    $
    117,390
    
    
    $
    117,326
    
    
    $
    267
    
    
    $
    (144
    )
    
    $
    117,449
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June 30, 2007Gross
    
    
    GrossCarrying
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedValue
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueShort-term investments:Certificates of deposit
    
    $
    75
    
    
    $
    75
    
    
    $
    
    
    
    $
    
    
    
    $
    75Obligations of states and political subdivisions
    
    
    79
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    79Corporate securities
    
    
    16,152
    
    
    
    16,165
    
    
    
    
    
    
    
    (24
    )
    
    
    16,141United States government agencies
    
    
    56,994
    
    
    
    56,996
    
    
    
    
    
    
    
    (94
    )
    
    
    56,902Total short-term investments
    
    
    73,300
    
    
    
    73,315
    
    
    
    
    
    
    
    (118
    )
    
    
    73,197Long-term investments:Corporate securities
    
    
    7,438
    
    
    
    7,438
    
    
    
    
    
    
    
    (30
    )
    
    
    7,408United States government agencies
    
    
    35,540
    
    
    
    35,536
    
    
    
    6
    
    
    
    (32
    )
    
    
    35,510Total long-term investments
    
    
    42,978
    
    
    
    42,974
    
    
    
    6
    
    
    
    (62
    )
    
    
    42,918Total investments
    
    $
    116,278
    
    
    $
    116,289
    
    
    $
    6
    
    
    $
    (180
    )
    
    $
    116,115
  September 30, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:Certificates of deposit
    
    $
    76
    
    
    $
    
    
    
    $
    
    
    
    $
    76Obligations of states and political subdivisions
    
    
    509
    
    
    
    
    
    
    
    (3
    )
    
    
    506Corporate securities
    
    
    14,774
    
    
    
    23
    
    
    
    (19
    )
    
    
    14,778United States government agencies
    
    
    34,255
    
    
    
    179
    
    
    
    (116
    )
    
    
    34,318Total available-for-sale investments
    
    
    49,614
    
    
    
    202
    
    
    
    (138
    )
    
    
    49,678Held-to-maturity investments:Corporate securities
    
    
    12,712
    
    
    
    38
    
    
    
    
    
    
    
    12,750United States government agencies
    
    
    55,000
    
    
    
    27
    
    
    
    (6
    )
    
    
    55,021Total held-to-maturity investments
    
    
    67,712
    
    
    
    65
    
    
    
    (6
    )
    
    
    67,771Total investments
    
    $
    117,326
    
    
    $
    267
    
    
    $
    (144
    )
    
    $
    117,449
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June 30, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:Certificates of deposit
    
    $
    75
    
    
    $
    
    
    
    $
    
    
    
    $
    75Obligations of states and political subdivisions
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    79Corporate securities
    
    
    10,932
    
    
    
    
    
    
    
    (13
    )
    
    
    10,919United States government agencies
    
    
    12,536
    
    
    
    6
    
    
    
    (4
    )
    
    
    12,538Total available-for-sale investments
    
    
    23,622
    
    
    
    6
    
    
    
    (17
    )
    
    
    23,611Held-to-maturity investments:Corporate securities
    
    
    12,671
    
    
    
    
    
    
    
    (41
    )
    
    
    12,630United States government agencies
    
    
    79,996
    
    
    
    
    
    
    
    (122
    )
    
    
    79,874Total held-to-maturity investments
    
    
    92,667
    
    
    
    
    
    
    
    (163
    )
    
    
    92,504Total investments
    
    $
    116,289
    
    
    $
    6
    
    
    $
    (180
    )
    
    $
    116,115
  September 30, 2007In Loss Position
    
    
    In Loss Position< 12 months
    
    
    12 months and longer
    
    
    Total in Loss PositionGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesAvailable-for-sale investments:Obligations of states and political subdivisions
    
    $
    506
    
    
    $
    (3
    )
    
    $
    
    
    
    $
    
    
    
    $
    506
    
    
    $
    (3
    )Corporate securities
    
    
    796
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    796
    
    
    
    (19
    )United States government agencies
    
    
    12,127
    
    
    
    (116
    )
    
    
    
    
    
    
    
    
    
    
    12,127
    
    
    
    (116
    )Total available-for-sale investments
    
    
    13,429
    
    
    
    (138
    )
    
    
    
    
    
    
    
    
    
    
    13,429
    
    
    
    (138
    )Held-to-maturity investments:United States government agencies
    
    
    
    
    
    
    
    
    
    
    14,995
    
    
    
    (6
    )
    
    
    14,995
    
    
    
    (6
    )Total held-to-maturity investments
    
    
    
    
    
    
    
    
    
    
    14,995
    
    
    
    (6
    )
    
    
    14,995
    
    
    
    (6
    )Total investments in loss position
    
    $
    13,429
    
    
    $
    (138
    )
    
    $
    14,995
    
    
    $
    (6
    )
    
    $
    28,424
    
    
    $
    (144
    )
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September 30, 2007
    
    
    June 30, 2007Amortized
    
    
    Estimated
    
    
    Amortized
    
    
    EstimatedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueAvailable-for-sale investments:Due in one year or less
    
    $
    15,541
    
    
    $
    15,556
    
    
    $
    13,087
    
    
    $
    13,072Due in one year to five years
    
    
    4,315
    
    
    
    4,321
    
    
    
    
    
    
    
    Due in five years to ten years
    
    
    2,823
    
    
    
    2,847
    
    
    
    1,133
    
    
    
    1,133Due after ten years
    
    
    26,935
    
    
    
    26,954
    
    
    
    9,402
    
    
    
    9,406Total available-for-sale investments
    
    
    49,614
    
    
    
    49,678
    
    
    
    23,622
    
    
    
    23,611Held-to-maturity investments:Due in one year or less
    
    
    44,644
    
    
    
    44,681
    
    
    
    60,229
    
    
    
    60,126Due in one year to five years
    
    
    23,068
    
    
    
    23,090
    
    
    
    32,438
    
    
    
    32,378Total held-to-maturity investments
    
    
    67,712
    
    
    
    67,771
    
    
    
    92,667
    
    
    
    92,504Total investments
    
    $
    117,326
    
    
    $
    117,449
    
    
    $
    116,289
    
    
    $
    116,115
 Accrued Transitional Costs for Contract Manufacturing.
 Consolidation ofWorkforce
    
    
    Excess FacilitiesReduction
    
    
    and Other Charges
    
    
    TotalLiability assumed from OCP acquisition in June 2007
    
    $
    1,232
    
    
    $
    
    
    
    $
    1,232Additional charge in June 2007
    
    
    216
    
    
    
    
    
    
    
    216June payments
    
    
    (214
    )
    
    
    
    
    
    
    (214
    )Balance at June 30, 2007
    
    
    1,234
    
    
    
    
    
    
    
    1,234Additional charge in September 2007
    
    
    248
    
    
    
    507
    
    
    
    755September payments
    
    
    (304
    )
    
    
    (507
    )
    
    
    (811
    )Balance at September 30, 2007
    
    $
    1,178
    
    
    $
    
    
    
    $
    1,178
   .
 11




---



##### Table of Contents



Inventories
 September 30,
    
    
    June 30,2007
    
    
    2007Inventories:Raw materials
    
    $
    24,239
    
    
    $
    21,156Work-in-process
    
    
    9,858
    
    
    
    10,159Finished goods
    
    
    2,742
    
    
    
    4,112Total
    
    $
    36,839
    
    
    $
    35,427
 Net Assets Held for Sale.
    12




---



##### Table of Contents



Goodwill and Intangible Assets, Net.
 EstimatedUseful Life
    
    
    Gross
    
    
    AccumulatedSeptember 30, 2007
    
    (in Years)
    
    
    Amount
    
    
    Amortization
    
    
    NetPatents
    
    
    5
    
    
    $
    400
    
    
    $
    393
    
    
    $
    7Technology
    
    
    3-6.5
    
    
    
    5,216
    
    
    
    1,340
    
    
    
    3,876Trade name
    
    
    3-6
    
    
    
    570
    
    
    
    128
    
    
    
    442Customer relationships
    
    
    3-4
    
    
    
    2,380
    
    
    
    414
    
    
    
    1,966Backlog
    
    
    1
    
    
    
    52
    
    
    
    36
    
    
    
    16Total
    
    
    
    
    
    $
    8,618
    
    
    $
    2,311
    
    
    $
    6,307
 EstimatedUseful Life
    
    
    Gross
    
    
    AccumulatedJune 30, 2007
    
    (in Years)
    
    
    Amount
    
    
    Amortization
    
    
    NetPatents
    
    
    5
    
    
    $
    400
    
    
    $
    373
    
    
    $
    27Technology
    
    
    3-6.5
    
    
    
    5,216
    
    
    
    1,040
    
    
    
    4,176Trade name
    
    
    3-6
    
    
    
    570
    
    
    
    97
    
    
    
    473Customer relationships
    
    
    3-4
    
    
    
    2,380
    
    
    
    252
    
    
    
    2,128Backlog
    
    
    1
    
    
    
    52
    
    
    
    9
    
    
    
    43Total
    
    
    
    
    
    $
    8,618
    
    
    $
    1,771
    
    
    $
    6,847
  Three Months EndedSeptember 30,Reported as:
    
    2007
    
    
    2006Cost of revenues
    
    $
    274
    
    
    $
    58Operating expenses
    
    
    266
    
    
    
    35Total
    
    $
    540
    
    
    $
    93
  Fiscal years ending June 30,
    
    Amount2008
    
    $
    1,4272009
    
    
    1,7912010
    
    
    1,4722011
    
    
    1,2302012
    
    
    218After 2012
    
    
    169$
    6,307
  13




---



##### Table of Contents



Accrued Liabilities.
 September 30,
    
    
    June 30,2007
    
    
    2007Accrued liabilities:Payroll and related expenses
    
    $
    5,185
    
    
    $
    5,876Accrued merger fees
    
    
    1,470
    
    
    
    329Accrued sales commission
    
    
    802
    
    
    
    778Accrued warranty
    
    
    457
    
    
    
    445Accrued professional fees
    
    
    1,196
    
    
    
    1,195Acquisition costs
    
    
    
    
    
    
    620Accrued sales return
    
    
    579
    
    
    
    562Income tax payable
    
    
    1,193
    
    
    
    311Advance deposits from
customers
    
    
    398
    
    
    
    433Other
    
    
    3,924
    
    
    
    3,271$
    15,204
    
    
    $
    13,820
 Product Warranties.
  Three Months EndedSeptember 30,2007
    
    
    2006Balance at the beginning of the period
    
    $
    445
    
    
    $
    405Accruals for warranties issued during the period
    
    
    62
    
    
    
    34Accruals related to pre-existing warranties
including expirations
and changes in
estimates
    
    
    (16
    )
    
    
    36Cost of warranty repair
    
    
    (34
    )
    
    
    (53
    )Balance at the end of the period
    
    $
    457
    
    
    $
    422
 Stock Compensation.
  14




---



##### Table of Contents



Three Months EndedSeptember 30,Oplink
    
    
    OCP
    
    
    OplinkStock
    
    
    Stock
    
    
    Consolidated2007
    
    
    2007
    
    
    2007
    
    
    2006Stock-based compensation expense by type of award:Employee stock options
    
    $
    987
    
    
    $
    404
    
    
    $
    1,391
    
    
    $
    1,002Restricted stock awards
    
    
    210
    
    
    
    43
    
    
    
    253
    
    
    
    Employee stock purchase plan
    
    
    91
    
    
    
    11
    
    
    
    102
    
    
    
    72Net change of amounts capitalized as inventory
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total stock-based compensation
    
    
    1,288
    
    
    
    458
    
    
    
    1,746
    
    
    
    1,074Tax effect on stock-based compensation
    
    
    (438
    )
    
    
    (156
    )
    
    
    (594
    )
    
    
    (365
    )Net effect on net income
    
    $
    850
    
    
    $
    302
    
    
    $
    1,152
    
    
    $
    709Effect on net income (loss) per share:Basic
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    (0.05
    )
    
    $
    (0.03
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    (0.05
    )
    
    $
    (0.03
    )
 Stock compensation related to Oplink stock
    Valuation Assumptions
  15




---



##### Table of Contents



Three Months EndedSeptember 30,2007
    
    2006Risk-free interest rate
    
    
    4.33
    %
    
    
    4.83
    %Expected term
    
    4.6 years
    
    
    4.8 yearsExpected dividends
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    43
    %
    
    
    48
    %
   Equity Incentive Program
  16




---



##### Table of Contents



WeightedNumber of
    
    
    AverageShares Available
    
    
    Options
    
    
    Exercisefor Grant
    
    
    Outstanding
    
    
    PriceBalance, June 30, 2007
    
    
    4,211,451
    
    
    
    3,449,236
    
    
    $
    16.3067Options and awards granted
    
    
    (519,580)
    *
    
    
    503,580
    
    
    
    13.1200Options exercised
    
    
    
    
    
    
    (16,823
    )
    
    
    9.9734Options canceled
    
    
    120,870
    
    
    
    (120,870
    )
    
    
    14.5419Balance, September 30, 2007
    
    
    3,812,741
    
    
    
    3,815,123
    
    
    
    15.9699
 
 *
    
    The number of options and awards granted in the three months ended September 30, 2007
include 16,000 stock awards that vest immediately upon grant.  Options Outstanding at September 30, 2007
    
    
    Options Vested and Exercisable at September 30, 2007Weighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    Weighted
    
    
    Aggregate
    
    
    
    
    
    
    Remaining
    
    
    Weighted
    
    
    AggregateContractual
    
    
    Average
    
    
    Intrinsic
    
    
    
    
    
    
    Contractual
    
    
    Average
    
    
    IntrinsicRange of Exercise
    
    Number
    
    
    Life
    
    
    Exercise
    
    
    Value
    
    
    Number
    
    
    Life
    
    
    Exercise
    
    
    ValuePrice
    
    Outstanding
    
    
    (in Years)
    
    
    Price
    
    
    (in thousands)
    
    
    Outstanding
    
    
    (in Years)
    
    
    Price
    
    
    (in thousands)$0.0001 - $2.0000
    
    
    11,964
    
    
    
    1.5
    
    
    $
    0.6273
    
    
    $
    156
    
    
    
    11,964
    
    
    
    1.5
    
    
    $
    0.6273
    
    
    $
    156$4.0001 - $5.0000
    
    
    806,615
    
    
    
    5.0
    
    
    
    4.6282
    
    
    
    7,285
    
    
    
    806,615
    
    
    
    5.0
    
    
    
    4.6282
    
    
    
    7,285$5.0001 - $10.0000
    
    
    80,704
    
    
    
    4.3
    
    
    
    8.0897
    
    
    
    450
    
    
    
    80,585
    
    
    
    4.3
    
    
    
    8.0875
    
    
    
    449$10.0001 - $11.0000
    
    
    245,471
    
    
    
    7.5
    
    
    
    10.2802
    
    
    
    830
    
    
    
    123,222
    
    
    
    7.4
    
    
    
    10.2298
    
    
    
    423$12.0000 - $13.0000
    
    
    228,299
    
    
    
    7.7
    
    
    
    12.2772
    
    
    
    316
    
    
    
    110,089
    
    
    
    7.4
    
    
    
    12.4086
    
    
    
    138$13.0001 - $15.0000
    
    
    756,327
    
    
    
    9.0
    
    
    
    13.4432
    
    
    
    309
    
    
    
    170,186
    
    
    
    6.6
    
    
    
    13.8464
    
    
    
    39$15.0001 - $17.0000
    
    
    107,028
    
    
    
    8.4
    
    
    
    16.7633
    
    
    
    
    
    
    
    20,428
    
    
    
    4.8
    
    
    
    15.8807
    
    
    
    $17.0001 - $19.0000
    
    
    344,552
    
    
    
    7.1
    
    
    
    18.0459
    
    
    
    
    
    
    
    177,081
    
    
    
    5.1
    
    
    
    18.1352
    
    
    
    $19.0001 - $20.0000
    
    
    90,500
    
    
    
    9.0
    
    
    
    19.7000
    
    
    
    
    
    
    
    22,729
    
    
    
    9.0
    
    
    
    19.7000
    
    
    
    $20.0001 - $21.0000
    
    
    767,670
    
    
    
    8.7
    
    
    
    20.2359
    
    
    
    
    
    
    
    226,950
    
    
    
    8.7
    
    
    
    20.2442
    
    
    
    $28.0000 - $37.0000
    
    
    299,650
    
    
    
    2.8
    
    
    
    35.5272
    
    
    
    
    
    
    
    299,650
    
    
    
    2.8
    
    
    
    35.5272
    
    
    
    $42.0000 - $140.0000
    
    
    76,343
    
    
    
    3.0
    
    
    
    66.3435
    
    
    
    
    
    
    
    76,343
    
    
    
    3.0
    
    
    
    66.3435
    
    
    
    3,815,123
    
    
    
    7.0
    
    
    $
    15.9699
    
    
    $
    9,346
    
    
    
    2,125,842
    
    
    
    5.4
    
    
    $
    15.8356
    
    
    $
    8,490Vested and expected
to vest
    
    
    3,542,892
    
    
    
    6.3
    
    
    $
    15.9547
    
    
    $
    9,192
   17




---



##### Table of Contents



Employee Stock Purchase Plan
   Stock compensation related to OCP stock
  OCPs Equity Incentive Program
  18




---



##### Table of Contents



Options Outstanding at September 30, 2007
    
    
    Options vested and Exercisale of September 30, 2007Weighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    Weighted
    
    
    Aggregate
    
    
    
    
    
    
    Remaining
    
    
    Weighted
    
    
    AggregateRange of
    
    
    
    
    
    Contractual
    
    
    Average
    
    
    Intrinsic
    
    
    
    
    
    
    Contractual
    
    
    Average
    
    
    IntrinsicExercise
    
    Number
    
    
    Life
    
    
    Exercise
    
    
    Value
    
    
    Number
    
    
    Life
    
    
    Exercise
    
    
    ValuePrice
    
    Outstanding
    
    
    (in Years)
    
    
    Price
    
    
    (in thousands)
    
    
    Outstanding
    
    
    (in Years)
    
    
    Price
    
    
    (in thousands)$0.19 - $1.64
    
    
    589,807
    
    
    
    4.9
    
    
    $
    1.07
    
    
    $
    337
    
    
    
    395,307
    
    
    
    4.0
    
    
    $
    0.85
    
    
    $
    311$1.65 - $3.47
    
    
    4,317,034
    
    
    
    7.0
    
    
    
    2.04
    
    
    
    
    
    
    
    1,323,204
    
    
    
    6.7
    
    
    
    2.11
    
    
    
    $3.64 - $9.72
    
    
    55,880
    
    
    
    4.3
    
    
    
    7.16
    
    
    
    
    
    
    
    52,880
    
    
    
    4.2
    
    
    
    7.36
    
    
    
    $11.00 - $11.12
    
    
    588,415
    
    
    
    3.1
    
    
    
    11.00
    
    
    
    
    
    
    
    588,415
    
    
    
    3.1
    
    
    
    11.00
    
    
    
    $17.38 - $17.38
    
    
    54,200
    
    
    
    3.3
    
    
    
    17.38
    
    
    
    
    
    
    
    54,200
    
    
    
    3.3
    
    
    
    17.38
    
    
    
    5,605,336
    
    
    
    6.3
    
    
    $
    3.08
    
    
    $
    337
    
    
    
    2,414,006
    
    
    
    5.2
    
    
    $
    4.53
    
    
    $
    311Vested and
expected to vest
    
    
    4,908,350
    
    
    
    4.1
    
    
    $
    3.23
    
    
    $
    332
    OCPs Employee Stock Purchase Plan
  OCPs Restricted Stock Awards
 th
 19




---



##### Table of Contents



.
  Repurchase of Common Stock
   Recent Accounting Pronouncements
   20




---



##### Table of Contents



Contingencies In re Oplink Communications,
Inc. Initial Public Offering Securities Litigation
    21




---



##### Table of Contents



Merlin Partners, LP vs. Optical Communication Products, Inc.,
Oplink Communications, Inc., et al.
  22




---



##### Table of Contents



Segment Reporting.
  Three MonthsEnded September 30,2007
    
    
    2006Revenues:United States
    
    $
    21,239
    
    
    $
    6,524Europe
    
    
    6,969
    
    
    
    5,794Asia
    
    
    16,474
    
    
    
    6,102Canada
    
    
    4,469
    
    
    
    1,294Totals
    
    $
    49,151
    
    
    $
    19,714
  September 30,
    
    
    June 30,2007
    
    
    2007United States
    
    $
    7,618
    
    
    $
    7,223Asia
    
    
    20,382
    
    
    
    21,385Europe
    
    
    202
    
    
    
    299Totals
    
    $
    28,202
    
    
    $
    28,907
 Accounting for Uncertainty in Income Taxes. Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109. Recognition Measurement
   23




---



##### Table of Contents



Subsequent Events.
  
 ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-looking statements
   Overview
  24




---



##### Table of Contents



25




---



##### Table of Contents



Use of Estimates and Critical Accounting Policies
   
    
    revenue recognition and product returns;
    
    warranty obligations;
    
    allowance for doubtful accounts;
    
    excess and obsolete inventory;
    
    long-lived asset valuation;
 26




---



##### Table of Contents




    
    business combination;
    
    deferred taxes;
    
    stock compensation; and
    
    loss contingencies..
   Results of Operations
 Revenues
 (in thousands, except percentages)
 Three Months EndedSeptember 30,
    
    
    
    
    
    
    Percentage2007
    
    
    2006
    
    
    Change
    
    
    ChangeRevenue
    
    $
    49,151
    
    
    $
    19,714
    
    
    $
    29,437
    
    
    
    149.3
    %
   27




---



##### Table of Contents



Gross Profit
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    PercentageSeptember 30,
    
    
    Change
    
    
    Change2007
    
    
    2006Gross profit
    
    $
    11,828
    
    
    $
    6,158
    
    
    $
    5,670
    
    
    
    92.1
    %Gross profit margin
    
    
    24.1
    %
    
    
    31.2
    %
    28




---



##### Table of Contents



Research and Development
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    PercentageSeptember 30,
    
    
    Change
    
    
    Change2007
    
    
    2006Research and
development
    
    $
    4,698
    
    
    $
    1,700
    
    
    $
    2,998
    
    
    
    176.4
    %
  Sales and Marketing
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    
    PercentageSeptember 30,
    
    
    Change
    
    
    Change2007
    
    
    2006Sales and marketing
    
    $
    3,129
    
    
    $
    1,540
    
    
    $
    1,589
    
    
    
    103.2
    %
   29




---



##### Table of Contents



General and Administrative
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    PercentageSeptember 30,
    
    Change
    
    Change2007
    
    2006General and administrative
    
    $
    5,506
    
    
    $
    2,221
    
    
    $
    3,285
    
    
    
    147.9
    %
   Stock Compensation Expense
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    PercentageSeptember 30,
    
    Change
    
    Change2007
    
    2006Stock compensation
expense
    
    $
    1,746
    
    
    $
    1,074
    
    
    $
    672
    
    
    
    62.6
    %
   30




---



##### Table of Contents



Transitional Costs for Contract Manufacturing
  Consolidation ofWorkforce
    
    
    Excess FacilitiesReduction
    
    
    and Other Charges
    
    
    TotalLiability assumed from OCP acquisition in June 2007
    
    $
    1,232
    
    
    $
    
    
    
    $
    1,232Additional charge in June 2007
    
    
    216
    
    
    
    
    
    
    
    216June payments
    
    
    (214
    )
    
    
    
    
    
    
    (214
    )Balance at June 30, 2007
    
    
    1,234
    
    
    
    
    
    
    
    1,234Additional charge in September 2007
    
    
    248
    
    
    
    507
    
    
    
    755September payments
    
    
    (304
    )
    
    
    (507
    )
    
    
    (811
    )Balance at September 30, 2007
    
    $
    1,178
    
    
    $
    
    
    
    $
    1,178
   .
 Merger Fees
  Amortization of Intangible and Other Assets
  Interest and Other Income, Net
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    PercentageSeptember 30,
    
    Change
    
    Change2007
    
    2006Interest and other
income, net
    
    $
    3,059
    
    
    $
    2,161
    
    
    $
    898
    
    
    
    41.6
    %
  31




---



##### Table of Contents



Minority Interest
  Provision for Income Taxes
  Liquidity and Capital Resources
  32




---



##### Table of Contents



Three Months Ended September 30, 2007
        33




---



##### Table of Contents



.
  Three Months Ended September 30, 2006
        .
 34




---



##### Table of Contents



Contractual Obligations
  Contractual Obligations Due by PeriodContractual Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    After 5 yearsPurchase obligations
    
    $
    27,143
    
    
    $
    27,143
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating leases
    
    
    2,691
    
    
    
    1,522
    
    
    
    1,169
    
    
    
    
    
    
    
    Total
    
    $
    29,834
    
    
    $
    28,665
    
    
    $
    1,169
    
    
    $
    
    
    
    $
    
 Recent Accounting Pronouncements
    
 ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Interest Rate Exposure
  35




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##### Table of Contents



Carrying
    
    
    Average Rate
    
    
    Carrying
    
    
    Average RateValue at
    
    
    of Return at
    
    
    Value at
    
    
    of Return atSeptember 30,
    
    
    September 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2007
    
    
    2007
    
    
    2007(Annualized)
    
    
    
    
    
    
    (Annualized)Investment Securities:Cash equivalents  variable rate
    
    $
    89,799
    
    
    
    3.1
    %
    
    $
    12,289
    
    
    
    5.2
    %Cash equivalents  fixed rate
    
    
    
    
    
    
    
    
    
    
    4,137
    
    
    
    5.3
    %Short-term investments  variable rate
    
    
    200
    
    
    
    2.2
    %
    
    
    154
    
    
    
    2.2
    %Short-term investments  fixed rate
    
    
    50,971
    
    
    
    5.2
    %
    
    
    73,146
    
    
    
    5.0
    %Long-term investments  fixed rate
    
    
    66,219
    
    
    
    7.2
    %
    
    
    42,978
    
    
    
    8.1
    %Total
    
    $
    207,189
    
    
    
    
    
    
    $
    132,704
 Expected Fiscal Year Maturity Date20112009
    
    2010
    
    and after
    
    Total
    
    Fair ValueLong-term investments  fixed rate
    
    $
    33,690
    
    
    $
    498
    
    
    $
    32,031
    
    
    $
    66,219
    
    
    $
    66,269Average interest rate
    
    
    4.9
    %
    
    
    4.3
    %
    
    
    7.5
    %
    
    
    7.2
    %
 Foreign Currency Exchange Rate Exposure
  36




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ITEM 4  CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control over Financial Reporting.
 
 PART II. OTHER INFORMATION
 
 ITEM
1 LEGAL PROCEEDINGS
 In re Oplink Communications, Inc. Initial Public
Offering Securities Litigation
  37




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38




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Merlin Partners, LP vs. Optical Communication Products, Inc.,
Oplink Communications, Inc., et al.
  
 Item 1A Risk Factors
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We have incurred significant losses in the past, and if we are unable to continue to increase our
revenues while controlling our costs and operating expenses, we may be unable to sustain our profitability.
  $
 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.
  ,
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Our ROADM Optical Switching and Routing product is a new product that has accounted for a
significant proportion of our recent revenue growth. A decline in the price of, or demand for, our
ROADM product, our failure to achieve broader market acceptance, or the introduction of competing
products by competitors, could harm our revenues and operating results. Further, even if revenue
from
our ROADM product remains strong, our overall gross margins will continue to be negatively affected
by
sales of our ROADM product.
   If we are unable to successfully integrate acquired businesses or technologies, our operating
results may be harmed. The recent acquisition of OCP is our largest ever acquisition and may substantially
challenge Oplinks management infrastructure
  
    
    additional operating expenses without additional revenues;
 41




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
    
    potential dilutive issuances of equity securities;
    
    the incurrence of debt and contingent liabilities;
    
    amortization of other intangibles;
    
    research and development write-offs; and
    
    other acquisition-related expenses.
     
    
    problems assimilating the purchased operations, technologies or products;
    
    unanticipated costs associated with the acquisition;
    
    diversion of managements attention from our core business;
 42




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
    
    adverse effects on existing business relationships with suppliers and customers;
    
    risks associated with entering markets in which we have no or limited prior
experience; and
    
    potential loss of key employees of purchased organizations.
  Our wavelength expansion products have accounted for a significant proportion of our revenues, and
our revenues could be harmed if the price of, or demand for these products further declines or if
these products fail to achieve broader market acceptance.
  The optical networking component industry is experiencing declining average selling prices, which
could cause our gross margins to decline and harm our operating results.
  Because none of our customers are obligated to purchase our products, they may cancel or defer
their purchases at any time and on short notice, which could harm our operating results.
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
    
    may stop purchasing our products or defer their purchases at any time without
penalty;
    
    are free to purchase products from our competitors;
    
    are not required to make minimum purchases; and
    
    may cancel orders that they place with us.
  Our markets are highly competitive, some of our customers are also our competitors, and our other
customers may choose to purchase our competitors products rather than our products or develop
internal capabilities to produce their own fiber optic modules.
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If
we are unable to generate adequate additional revenue as a result of the expansion of our sales
operations, our competitive position may be harmed and our revenue or margins may decline.
  If
our customers do not approve our manufacturing processes and qualify our products, we will lose
significant customer sales and opportunities.
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Our quarterly revenues and operating results are difficult to predict and may continue to fluctuate
significantly from quarter to quarter and, therefore, may vary from public market analysts or
investors
expectations, which could cause our stock price to drop.
  
    
    the availability of raw materials used in our products, increases in the price of these
raw materials or to the extent a greater degree of the raw material content of our product
is from third parties, which most likely would cause our gross profit margin to decline;
    
    impact on our sales and margins as a result of our customers continued migration to
contract manufacturers and the extent to which we engage in contract manufacturing
activities, which most likely would cause our gross profit margin to decline;
    
    fluctuation in the mix of products sold towards products with lower margins such as
ROADMs;
    
    fluctuations in demand for, and sales of, our products;
    
    changes in customer, geographic or product mix and the average selling prices of our
products;
    
    economic conditions specific to the communications and related industries and the
development and size of the markets for our products;
    
    our inability to cut costs quickly in the event of market or demand downturns, due to
the fact that a high percentage of our expenses, including those related to manufacturing,
engineering, research and development, sales and marketing and general and administrative
functions, is fixed in the short term;
    
    cancellations or delays of orders or shipment rescheduling by our customers;
    
    the lingering effects of the recent economic downturn and resulting uncertainty of the
fiber optic industry;
    
    the ability of our manufacturing operations in China to timely produce and deliver
products in the quantity and of the quality our customers require;
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
    
    our ability to successfully improve our manufacturing capabilities and achieve
acceptable production yields in our facilities in China;
    
    the tendency of communications equipment suppliers to sporadically place large orders
with short lead times;
    
    competitive factors in the fiber optic components and subsystems market, including
introductions of new products, new technologies and product enhancements by competitors,
consolidation of competitors, customers and service provider end users and pricing
pressures;
    
    the recent acquisition of OCP and its subsequent integration with Oplinks operations
may severely stress our infrastructure resulting in possible operational bottlenecks that
may result in loss of revenue and increased costs;
    
    our ability to develop, introduce, manufacture and ship new and enhanced optical
networking products in a timely manner and in production quantities without defects or
other quality issues;
    
    with respect to new products, a mismatching of research and development expenses and
sales and marketing expenses that are incurred in one quarter with revenues that are not
recognized, if at all, until a subsequent quarter when the new products are introduced and
commercially accepted; and
    
    costs associated with, and the outcomes of, any intellectual property or other
litigation to which we are, or may become, a party.
 If we fail to effectively manage our manufacturing capability, produce products that meet our
customers
quality requirements and achieve acceptable production yields in China, we may not be able to
deliver
sufficient quantities of products that meet all of our customers order requirements in a timely
manner,
which would harm our operating results.
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
    
    our ability to procure the necessary raw materials and equipment on a timely basis;
    
    a potential lack of availability of qualified management and manufacturing personnel;
    
    our ability to maintain quality;
    
    our ability to effectively manage headcount, particularly if we undertake to expand our
manufacturing operations;
    
    vulnerability of telecommunications networks in East Asia to natural disasters, such as
the recent earthquake that damaged several undersea fiber-optic cables responsible for
Internet and telephone connections with parts of China; and
    
    our ability to quickly and efficiently implement an adequate set of financial controls
to effectively track and control inventory levels and inventory mix and to accurately
predict inventory requirements.
  If we fail to predict our manufacturing requirements accurately, we could incur additional carrying
costs
and have excess and obsolete inventory or we could experience manufacturing delays, which could
cause
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us to lose orders or customers.
  Our
transition of manufacturing operations from California and Taiwan to SAE in China is subject to risks and uncertainties.
   Our products may have defects that are not detected until full deployment of a customers
equipment,
which could result in a loss of customers, damage to our reputation and substantial costs.
  
    
    loss of customers;
 49




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
    
    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.
  We depend on the growth and success of the communications industry, which is subject to severe
fluctuations in economic activity and is also experiencing consolidation and realignment, as well
as a
trend towards outsourced manufacturing.
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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, or these materials may
become
unavailable due to technological changes, which could limit our ability to fill customer orders and
harm
our operating results.
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We compete in a highly competitive industry, and if we are unable to compete successfully or
develop new products and product enhancements that achieve market acceptance, our revenues could
decline, which would harm our operating results.
  52




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The market for our products is characterized by rapid technological changes and evolving industry
standards. If we do not respond to the changes in a timely manner, our products likely will not
achieve
market acceptance.
  If our liability for U.S. and foreign taxes is greater than we have anticipated and reserved for,
our operating results may suffer.
  54




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Disruption to commercial activities in the United States or in other countries, particularly in
China and Taiwan, may adversely impact our results of operations, our ability to raise capital or our future
growth.
  
    
    disruptions to commercial activities or damage to our facilities as a result of natural
disasters, political unrest, war, terrorism, labor strikes, and work stoppages;
    
    disruptions of telecommunications networks due to natural disasters, such as the recent
earthquake that damaged several undersea fiber-optic cables responsible for Internet and
telephone connections with parts of China;
    
    difficulties and costs of staffing and managing foreign operations with personnel who
have expertise in optical network technology;
    
    unexpected changes in regulatory or certification requirements for optical systems or
networks;
    
    disruptions in the transportation of our products and other risks related to the
infrastructure of foreign countries;
    
    economic instability;
    
    any future outbreak of severe acute respiratory syndrome, avian influenza and other
epidemics or illnesses; and
    
    power shortages at our manufacturing facilities in China, which may lead to production
delays.
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We are exposed to currency rate fluctuations and exchange controls that could adversely impact our
operating results.
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If tax benefits available to our subsidiaries located in China are reduced or repealed or our China
subsidiaries fail to meet the requirements for utilizing such tax benefits, our financial condition
and operating results could suffer.
  If we are unable to protect our proprietary technology, our ability to succeed will be harmed.
  57




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We may be involved in intellectual property disputes in the future, which will divert managements
attention and could cause us to incur significant costs and prevent us from selling or using the
challenged technology.
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
    
    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.
  We depend on key personnel to manage our business effectively in a rapidly changing market, and if
we are unable to retain our key employees and hire additional personnel, our ability to sell our
products could be harmed.
 .
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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.
  Our failure to comply with governmental regulations could subject us to liability.
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Enacted and proposed changes in securities laws and regulations have increased and are likely to
continue to increase our costs.
  Failure to maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could impair the reliability of our financial statements, cause us to delay filing our
periodic reports with the SEC, harm our reputation and adversely affect our stock price.
 61




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Changes in existing financial accounting standards or practices may adversely affect our results of operations.
  62




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Because of 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.
  
    
    economic downturn in the fiber optics industry;
    
    preannouncement of financial results;
    
    quarterly variations in our operating results;
    
    changes in financial estimates by securities analysts and our failure to meet estimates;
    
    changes in market values of comparable companies;
    
    announcements by our competitors or us of new products or of significant acquisitions,
strategic partnerships or joint ventures;
    
    any loss by us of a major customer;
    
    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.
  Provisions of our charter documents and Delaware law and other arrangements may have anti-takeover
effects that could prevent any change in control, which could negatively affect your investment.
 63




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
    
    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.
  Uncertainties arising out of terrorist activities, resulting military actions and other factors
could adversely affect our business and operating results.
  64




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ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3  DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5  OTHER INFORMATION
  
 ITEM 6   EXHIBITS
 Exhibit Index
 Exhibit No.
    
    Description3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Designation of Series A Junior Participating Preferred Stock.3.4(3)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant.10.36(4)
    
    Agreement of Purchase and Sale and Escrow Instructions between Optical Communication Products,
Inc. and DS Ventures, LLC31.1
    
    Certification of Chief Executive Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. Section 1350).32.2*
    
    Certification of Chief Financial Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.
 
 (1)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1/A, No. 333-41506, as filed on
October 3, 2000.(2)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on March 22, 2002 and incorporated
herein by reference.(3)
    
    Previously filed as an Exhibit to the Registrants Quarterly Report on Form 10-Q filed on November 14, 2006 and
incorporated herein by reference.(4)
    
    Previously filed as an Exhibit to Optical Communication Products, Inc.s Report on Form 8-K filed on October
3, 2007 and
incorporated herein by reference.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompanies this Quarterly Report on Form
10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by
the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. 65




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SIGNATURES
  OPLINK COMMUNICATIONS, INC.
(Registrant)DATE: November 9, 2007
    By:
    /s/ Shirley YinShirley YinChief Financial Officer
(Principal Financial and Accounting Officer) 66




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Exhibit Index
 Exhibit No.
    
    Description3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Designation of Series A Junior Participating Preferred Stock.3.4(3)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant.10.36(4)
    
    Agreement of Purchase and Sale and Escrow Instructions between Optical Communication Products,
Inc. and DS Ventures, LLC31.1
    
    Certification of Chief Executive Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. Section 1350).32.2*
    
    Certification of Chief Financial Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.
 
 (1)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1/A, No. 333-41506, as filed on
October 3, 2000.(2)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on March 22, 2002 and incorporated
herein by reference.(3)
    
    Previously filed as an Exhibit to the Registrants Quarterly Report on Form 10-Q filed on November 14, 2006 and
incorporated herein by reference.(4)
    
    Previously filed as an Exhibit to Optical Communication Products, Inc.s Report on Form 8-K filed on October
3, 2007 and
incorporated herein by reference.*
    
    The certifications attached as Exhibits 32.1 and 32.2 accompanies this Quarterly Report on Form
10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by
the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.