##### 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 December 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-31581
 OPLINK COMMUNICATIONS, INC.
  Delaware
    
    No. 77-0411346(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 (Address of principal executive offices) (Zip Code)
  þ o
  o þ o
 o þ




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##### 



OPLINK COMMUNICATIONS, INC.
   PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Condensed Consolidated Balance Sheets  December 31, 2006 and June 30, 2006
    
    
    3Condensed Consolidated Statements of Operations  Three and six months ended December 31, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows  Six months ended December 31, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56Item 3. Defaults Upon Senior Securities
    
    
    56Item 4. Submission of Matters to a Vote of Security Holders
    
    
    56Item 5. Other Information
    
    
    57Item 6. Exhibits
    
    
    57SIGNATURES
    
    
    58EXHIBIT 3.5EXHIBIT 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)
 December 31,
    
    
    June 30,2006
    
    
    2006(1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,529
    
    
    $
    7,856Short-term investments
    
    
    134,722
    
    
    
    117,395Accounts receivable, net
    
    
    19,422
    
    
    
    13,369Inventories, net
    
    
    11,446
    
    
    
    7,953Prepaid expenses and other current assets
    
    
    3,669
    
    
    
    2,435Total current assets
    
    
    186,788
    
    
    
    149,008Long-term investments
    
    
    45,000
    
    
    
    63,029Property, plant and equipment, net
    
    
    22,811
    
    
    
    23,443Goodwill and intangible assets, net
    
    
    1,509
    
    
    
    1,694Other assets
    
    
    172
    
    
    
    781Total assets
    
    $
    256,280
    
    
    $
    237,955LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,868
    
    
    $
    4,516Accrued liabilities
    
    
    6,058
    
    
    
    6,216Total current liabilities
    
    
    12,926
    
    
    
    10,732Non-current liabilities
    
    
    79
    
    
    
    83Total liabilities
    
    
    13,005
    
    
    
    10,815Contingencies (Note 14)Stockholders equity:Common stock, $0.001 par value, 400,000,000 shares authorized;
22,160,888 and 21,521,989 shares issued and outstanding as of
December 31, 2006 and June 30, 2006, respectively
    
    
    22
    
    
    
    22Additional paid-in capital
    
    
    460,456
    
    
    
    451,030Treasury stock, at cost (1,248 shares as of June 30, 2006)
    
    
    
    
    
    
    (11
    )Accumulated other comprehensive income
    
    
    2,060
    
    
    
    1,248Accumulated deficit
    
    
    (219,263
    )
    
    
    (225,149
    )Total stockholders equity
    
    
    243,275
    
    
    
    227,140Total liabilities and stockholders equity
    
    $
    256,280
    
    
    $
    237,955
 
 (1) The condensed consolidated balance sheet at June 30, 2006 has been derived from the audited
consolidated financial statements at that date.
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 3




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

(Unaudited)
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    22,953
    
    
    $
    12,651
    
    
    $
    42,667
    
    
    $
    23,334Cost of revenues:Cost of revenues
    
    
    16,497
    
    
    
    9,164
    
    
    
    29,988
    
    
    
    17,222Stock compensation expense
    
    
    75
    
    
    
    66
    
    
    
    140
    
    
    
    121Total cost of revenues
    
    
    16,572
    
    
    
    9,230
    
    
    
    30,128
    
    
    
    17,343Gross profit
    
    
    6,381
    
    
    
    3,421
    
    
    
    12,539
    
    
    
    5,991Operating expenses:Research and development:Research and development
    
    
    1,429
    
    
    
    1,338
    
    
    
    3,000
    
    
    
    2,826Stock compensation expense
    
    
    144
    
    
    
    154
    
    
    
    273
    
    
    
    307Total research and development
    
    
    1,573
    
    
    
    1,492
    
    
    
    3,273
    
    
    
    3,133Sales and marketing:Sales and marketing
    
    
    1,280
    
    
    
    886
    
    
    
    2,662
    
    
    
    1,771Stock compensation expense
    
    
    170
    
    
    
    141
    
    
    
    328
    
    
    
    283Total sales and marketing
    
    
    1,450
    
    
    
    1,027
    
    
    
    2,990
    
    
    
    2,054General and administrative:General and administrative
    
    
    1,772
    
    
    
    1,701
    
    
    
    3,271
    
    
    
    3,337Stock compensation expense
    
    
    717
    
    
    
    282
    
    
    
    1,439
    
    
    
    529Total general and administrative
    
    
    2,489
    
    
    
    1,983
    
    
    
    4,710
    
    
    
    3,866Amortization of intangible and other assets
    
    
    35
    
    
    
    18
    
    
    
    70
    
    
    
    18In-process research and development
    
    
    
    
    
    
    1,120
    
    
    
    
    
    
    
    1,120Total operating expenses
    
    
    5,547
    
    
    
    5,640
    
    
    
    11,043
    
    
    
    10,191Income (loss) from operations
    
    
    834
    
    
    
    (2,219
    )
    
    
    1,496
    
    
    
    (4,200
    )Interest and other income, net
    
    
    2,332
    
    
    
    1,633
    
    
    
    4,505
    
    
    
    3,193Loss on sale of assets
    
    
    (2
    )
    
    
    (8
    )
    
    
    
    
    
    
    (27
    )Income (loss) before provision for income taxes
    
    
    3,164
    
    
    
    (594
    )
    
    
    6,001
    
    
    
    (1,034
    )Provision for income taxes
    
    
    33
    
    
    
    
    
    
    
    115
    
    
    
    Net income (loss)
    
    $
    3,131
    
    
    $
    (594
    )
    
    $
    5,886
    
    
    $
    (1,034
    )Net income (loss) per share:Basic
    
    $
    0.14
    
    
    $
    (0.03
    )
    
    $
    0.27
    
    
    $
    (0.05
    )Diluted
    
    $
    0.14
    
    
    $
    (0.03
    )
    
    $
    0.26
    
    
    $
    (0.05
    )Shares used in per share calculation:Basic
    
    
    22,000
    
    
    
    21,318
    
    
    
    21,778
    
    
    
    21,296Diluted
    
    
    23,022
    
    
    
    21,318
    
    
    
    22,810
    
    
    
    21,296
 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)
 Six Months EndedDecember 31,2006
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    5,886
    
    
    $
    (1,034
    )Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    2,365
    
    
    
    3,729Amortization of intangible and other assets
    
    
    185
    
    
    
    54Stock compensation expense
    
    
    2,180
    
    
    
    1,240Amortization of premium on investments
    
    
    134
    
    
    
    121Loss on sale or disposal of assets
    
    
    
    
    
    
    27In-process research and development
    
    
    
    
    
    
    1,120Other
    
    
    (42
    )
    
    
    (54
    )Change in assets and liabilities:Accounts receivable
    
    
    (5,929
    )
    
    
    (2,825
    )Inventories
    
    
    (3,252
    )
    
    
    (948
    )Prepaid expenses and other current assets
    
    
    (1,210
    )
    
    
    (1,347
    )Other assets
    
    
    592
    
    
    
    7Accounts payable
    
    
    2,299
    
    
    
    1,573Accrued liabilities
    
    
    (165
    )
    
    
    (326
    )Net cash provided by operating activities
    
    
    3,043
    
    
    
    1,337Cash flows from investing activities:Purchases of available-for-sale investments
    
    
    (32,696
    )
    
    
    (17,961
    )Sales and maturities of available-for-sale investments
    
    
    19,729
    
    
    
    39,595Purchases of held-to-maturity investments
    
    
    (31,990
    )
    
    
    (30,004
    )Maturities of held-to-maturity investments
    
    
    45,540
    
    
    
    20,000Proceeds from sales of property and equipment
    
    
    9
    
    
    
    5Purchases of property and equipment
    
    
    (1,234
    )
    
    
    (609
    )Acquisition of F3 Inc., net of cash acquired
    
    
    
    
    
    
    (4,365
    )Net cash (used in) provided by investing activities
    
    
    (642
    )
    
    
    6,661Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    7,257
    
    
    
    648Repurchase of common stock
    
    
    
    
    
    
    (11
    )Net cash provided by financing activities
    
    
    7,257
    
    
    
    637Effect of exchange rate changes on cash
    
    
    15
    
    
    
    40Net increase in cash and cash equivalents
    
    
    9,673
    
    
    
    8,675Cash and cash equivalents, beginning of period
    
    
    7,856
    
    
    
    29,710Cash and cash equivalents, end of period
    
    $
    17,529
    
    
    $
    38,385
 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
  Description of Business.
  Basis of Presentation
 6




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Net Income (Loss) Per Share
 7




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Net income (loss)
    
    $
    3,131
    
    
    $
    (594
    )
    
    $
    5,886
    
    
    $
    (1,034
    )Denominator:Weighted average shares outstanding  basic
    
    
    22,000
    
    
    
    21,318
    
    
    
    21,778
    
    
    
    21,296Effect of dilutive potential common shares
    
    
    1,022
    
    
    
    
    
    
    
    1,032
    
    
    
    Weighted average shares outstanding  diluted
    
    
    23,022
    
    
    
    21,318
    
    
    
    22,810
    
    
    
    21,296Net income (loss) per share  basic
    
    $
    0.14
    
    
    $
    (0.03
    )
    
    $
    0.27
    
    
    $
    (0.05
    )Net income (loss) per share  diluted
    
    $
    0.14
    
    
    $
    (0.03
    )
    
    $
    0.26
    
    
    $
    (0.05
    )Antidilutive stock options not included in net
income (loss) per share calculation
    
    
    1,536
    
    
    
    3,128
    
    
    
    1,546
    
    
    
    3,128
 Comprehensive Income (Loss).
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    3,131
    
    
    $
    (594
    )
    
    $
    5,886
    
    
    $
    (1,034
    )Unrealized (loss) gain on investments
    
    
    (7
    )
    
    
    (8
    )
    
    
    30
    
    
    
    (36
    )Change in cumulative translation adjustments
    
    
    606
    
    
    
    69
    
    
    
    782
    
    
    
    893Total comprehensive income (loss)
    
    $
    3,730
    
    
    $
    (533
    )
    
    $
    6,698
    
    
    $
    (177
    )
 Short-Term and Long-Term Investments.
  8




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December 31, 2006Gross
    
    
    GrossCarrying
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedValue
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueShort-term investments:Certificates of deposit
    
    $
    350
    
    
    $
    350
    
    
    $
    
    
    
    $
    
    
    
    $
    350Obligations of states and political subdivisions
    
    
    23,900
    
    
    
    23,900
    
    
    
    
    
    
    
    
    
    
    
    23,900Corporate securities
    
    
    50,472
    
    
    
    50,505
    
    
    
    2
    
    
    
    (44
    )
    
    
    50,463United States government agencies
    
    
    60,000
    
    
    
    60,000
    
    
    
    
    
    
    
    (228
    )
    
    
    59,772Total short-term investments
    
    
    134,722
    
    
    
    134,755
    
    
    
    2
    
    
    
    (272
    )
    
    
    134,485Long-term investments:United States government agencies
    
    
    45,000
    
    
    
    45,000
    
    
    
    
    
    
    
    (81
    )
    
    
    44,919Total long-term investments
    
    
    45,000
    
    
    
    45,000
    
    
    
    
    
    
    
    (81
    )
    
    
    44,919Total investments
    
    $
    179,722
    
    
    $
    179,755
    
    
    $
    2
    
    
    $
    (353
    )
    
    $
    179,404
 June 30, 2006Gross
    
    
    GrossCarrying
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedValue
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueShort-term investments:Certificates of deposit
    
    $
    390
    
    
    $
    390
    
    
    $
    
    
    
    $
    
    
    
    $
    390Obligations of states and political subdivisions
    
    
    18,400
    
    
    
    18,400
    
    
    
    
    
    
    
    
    
    
    
    18,400Corporate securities
    
    
    43,618
    
    
    
    43,677
    
    
    
    1
    
    
    
    (180
    )
    
    
    43,498United States government agencies
    
    
    54,987
    
    
    
    55,001
    
    
    
    
    
    
    
    (440
    )
    
    
    54,561Total short-term investments
    
    
    117,395
    
    
    
    117,468
    
    
    
    1
    
    
    
    (620
    )
    
    
    116,849Long-term investments:Corporate securities
    
    
    3,029
    
    
    
    3,029
    
    
    
    
    
    
    
    (7
    )
    
    
    3,022United States government agencies
    
    
    60,000
    
    
    
    60,000
    
    
    
    
    
    
    
    (525
    )
    
    
    59,475Total long-term investments
    
    
    63,029
    
    
    
    63,029
    
    
    
    
    
    
    
    (532
    )
    
    
    62,497Total investments
    
    $
    180,424
    
    
    $
    180,497
    
    
    $
    1
    
    
    $
    (1,152
    )
    
    $
    179,346
 9




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##### Table of Contents



December 31, 2006Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:Certificates of deposit
    
    $
    350
    
    
    $
    
    
    
    $
    
    
    
    $
    350Obligations of states and political subdivisions
    
    
    23,900
    
    
    
    
    
    
    
    
    
    
    
    23,900Corporate securities
    
    
    31,390
    
    
    
    
    
    
    
    (33
    )
    
    
    31,357United States government agencies
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    5,000Total available-for-sale investments
    
    
    60,640
    
    
    
    
    
    
    
    (33
    )
    
    
    60,607Held-to-maturity investments:Corporate securities
    
    
    19,115
    
    
    
    2
    
    
    
    (11
    )
    
    
    19,106United States government agencies
    
    
    100,000
    
    
    
    
    
    
    
    (309
    )
    
    
    99,691Total held-to-maturity investments
    
    
    119,115
    
    
    
    2
    
    
    
    (320
    )
    
    
    118,797Total investments
    
    $
    179,755
    
    
    $
    2
    
    
    $
    (353
    )
    
    $
    179,404
 June 30, 2006Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale investments:Certificates of deposit
    
    $
    390
    
    
    $
    
    
    
    $
    
    
    
    $
    390Obligations of states and political subdivisions
    
    
    18,400
    
    
    
    
    
    
    
    
    
    
    
    18,400Corporate securities
    
    
    23,867
    
    
    
    1
    
    
    
    (60
    )
    
    
    23,808United States government agencies
    
    
    5,000
    
    
    
    
    
    
    
    (14
    )
    
    
    4,986Total available-for-sale investments
    
    
    47,657
    
    
    
    1
    
    
    
    (74
    )
    
    
    47,584Held-to-maturity investments:Corporate securities
    
    
    22,839
    
    
    
    
    
    
    
    (127
    )
    
    
    22,712United States government agencies
    
    
    110,001
    
    
    
    
    
    
    
    (951
    )
    
    
    109,050Total held-to-maturity investments
    
    
    132,840
    
    
    
    
    
    
    
    (1,078
    )
    
    
    131,762Total investments
    
    $
    180,497
    
    
    $
    1
    
    
    $
    (1,152
    )
    
    $
    179,346
  10




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December 31, 2006In Loss Position
    
    
    In Loss Position< 12 Months
    
    
    12 Months and Longer
    
    
    Total In Loss PositionGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesAvailable-for-sale investments:Corporate securities
    
    $
    24,892
    
    
    $
    (33
    )
    
    $
    
    
    
    $
    
    
    
    $
    24,892
    
    
    $
    (33
    )Total available-for-sale investments:
    
    
    24,892
    
    
    
    (33
    )
    
    
    
    
    
    
    
    
    
    
    24,892
    
    
    
    (33
    )Held-to-maturity investments:Corporate securities
    
    
    12,056
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    12,056
    
    
    
    (11
    )United States government agencies
    
    
    39,933
    
    
    
    (67
    )
    
    
    59,758
    
    
    
    (242
    )
    
    
    99,691
    
    
    
    (309
    )Total held-to-maturity investments
    
    
    51,989
    
    
    
    (78
    )
    
    
    59,758
    
    
    
    (242
    )
    
    
    111,747
    
    
    
    (320
    )Total investments in loss position
    
    $
    76,881
    
    
    $
    (111
    )
    
    $
    59,758
    
    
    $
    (242
    )
    
    $
    136,639
    
    
    $
    (353
    )
  December 31, 2006
    
    
    June 30, 2006Amortized
    
    
    Estimated
    
    
    Amortized
    
    
    EstimatedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair ValueAvailable-for-sale investments:Due in one year or less
    
    $
    30,340
    
    
    $
    30,307
    
    
    $
    28,357
    
    
    $
    28,284Due in one year to five years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due in five years to ten years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due after ten years
    
    
    30,300
    
    
    
    30,300
    
    
    
    19,300
    
    
    
    19,300Total available-for-sale investments
    
    
    60,640
    
    
    
    60,607
    
    
    
    47,657
    
    
    
    47,584Held-to-maturity investments:Due in one year or less
    
    
    74,115
    
    
    
    73,878
    
    
    
    69,811
    
    
    
    69,265Due in one year to five years
    
    
    45,000
    
    
    
    44,919
    
    
    
    63,029
    
    
    
    62,497Total held-to-maturity investments
    
    
    119,115
    
    
    
    118,797
    
    
    
    132,840
    
    
    
    131,762Total investments
    
    $
    179,755
    
    
    $
    179,404
    
    
    $
    180,497
    
    
    $
    179,346
  11




---



##### Table of Contents



Inventories
 December 31,
    
    
    June 30,2006
    
    
    2006Inventories, net:Raw materials
    
    $
    6,406
    
    
    $
    5,588Work-in-process
    
    
    3,930
    
    
    
    2,365Finished goods
    
    
    1,110
    
    
    
    Total
    
    $
    11,446
    
    
    $
    7,953
 Property, Plant and Equipment.
 December 31,
    
    
    June 30,2006
    
    
    2006Property, plant and equipment:Production and engineering equipment
    
    $
    33,416
    
    
    $
    32,277Computer equipment and software
    
    
    6,562
    
    
    
    6,464Building and building improvements
    
    
    15,406
    
    
    
    15,151Land
    
    
    1,949
    
    
    
    1,949Sub-total
    
    
    57,333
    
    
    
    55,841Less: Accumulated depreciation and
amortization
    
    
    (34,522
    )
    
    
    (32,398
    )Total
    
    $
    22,811
    
    
    $
    23,443
 Goodwill and Intangible Assets, Net.
 EstimatedUseful Life
    
    
    Gross
    
    
    AccumulatedDecember 31, 2006
    
    (in Years)
    
    
    Amount
    
    
    Amortization
    
    
    NetTechnology
    
    
    4
    
    
    $
    921
    
    
    $
    260
    
    
    $
    661Trade name
    
    
    3
    
    
    
    163
    
    
    
    63
    
    
    
    100Customer relationships
    
    
    3
    
    
    
    253
    
    
    
    79
    
    
    
    174Total
    
    
    
    
    
    $
    1,337
    
    
    $
    402
    
    
    $
    935
 EstimatedUseful Life
    
    
    Gross
    
    
    AccumulatedJune 30, 2006
    
    (in Years)
    
    
    Amount
    
    
    Amortization
    
    
    NetTechnology
    
    
    4
    
    
    $
    921
    
    
    $
    145
    
    
    $
    776Trade name
    
    
    3
    
    
    
    163
    
    
    
    36
    
    
    
    127Customer relationships
    
    
    3
    
    
    
    253
    
    
    
    36
    
    
    
    217Total
    
    
    
    
    
    $
    1,337
    
    
    $
    217
    
    
    $
    1,120
 12




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Reported as:Cost of revenues
    
    $
    57
    
    
    $
    36
    
    
    $
    115
    
    
    $
    36Operating expenses
    
    
    35
    
    
    
    18
    
    
    
    70
    
    
    
    18Total
    
    $
    92
    
    
    $
    54
    
    
    $
    185
    
    
    $
    54
  Fiscal years ending June 30,
    
    Amount2007
    
    $
    1852008
    
    
    3682009
    
    
    2972010
    
    
    85$
    935
  Accrued Liabilities.
 December 31,
    
    
    June 30,2006
    
    
    2006Accrued liabilities:Payroll and related expenses
    
    $
    1,788
    
    
    $
    1,489Accrued sales commission
    
    
    524
    
    
    
    469Accrued warranty
    
    
    400
    
    
    
    405Accrued professional fees
    
    
    788
    
    
    
    975Remaining amounts payable for acquisitions
    
    
    
    
    
    
    510Other
    
    
    2,558
    
    
    
    2,368Total
    
    $
    6,058
    
    
    $
    6,216
 Product Warranties.
 13




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at the beginning of the period
    
    $
    422
    
    
    $
    607
    
    
    $
    405
    
    
    $
    560Accruals for warranties issued during the period
    
    
    55
    
    
    
    56
    
    
    
    89
    
    
    
    156Accruals related to pre-existing warranties
including expirations and changes in estimates
    
    
    7
    
    
    
    (50
    )
    
    
    43
    
    
    
    (50
    )Cost of warranty repair
    
    
    (84
    )
    
    
    (32
    )
    
    
    (137
    )
    
    
    (85
    )Balance at the end of the period
    
    $
    400
    
    
    $
    581
    
    
    $
    400
    
    
    $
    581
 Stock Compensation.
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Stock-based compensation expense by type of award:Employee stock options
    
    $
    1,022
    
    
    $
    530
    
    
    $
    2,024
    
    
    $
    1,011Employee stock purchase plan
    
    
    84
    
    
    
    110
    
    
    
    156
    
    
    
    240Net change of amounts capitalized as inventory
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (11
    )Total stock-based compensation
    
    
    1,106
    
    
    
    643
    
    
    
    2,180
    
    
    
    1,240Tax effect on stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net effect on net income (loss)
    
    $
    1,106
    
    
    $
    643
    
    
    $
    2,180
    
    
    $
    1,240Effect on net income (loss) per share:Basic
    
    $
    (0.05
    )
    
    $
    (0.03
    )
    
    $
    (0.10
    )
    
    $
    (0.06
    )Diluted
    
    $
    (0.05
    )
    
    $
    (0.03
    )
    
    $
    (0.10
    )
    
    $
    (0.06
    )
   14




---



##### Table of Contents



Valuation Assumptions
  Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2006
    
    2005
    
    2006
    
    2005Risk-free interest rate
    
    
    4.62
    %
    
    
    4.40
    %
    
    
    4.77
    %
    
    
    4.29
    %Expected term
    
    4.6 years
    
    
    4.9 years
    
    
    4.7 years
    
    
    4.8 yearsExpected dividends
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    48
    %
    
    
    45
    %
    
    
    48
    %
    
    
    46
    %
  Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2006
    
    2005
    
    2006
    
    2005Risk-free interest rate
    
    
    4.95
    %
    
    
    4.34
    %
    
    
    4.95
    %
    
    
    4.34
    %Expected term
    
    1.3 years
    
    
    1.3 years
    
    
    1.3 years
    
    
    1.3 yearsExpected dividends
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    48
    %
    
    
    45
    %
    
    
    48
    %
    
    
    45
    %
   15




---



##### Table of Contents



Equity Incentive Program
   16




---



##### Table of Contents



WeightedNumber of
    
    
    AverageShares Available
    
    
    Options
    
    
    Exercisefor Grant
    
    
    Outstanding
    
    
    PriceBalance, June 30, 2004
    
    
    5,065,272
    
    
    
    2,827,761
    
    
    $
    15.8655Options granted
    
    
    (674,929
    )
    
    
    674,929
    
    
    
    11.1804Options exercised
    
    
    
    
    
    
    (39,267
    )
    
    
    6.6619Options canceled
    
    
    399,934
    
    
    
    (399,934
    )
    
    
    18.7215Balance, June 30, 2005
    
    
    4,790,277
    
    
    
    3,063,489
    
    
    
    14.5481Options granted
    
    
    (1,075,567
    )
    
    
    1,075,567
    
    
    
    17.7316Options exercised
    
    
    
    
    
    
    (180,433
    )
    
    
    10.8641Options canceled
    
    
    317,294
    
    
    
    (317,294
    )
    
    
    19.5404Expired (1)
    
    
    (5,837
    )
    
    
    
    
    
    
    Balance, June 30, 2006
    
    
    4,026,167
    
    
    
    3,641,329
    
    
    
    15.2351Options granted
    
    
    (361,912
    )
    
    
    361,912
    
    
    
    17.3871Options exercised
    
    
    
    
    
    
    (588,501
    )
    
    
    11.5590Options canceled
    
    
    50,787
    
    
    
    (50,787
    )
    
    
    14.8547Balance, December 31, 2006
    
    
    3,715,042
    
    
    
    3,363,953
    
    
    $
    16.0492
 
  17




---



##### Table of Contents



Options Outstanding
    
    
    Options Vested and Exercisableat December 31, 2006
    
    
    at December 31, 2006Weighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 thousand)
    
    
    Outstanding
    
    
    (in Years)
    
    
    Price
    
    
    (in thousand)$0.0001 - $2.0000
    
    
    39,484
    
    
    
    0.7
    
    
    $
    0.2591
    
    
    $
    802
    
    
    
    39,484
    
    
    
    0.7
    
    
    $
    0.2591
    
    
    $
    802$4.0001 - $5.0000
    
    
    810,615
    
    
    
    5.7
    
    
    
    4.6281
    
    
    
    12,915
    
    
    
    810,615
    
    
    
    5.7
    
    
    
    4.6281
    
    
    
    12,915$5.0001 - $10.0000
    
    
    83,275
    
    
    
    5.1
    
    
    
    8.1101
    
    
    
    1,037
    
    
    
    82,150
    
    
    
    5.1
    
    
    
    8.1060
    
    
    
    1,023$10.0001 - $11.0000
    
    
    320,883
    
    
    
    8.3
    
    
    
    10.2278
    
    
    
    3,315
    
    
    
    83,433
    
    
    
    8.0
    
    
    
    10.1616
    
    
    
    868$12.0001 - $13.0000
    
    
    287,347
    
    
    
    8.3
    
    
    
    12.3349
    
    
    
    2,363
    
    
    
    80,846
    
    
    
    7.9
    
    
    
    12.5488
    
    
    
    648$13.0001 - $15.0000
    
    
    303,428
    
    
    
    8.2
    
    
    
    14.0944
    
    
    
    1,962
    
    
    
    107,538
    
    
    
    6.6
    
    
    
    13.6594
    
    
    
    742$15.0001 - $17.0000
    
    
    24,428
    
    
    
    6.1
    
    
    
    15.9968
    
    
    
    111
    
    
    
    17,856
    
    
    
    5.0
    
    
    
    15.7785
    
    
    
    85$17.0001 - $19.0000
    
    
    228,404
    
    
    
    6.4
    
    
    
    18.2188
    
    
    
    535
    
    
    
    160,124
    
    
    
    5.4
    
    
    
    18.0889
    
    
    
    396$19.0001 - $20.0000
    
    
    92,715
    
    
    
    9.7
    
    
    
    19.7000
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $20.0001 - $21.0000
    
    
    791,670
    
    
    
    9.5
    
    
    
    20.2315
    
    
    
    260
    
    
    
    570
    
    
    
    9.9
    
    
    
    20.0900
    
    
    
    $28.0001 - $37.0000
    
    
    299,650
    
    
    
    3.6
    
    
    
    35.5272
    
    
    
    
    
    
    
    299,650
    
    
    
    3.6
    
    
    
    35.5272
    
    
    
    $42.0001 - $140.0000
    
    
    82,054
    
    
    
    3.7
    
    
    
    65.9050
    
    
    
    
    
    
    
    82,054
    
    
    
    3.7
    
    
    
    65.9050
    
    
    
    3,363,953
    
    
    
    7.1
    
    
    $
    16.0492
    
    
    $
    23,380
    
    
    
    1,764,320
    
    
    
    5.4
    
    
    $
    15.3046
    
    
    $
    17,479Vested and expected
to vest
    
    
    3,205,082
    
    
    
    7.0
    
    
    $
    15.9867
    
    
    $
    22,863
    Employee Stock Purchase Plan
  18




---



##### Table of Contents



Repurchase of Common Stock
 Recent Accounting Pronouncements
  19




---



##### Table of Contents




 
 .
  20




---



##### Table of Contents



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




---



##### Table of Contents



Hakimoglu v.
Oplink Communications, Inc. and Liberty Suplus Insurance Corp. OZ Optics, Ltd., et al. v. Hakimoglu, et
al.
 22




---



##### Table of Contents



ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-looking statements
   Overview
  23




---



##### Table of Contents



Use of Estimates and Critical Accounting Policies
  24




---



##### Table of Contents




    
    revenue recognition and product returns;
    
    warranty obligations;
    
    risk evaluation;
    
    allowance for doubtful accounts;
    
    excess and obsolete inventory;
    
    long-lived asset valuation;
    
    business combination;
    
    deferred taxes; and
    
    stock compensation.
  25




---



##### Table of Contents



Results of Operations
 Revenues
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    Percentage
    
    Six Months Ended
    
    
    
    
    
    PercentageDecember 31,
    
    Change
    
    Change
    
    December 31,
    
    Change
    
    Change2006
    
    2005
    
    
    
    
    
    
    
    
    
    2006
    
    2005Revenues
    
    $
    22,953
    
    
    $
    12,651
    
    
    $
    10,302
    
    
    
    81.4
    %
    
    $
    42,667
    
    
    $
    23,334
    
    
    $
    19,333
    
    
    
    82.9
    %
    Gross Profit
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    Percentage
    
    Six Months Ended
    
    
    
    
    
    PercentageDecember 31,
    
    Change
    
    Change
    
    December 31,
    
    Change
    
    Change2006
    
    2005
    
    
    
    
    
    
    
    
    
    2006
    
    2005Gross profit
    
    $
    6,381
    
    
    $
    3,421
    
    
    $
    2,960
    
    
    
    86.5
    %
    
    $
    12,539
    
    
    $
    5,991
    
    
    $
    6,548
    
    
    
    109.3
    %Gross profit margin
    
    
    27.8
    %
    
    
    27.0
    %
    
    
    
    
    
    
    
    
    
    
    29.4
    %
    
    
    25.7
    %
 26




---



##### Table of Contents



Research and Development
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    Percentage
    
    Six Months Ended
    
    
    
    
    
    PercentageDecember 31,
    
    Change
    
    Change
    
    December 31,
    
    Change
    
    Change2006
    
    2005
    
    
    
    
    
    
    
    
    
    2006
    
    2005Research and development
    
    $
    1,573
    
    
    $
    1,492
    
    
    $
    81
    
    
    
    5.4
    %
    
    $
    3,273
    
    
    $
    3,133
    
    
    $
    140
    
    
    
    4.5
    %
  27




---



##### Table of Contents



Sales and Marketing
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    Percentage
    
    Six Months Ended
    
    
    
    
    
    PercentageDecember 31,
    
    Change
    
    Change
    
    December 31,
    
    Change
    
    Change2006
    
    2005
    
    
    
    
    
    
    
    
    
    2006
    
    2005Sales and marketing
    
    $
    1,450
    
    
    $
    1,027
    
    
    $
    423
    
    
    
    41.2
    %
    
    $
    2,990
    
    
    $
    2,054
    
    
    $
    936
    
    
    
    45.6
    %
  General and Administrative
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    Percentage
    
    Six Months Ended
    
    
    
    
    
    PercentageDecember 31,
    
    Change
    
    Change
    
    December 31,
    
    Change
    
    Change2006
    
    2005
    
    
    
    
    
    
    
    
    
    2006
    
    2005General and administrative
    
    $
    2,489
    
    
    $
    1,983
    
    
    $
    506
    
    
    
    25.5
    %
    
    $
    4,710
    
    
    $
    3,866
    
    
    $
    844
    
    
    
    21.8
    %
  Stock Compensation Expense
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    Percentage
    
    Six Months Ended
    
    
    
    
    
    PercentageDecember 31,
    
    Change
    
    Change
    
    December 31,
    
    Change
    
    Change2006
    
    2005
    
    
    
    
    
    
    
    
    
    2006
    
    2005Stock compensation
expense
    
    $
    1,106
    
    
    $
    643
    
    
    $
    463
    
    
    
    72.0
    %
    
    $
    2,180
    
    
    $
    1,240
    
    
    $
    940
    
    
    
    75.8
    %
 28




---



##### Table of Contents



Interest and Other Income, Net
 (In thousands, except percentages)
 Three Months Ended
    
    
    
    
    
    Percentage
    
    Six Months Ended
    
    
    
    
    
    PercentageDecember 31,
    
    Change
    
    Change
    
    December 31,
    
    Change
    
    Change2006
    
    2005
    
    
    
    
    
    
    
    
    
    2006
    
    2005Interest and other
income, net
    
    $
    2,332
    
    
    $
    1,633
    
    
    $
    699
    
    
    
    42.8
    %
    
    $
    4,505
    
    
    $
    3,193
    
    
    $
    1,312
    
    
    
    41.1
    %
  In-Process Research and Development (IP R&D).
  Provision for Income Taxes
  29




---



##### Table of Contents



Liquidity and Capital Resources
  Six Months Ended December 31, 2006
      30




---



##### Table of Contents



.
 Six Months Ended December 31, 2005
        31




---



##### Table of Contents



Contractual Obligations
  Contractual Obligations Due by PeriodTotal
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    After 5 yearsContractual ObligationsPurchase obligations
    
    $
    15,201
    
    
    $
    15,201
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating leases
    
    
    566
    
    
    
    380
    
    
    
    186
    
    
    
    
    
    
    
    -Total
    
    $
    15,767
    
    
    $
    15,581
    
    
    $
    186
    
    
    $
    
    
    
    $
    
 Recent Accounting Pronouncements
   32




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
 
 .
  33




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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Interest Rate Exposure
    34




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Carrying
    
    
    Average Rate
    
    
    Carrying
    
    
    Average RateValue at
    
    
    of Return at
    
    
    Value at
    
    
    of Return atDecember 31,
    
    
    December 31,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2006
    
    
    2006
    
    
    2006(Annualized)
    
    
    
    
    
    
    (Annualized)Investment Securities:Cash equivalents  variable rate
    
    $
    1,863
    
    
    
    5.1
    %
    
    $
    1,195
    
    
    
    5.0
    %Cash equivalents  fixed rate
    
    
    3,994
    
    
    
    5.3
    %
    
    
    
    
    
    
    Short-term investments  variable rate
    
    
    30,714
    
    
    
    4.0
    %
    
    
    24,669
    
    
    
    4.0
    %Short-term investments  fixed rate
    
    
    104,008
    
    
    
    4.8
    %
    
    
    92,726
    
    
    
    4.2
    %Long-term investments  fixed rate
    
    
    45,000
    
    
    
    5.3
    %
    
    
    63,029
    
    
    
    4.9
    %Total
    
    $
    185,579
    
    
    
    
    
    
    $
    181,619
 Expected Fiscal Year Maturity Date2007
    
    2008
    
    2009
    
    Total
    
    Fair ValueLong-term investments  fixed rate
    
    $
    
    
    
    $
    20,000
    
    
    $
    25,000
    
    
    $
    45,000
    
    
    $
    44,919Average interest rate
    
    
    
    
    
    
    5.1
    %
    
    
    5.4
    %
    
    
    5.3
    %
 Foreign Currency Exchange Rate Exposure
    35




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##### Table of Contents



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
   36




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##### Table of Contents



Hakimoglu v.
Oplink Communications, Inc. and Liberty Suplus Insurance Corp. OZ Optics, Ltd., et al. v. Hakimoglu, et
al.
  37




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##### Table of Contents



ITEM 1A  RISK FACTORS
  We have incurred significant losses in the past, and if we are unable to continue to increase our
revenues while controlling our costs and operating expenses, we may be unable to sustain our
profitability.
  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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The optical networking component industry is experiencing declining average selling prices, which
could cause our gross margins to decline and harm our operating results.
  Our ROADM Optical Switching and Routing product 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.
   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.
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Because none of our customers are obligated to purchase our products, they may cancel or defer
their purchases at any time and on short notice, which could harm our operating results.
  -
    
    may stop purchasing our products or defer their purchases 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 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;
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-
    
    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;-
    
    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;-
    
    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.
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If we fail to effectively manage our manufacturing capability, produce products that meet our
customers quality requirements and achieve acceptable production yields in China, we may not be
able to deliver sufficient quantities of products that meet all of our customers order
requirements in a timely manner, which would harm our operating results.
      -
    
    our ability to procure the necessary raw materials and equipment on a timely basis;-
    
    a potential lack of availability of qualified management and manufacturing personnel;-
    
    our ability to maintain quality;-
    
    our ability to effectively manage headcount, particularly if we undertake to expand our
manufacturing operations;-
    
    vulnerability of telecommunications networks in East Asia to natural disasters, such as
the recent earthquake that damaged several undersea fiber-optic cables responsible for
Internet and telephone connections with parts of China; and-
    
    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.
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Our products may have defects that are not detected until full deployment of a customers
equipment, which could result in a loss of customers, damage to our reputation and substantial
costs.
  -
    
    loss of customers;-
    
    loss of or delay in revenues;-
    
    loss of market share;-
    
    damage to our brand and reputation;-
    
    inability to attract new customers or achieve market acceptance;-
    
    diversion of development resources;-
    
    increased service and warranty costs;-
    
    legal actions by our customers; and-
    
    increased insurance costs.
  43




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##### Table of Contents



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.
     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.
  44




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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.
    45




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##### Table of Contents



If our liability for U.S. and foreign taxes is greater than we have anticipated and reserved for,
our operating results may suffer.
   46




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##### Table of Contents



If we are unable to successfully integrate acquired businesses or technologies, our operating
results may be harmed.
  -
    
    additional operating expenses without additional revenues;-
    
    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.
  Disruption to commercial activities in the United States or in other countries, particularly in
China, 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;
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##### Table of Contents



-
    
    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.
    We are exposed to currency rate fluctuations and exchange controls that could adversely impact our
operating results.
  48




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49




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##### Table of Contents



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.
  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.
  50




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##### Table of Contents



-
    
    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 are the target of a securities class action complaint and are at risk of securities class action
litigation, which could result in costs and divert management attention and resources.
  51




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Our lengthy and variable qualification and sales cycle requires us to incur substantial costs to
make a sale, and if the sale does not occur then we will have incurred these expenses without
obtaining increased sales.
   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.
   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.
  52




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Our failure to comply with governmental regulations could subject us to liability.
     53




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##### Table of Contents



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.
  54




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Changes in existing financial accounting standards or practices may adversely affect our results of
operations.
  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.
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Provisions of our charter documents and Delaware law and other arrangements may have anti-takeover
effects that could prevent any change in control, which could negatively affect your investment.
  -
    
    issue preferred stock with rights senior to those of the common stock without any
further vote or
action by the stockholders;-
    
    provide for a classified board of directors;-
    
    eliminate the right of the stockholders to call a special meeting of stockholders;-
    
    eliminate the right of stockholders to act by written consent; and-
    
    impose various procedural and other requirements, which could make it difficult for
stockholders to effect certain corporate actions.
   
 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
  56




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##### Table of Contents



Nominee
    
    Votes For
    
    Votes WithheldJesse W. Jack
    
    
    19,203,145
    
    
    
    1,334,645Leonard J. LeBlanc
    
    
    19,555,856
    
    
    
    981,934
    For
    
    Against
    
    Abstain
    
    Broker non-votes20,034,481
    
    502,376
    
    933
    
    0
  For
    
    Against
    
    Abstain
    
    Broker non-votes20,530,759
    
    4,583
    
    2,448
    
    0
 
 ITEM 5  OTHER INFORMATION
  
 ITEM 6   EXHIBITS
 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.3.5
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant.10.32
    (4)
    Amendment to Stock Option Agreement and Promise to Make Cash Payment dated December 27, 2006
between the Company and Joseph Liu.31.1
    
    Certification of Chief Executive Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.32.1
    *
    Certification of Chief Executive Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. Section 1350).32.2
    *
    Certification of Chief Financial Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.
 
 (1)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1/A, No. 333-41506, as filed on
October 3, 2000.(2)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on March 22, 2002 and incorporated
herein by reference.(3)
    
    Previously filed as an Exhibit to the Registrants Quarterly Report on Form 10-Q filed on November 14, 2005 and
incorporated herein by reference.(4)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on December 29, 2006 and
incorporated herein by reference.  57




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##### Table of Contents



SIGNATURES
  OPLINK COMMUNICATIONS, INC.(Registrant)DATE: February 9, 2007
    
    By:
    
    /s/ Bruce D. HornBruce D. HornChief Financial Officer(Principal Financial and Accounting Officer)
 58




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##### Table of Contents



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.3.5
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant.10.32(4)
    
    Amendment to Stock Option Agreement and Promise to Make Cash Payment dated December 27, 2006
between the Company and Joseph Liu.31.1
    
    Certification of Chief Executive Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer Required under Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. Section 1350).32.2*
    
    Certification of Chief Financial Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.
 
 (1)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1/A, No. 333-41506, as filed on
October 3, 2000.(2)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on March 22, 2002 and incorporated
herein by reference.(3)
    
    Previously filed as an Exhibit to the Registrants Quarterly Report on Form 10-Q filed on November 14, 2005 and
incorporated herein by reference.(4)
    
    Previously filed as an Exhibit to the Registrants Report on Form 8-K filed on December 29, 2006 and
incorporated herein by reference.