##### 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 January 1, 2011
 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 000-30684
 
 OCLARO, INC.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    20-1303994
(I.R.S. Employer Identification Number)
 2560 Junction Avenue, San Jose, California 95134
 (408) 383-1400    2584 Junction Avenue, San Jose, California 95134
 
  þ o
  o o
  Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o(Do not check if a smaller reporting company)

Smaller reporting company o
  o þ




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##### 



OCLARO, INC.
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1.Financial Statements (Unaudited):Condensed Consolidated Balance Sheets as of January 1, 2011 and July 3, 2010
    
    
    3Condensed Consolidated Statements of Operations for the three and six months ended
January 1, 2011 and January 2, 2010
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended January 1,
2011 and January 2, 2010
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4.Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    30Item 1A.Risk Factors
    
    
    31Item 6.Exhibits
    
    
    47Signature
    
    
    48EX-10.4EX-10.5EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 OCLARO, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 January 1, 2011
    
    
    July 3, 2010(Thousands, except par value)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    77,279
    
    
    $
    107,176Restricted cash
    
    
    845
    
    
    
    4,458Accounts receivable, net
    
    
    105,715
    
    
    
    93,412Inventories
    
    
    82,840
    
    
    
    62,570Prepaid expenses and other current assets
    
    
    15,858
    
    
    
    14,905Total current assets
    
    
    282,537
    
    
    
    282,521Property and equipment, net
    
    
    54,086
    
    
    
    37,516Other intangible assets, net
    
    
    21,060
    
    
    
    10,610Goodwill
    
    
    30,904
    
    
    
    20,000Other non-current assets
    
    
    10,094
    
    
    
    10,148Total assets
    
    $
    398,681
    
    
    $
    360,795LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    61,763
    
    
    $
    50,103Accrued expenses and other liabilities
    
    
    45,520
    
    
    
    35,404Total current liabilities
    
    
    107,283
    
    
    
    85,507Deferred gain on sale-leaseback
    
    
    12,899
    
    
    
    12,969Other non-current liabilities
    
    
    14,631
    
    
    
    9,785Total liabilities
    
    
    134,813
    
    
    
    108,261Commitments and contingencies (Note 9)Stockholders equity:Preferred stock: 1,000 shares authorized; none issued
and outstanding
    
    
    
    
    
    
    Common stock: $0.01 par value per share; 90,000 shares
authorized;
49,931 and 49,396 shares issued and outstanding at January 1,
2011 and July 3, 2010, respectively
    
    
    499
    
    
    
    494Additional paid-in capital
    
    
    1,308,538
    
    
    
    1,304,779Accumulated other comprehensive income
    
    
    34,334
    
    
    
    26,907Accumulated deficit
    
    
    (1,079,503
    )
    
    
    (1,079,646
    )Total stockholders equity
    
    
    263,868
    
    
    
    252,534Total liabilities and stockholders equity
    
    $
    398,681
    
    
    $
    360,795
 The accompanying notes form an integral part of these condensed consolidated financial statements.
 3




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OCLARO, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJanuary 1,
    
    
    January 2,
    
    
    January 1,
    
    
    January 2,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands, except per share amounts)Revenues
    
    $
    120,299
    
    
    $
    93,574
    
    
    $
    241,646
    
    
    $
    178,684Cost of revenues
    
    
    84,556
    
    
    
    68,715
    
    
    
    171,077
    
    
    
    131,834Gross profit
    
    
    35,743
    
    
    
    24,859
    
    
    
    70,569
    
    
    
    46,850Operating expenses:Research and development
    
    
    15,696
    
    
    
    9,675
    
    
    
    29,407
    
    
    
    18,689Selling, general and administrative
    
    
    15,149
    
    
    
    14,835
    
    
    
    29,962
    
    
    
    27,798Amortization of intangible assets
    
    
    739
    
    
    
    125
    
    
    
    1,358
    
    
    
    250Restructuring, acquisition and related costs
    
    
    903
    
    
    
    3,040
    
    
    
    1,573
    
    
    
    4,539Legal settlements
    
    
    1,678
    
    
    
    
    
    
    
    1,678
    
    
    
    Gain on sale of property and equipment
    
    
    (48
    )
    
    
    (71
    )
    
    
    (69
    )
    
    
    (603
    )Total operating expenses
    
    
    34,117
    
    
    
    27,604
    
    
    
    63,909
    
    
    
    50,673Operating income (loss)
    
    
    1,626
    
    
    
    (2,745
    )
    
    
    6,660
    
    
    
    (3,823
    )Other income (expense):Interest income
    
    
    9
    
    
    
    2
    
    
    
    16
    
    
    
    25Interest expense
    
    
    (479
    )
    
    
    (33
    )
    
    
    (1,052
    )
    
    
    (121
    )Gain (loss) on foreign currency translation
    
    
    (1,119
    )
    
    
    793
    
    
    
    (4,706
    )
    
    
    (483
    )Other income
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    5,295Total other income (expense)
    
    
    (1,589
    )
    
    
    790
    
    
    
    (5,742
    )
    
    
    4,716Income (loss) from continuing operations
before income taxes
    
    
    37
    
    
    
    (1,955
    )
    
    
    918
    
    
    
    893Income tax provision
    
    
    250
    
    
    
    524
    
    
    
    775
    
    
    
    747Income (loss) from continuing operations
    
    
    (213
    )
    
    
    (2,479
    )
    
    
    143
    
    
    
    146Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,420Net income (loss)
    
    $
    (213
    )
    
    $
    (2,479
    )
    
    $
    143
    
    
    $
    1,566Basic net income (loss) per share:Income (loss) per share from continuing operations
    
    $
    
    
    
    $
    (0.07
    )
    
    $
    
    
    
    $
    Income per share from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.04Basic net income (loss) per share
    
    $
    
    
    
    $
    (0.07
    )
    
    $
    
    
    
    $
    0.04Diluted net income (loss) per share:Income (loss) per share from continuing operations
    
    $
    
    
    
    $
    (0.07
    )
    
    $
    
    
    
    $
    Income per share from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.04Diluted net income (loss) per share
    
    $
    
    
    
    $
    (0.07
    )
    
    $
    
    
    
    $
    0.04Shares used in computing net income (loss) per share:Basic
    
    
    48,262
    
    
    
    37,980
    
    
    
    48,189
    
    
    
    37,624Diluted
    
    
    48,262
    
    
    
    37,980
    
    
    
    51,109
    
    
    
    38,830
 The accompanying notes form an integral part of these condensed consolidated financial statements.
 4




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OCLARO, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months EndedJanuary 1, 2011
    
    
    January 2, 2010(Thousands)Cash flows from operating activities:Net income
    
    $
    143
    
    
    $
    1,566Adjustments to reconcile net income to net cash used
in operating activities:Amortization of deferred gain on sale-leaseback
    
    
    (458
    )
    
    
    (466
    )Depreciation and amortization
    
    
    8,053
    
    
    
    5,736Gain on bargain purchase
    
    
    
    
    
    
    (5,267
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    (1,420
    )Stock-based compensation expense
    
    
    3,032
    
    
    
    1,951Other non-cash adjustments
    
    
    (70
    )
    
    
    (609
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (6,135
    )
    
    
    (10,238
    )Inventories
    
    
    (14,450
    )
    
    
    5,462Prepaid expenses and other current assets
    
    
    (238
    )
    
    
    (1,201
    )Other non-current assets
    
    
    105
    
    
    
    1,590Accounts payable
    
    
    8,033
    
    
    
    6,634Accrued expenses and other liabilities
    
    
    (5,348
    )
    
    
    (7,295
    )Net cash used in operating activities
    
    
    (7,333
    )
    
    
    (3,557
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (18,681
    )
    
    
    (2,368
    )Proceeds from sales of property and equipment
    
    
    69
    
    
    
    691Sales and maturities of available-for-sale investments
    
    
    
    
    
    
    9,258Transfer (to) from restricted cash
    
    
    3,693
    
    
    
    (95
    )Cash (paid for) received from business combinations
    
    
    (10,482
    )
    
    
    3,277Net cash provided by (used in) investing activities
    
    
    (25,401
    )
    
    
    10,763Cash flows from financing activities:Proceeds from issuance of common stock, net
    
    
    625
    
    
    
    Repayment of loans
    
    
    
    
    
    
    (52
    )Net cash provided by (used in) financing activities
    
    
    625
    
    
    
    (52
    )Effect of exchange rate on cash and cash equivalents
    
    
    2,212
    
    
    
    16Net increase (decrease) in cash and cash equivalents
    
    
    (29,897
    )
    
    
    7,170Cash and cash equivalents at beginning of period
    
    
    107,176
    
    
    
    44,561Cash and cash equivalents at end of period
    
    $
    77,279
    
    
    $
    51,731
 The accompanying notes form an integral part of these condensed consolidated financial statements.
 5




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OCLARO, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1. Basis of Preparation
 Basis of Presentation
    Fiscal Years
  Reclassifications
   Recent Accounting Pronouncements
  6




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Comprehensive Income (Loss)
   Three Months Ended
    
    
    Six Months EndedJanuary 1,
    
    
    January 2,
    
    
    January 1,
    
    
    January 2,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)Net income (loss)
    
    $
    (213
    )
    
    $
    (2,479
    )
    
    $
    143
    
    
    $
    1,566Other comprehensive income (loss):Unrealized gain (loss) on currency instruments
designated as cash flow hedges
    
    
    (288
    )
    
    
    354
    
    
    
    35
    
    
    
    331Currency translation adjustments
    
    
    1,779
    
    
    
    (1,101
    )
    
    
    7,392
    
    
    
    446Unrealized loss on short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Comprehensive income (loss)
    
    $
    1,278
    
    
    $
    (3,226
    )
    
    $
    7,570
    
    
    $
    2,336
 Note 2. Fair Value
  Level 1  
 Level 2 
 Level 3 
  e
 7




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Business Combinations
  Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Fair Value Measurement at Reporting Date UsingQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total(Thousands)Assets:Cash and cash equivalents (1):Money market funds
    
    $
    48,196
    
    
    $
    
    
    
    $
    
    
    
    $
    48,196Prepaid expenses and other current assets:Unrealized gain on currency instruments
designated as cash flow hedges
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    84Total assets measured at fair value
    
    $
    48,196
    
    
    $
    84
    
    
    $
    
    
    
    $
    48,280Liabilities:Accrued expenses and other liabilities:Escrow liability for Xtellus
acquisition (2)
    
    $
    
    
    
    $
    6,767
    
    
    $
    
    
    
    $
    6,767Earnout liability for Mintera
acquisition (2)
    
    
    
    
    
    
    
    
    
    
    4,465
    
    
    
    4,465Other non-current liabilities:Earnout liability for Mintera
acquisition (2)
    
    
    
    
    
    
    
    
    
    
    11,134
    
    
    
    11,134Total liabilities measured at fair value
    
    $
    
    
    
    $
    6,767
    
    
    $
    15,599
    
    
    $
    22,366
 
 (1)
    
    Excludes $29.1 million in cash held in our bank accounts at January 1, 2011.(2)
    
    Includes interest expense accrued during the six months ended January 1, 2011. 8




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Fair Value Measured and 
Recorded Using Significant Unobservable Inputs (Level 3)Accrued Expenses
    
    
    Otherand Other
    
    
    Non-CurrentLiabilities
    
    
    Liabilities(Thousands)Balance at July 3, 2010
    
    $
    
    
    
    $
    Earnout liabilities from Mintera acquisition
    
    
    4,338
    
    
    
    10,810Interest expense on Mintera earnout liabilities
    
    
    127
    
    
    
    324Balance at January 1, 2011
    
    $
    4,465
    
    
    $
    11,134
 Derivative Financial Instruments
  Note 3. Business Combinations
  Sale of the New Focus Business and Acquisition of Newports High Power Laser Diodes Business
  9




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Acquisition of Xtellus
    Business Combinations
 Acquisition of Mintera
   Total Consideration(Thousands)Consideration to security holders and creditors of Mintera
    
    $
    12,000Less: Unpaid liabilities of Mintera security holders assumed by Oclaro
    
    
    (1,518
    )Net cash paid to security holders and
creditors of Mintera
    
    
    10,482Estimated fair value for the 12-month earnout liability
    
    
    4,338Estimated fair value for the 18-month earnout liability
    
    
    10,810Total estimated fair value for the earnouts
    
    
    15,148Total consideration
    
    $
    25,630
 10




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Purchase Price(Thousands)Restricted cash
    
    $
    41Accounts receivable, net
    
    
    3,053Inventories
    
    
    2,592Prepaid expenses and other current assets
    
    
    130Property and equipment, net
    
    
    3,202Other intangible assets
    
    
    11,740Accounts payable
    
    
    (1,947
    )Accrued expenses and other current liabilities
    
    
    (4,085
    )Fair value of assets acquired and liabilities assumed
    
    
    14,726Goodwill
    
    
    10,904Total purchase price
    
    $
    25,630
  Unaudited Pro Forma Financial Information
  Three Months Ended
    
    
    Six Months EndedJanuary 1, 2011
    
    

January 2, 2010
    
    

January 1, 2011
    
    

January 2, 2010(Thousands)
    
    
    (Thousands)Revenues
    
    $
    120,299
    
    
    $
    100,436
    
    
    $
    242,114
    
    
    $
    192,408Loss from continuing operations
    
    $
    (213
    )
    
    $
    (3,926
    )
    
    $
    (2,215
    )
    
    $
    (2,748
    )Net loss
    
    $
    (213
    )
    
    $
    (3,926
    )
    
    $
    (2,215
    )
    
    $
    (1,328
    )Net loss per share  basic
    
    $
    
    
    
    $
    (0.10
    )
    
    $
    (0.05
    )
    
    $
    (0.04
    )Net loss per share  diluted
    
    $
    
    
    
    $
    (0.10
    )
    
    $
    (0.05
    )
    
    $
    (0.04
    )Shares used in computing net loss
per share  basic
    
    
    48,262
    
    
    
    37,980
    
    
    
    48,189
    
    
    
    37,624Shares used in computing net loss
per share  diluted
    
    
    48,262
    
    
    
    37,980
    
    
    
    48,189
    
    
    
    37,624
  11




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Note 4. Balance Sheet Details
  January 1, 2011
    
    
    July 3, 2010(Thousands)Cash and cash equivalents:Cash-in-bank
    
    $
    29,083
    
    
    $
    23,962Money market funds
    
    
    48,196
    
    
    
    83,214$
    77,279
    
    
    $
    107,176
  January 1, 2011
    
    
    July 3, 2010(Thousands)Inventories:Raw materials
    
    $
    33,530
    
    
    $
    17,732Work-in-process
    
    
    32,503
    
    
    
    32,491Finished goods
    
    
    16,807
    
    
    
    12,347$
    82,840
    
    
    $
    62,570
  January 1, 2011
    
    
    July 3, 2010(Thousands)Property and equipment, net:Buildings
    
    $
    16,547
    
    
    $
    16,104Plant and machinery
    
    
    118,903
    
    
    
    97,186Fixtures, fittings
and equipment
    
    
    1,368
    
    
    
    1,142Computer equipment
    
    
    13,063
    
    
    
    12,232149,881
    
    
    
    126,664Less: Accumulated
depreciation
    
    
    (95,795
    )
    
    
    (89,148
    )$
    54,086
    
    
    $
    37,516
  January 1, 2011
    
    
    July 3, 2010(Thousands)Accrued expenses and other liabilities:Trade payables
    
    $
    5,975
    
    
    $
    4,464Compensation and
benefits related
accruals
    
    
    7,806
    
    
    
    8,688Warranty accrual
    
    
    2,241
    
    
    
    2,437Restructuring accrual
    
    
    1,379
    
    
    
    4,338Escrow liability for
Xtellus acquisition
(1)
    
    
    6,767
    
    
    
    Earnout liability
for Mintera
acquisition (2)
    
    
    4,465
    
    
    
    Other accruals
    
    
    16,887
    
    
    
    15,477$
    45,520
    
    
    $
    35,404
 
 (1)
    
    Includes interest expense accrued during the six months ended January 1, 2011. During
the first quarter of fiscal year 2011, we reclassified this escrow liability from other
non-current liabilities to accrued expenses and other
liabilities.(2)
    
    Includes interest expense accrued during the six months ended January 1, 2011. 12




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January 1, 2011
    
    
    July 3, 2010(Thousands)Other non-current liabilitiesEscrow liability for Xtellus acquisition (1)
    
    $
    
    
    
    $
    6,324Earnout liability for Mintera acquisition (2)
    
    
    11,134
    
    
    
    Other non-current liabilities
    
    
    3,497
    
    
    
    3,461$
    14,631
    
    
    $
    9,785
 
 (1)
    
    During the first quarter of fiscal year 2011, we reclassified this escrow liability from
other non-current liabilities to accrued expenses and other
liabilities.(2)
    
    Includes interest expense accrued during the six months ended January 1, 2011.  January 1, 2011
    
    
    July 3, 2010(Thousands)Accumulated other comprehensive income:Unrealized gain on currency
instruments designated as cash flow
hedges
    
    $
    84
    
    
    $
    49Currency translation adjustments
    
    
    35,403
    
    
    
    28,011Swiss defined benefit plan
    
    
    (1,153
    )
    
    
    (1,153
    )$
    34,334
    
    
    $
    26,907
 Note 5. Goodwill and Other Intangible Assets
   Other Intangible AssetsAccumulated
    
    
    Net BookGoodwill
    
    
    Cost
    
    
    Amortization
    
    
    Value(Thousands)Balance at July 3, 2010
    
    $
    20,000
    
    
    $
    12,815
    
    
    $
    (2,205
    )
    
    $
    10,610Acquired
    
    
    10,904
    
    
    
    11,740
    
    
    
    
    
    
    
    11,740Amortization
    
    
    
    
    
    
    
    
    
    
    (1,358
    )
    
    
    (1,358
    )Exchange rate adjustment
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    68Balance at January 1,
2011
    
    $
    30,904
    
    
    $
    24,623
    
    
    $
    (3,563
    )
    
    $
    21,060
 13




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##### Table of Contents



January 1,
    
    
    July 3,2011
    
    
    2010(Thousands)Other intangible assets, netSupply agreements
    
    $
    3,124
    
    
    $
    3,056Customer relationships
    
    
    3,200
    
    
    
    1,760Core and current technology
    
    
    10,939
    
    
    
    4,909Patent portfolio
    
    
    2,910
    
    
    
    2,780Development agreement
    
    
    3,350
    
    
    
    Manufacturing software
    
    
    680
    
    
    
    Backlog
    
    
    140
    
    
    
    110Tradename
    
    
    280
    
    
    
    20024,623
    
    
    
    12,815Less: Accumulated amortization
    
    
    (3,563
    )
    
    
    (2,205
    )$
    21,060
    
    
    $
    10,610
  Note 6. Restructuring Liabilities
  AccruedAccrued
    
    
    Amounts
    
    
    
    
    
    
    
    
    
    
    RestructuringRestructuring
    
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    Costs atCosts at July
    
    
    Restructuring
    
    
    Amounts
    
    
    
    
    
    
    January 1,3, 2010
    
    
    Costs
    
    
    Paid
    
    
    Adjustments
    
    
    2011(Thousands)Lease cancellations and commitments
and other charges
    
    $
    4,107
    
    
    $
    
    
    
    $
    (2,951
    )
    
    $
    (257
    )
    
    $
    899Termination payments to employees
and related costs
    
    
    231
    
    
    
    1,103
    
    
    
    (865
    )
    
    
    11
    
    
    
    480Total accrued restructuring charges
    
    $
    4,338
    
    
    $
    1,103
    
    
    $
    (3,816
    )
    
    $
    (246
    )
    
    $
    1,379
  14




---



##### Table of Contents



Note 7. Credit Facility
  Note 8. Post-Retirement Benefits
 Switzerland Defined Benefit Plan (Swiss Plan)
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJanuary 1,
    
    
    January 1,2011
    
    
    2011(Thousands)Service cost
    
    $
    436
    
    
    $
    855Interest cost
    
    
    183
    
    
    
    359Expected return on plan assets
    
    
    (241
    )
    
    
    (473
    )Net periodic
pension costs
    
    $
    378
    
    
    $
    741
  Note 9. Commitments and Contingencies
 Guarantees
   Warranty accrual
  15




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJanuary 1,
    
    
    January 2,
    
    
    January 1,
    
    
    January 2,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)Warranty provision  beginning of period
    
    $
    2,736
    
    
    $
    2,317
    
    
    $
    2,437
    
    
    $
    2,228Warranties assumed in acquisitions
    
    
    
    
    
    
    93
    
    
    
    357
    
    
    
    248Warranties issued
    
    
    444
    
    
    
    928
    
    
    
    876
    
    
    
    1,700Warranties utilized or expired
    
    
    (916
    )
    
    
    (821
    )
    
    
    (1,480
    )
    
    
    (1,664
    )Currency translation adjustment
    
    
    (23
    )
    
    
    (31
    )
    
    
    51
    
    
    
    (26
    )Warranty provision  end of period
    
    $
    2,241
    
    
    $
    2,486
    
    
    $
    2,241
    
    
    $
    2,486
 Litigation
 In re New Focus, Inc. Initial Public Offering Securities Litigation
 In re Initial Public
Offering Securities Litigation
  QinetiQ Limited v. Oclaro, Inc
 et al.
 16




---



##### Table of Contents



Note 10. Employee Stock Plans
    Shares
    
    
    Stock
    
    
    Weighted-
    
    
    Restricted Stock
    
    
    Weighted-Available
    
    
    Options
    
    
    Average
    
    
    Awards / Units
    
    
    Average GrantFor Grant
    
    
    Outstanding
    
    
    Exercise Price
    
    
    Outstanding
    
    
    Date Fair Value(Thousands)
    
    
    (Thousands)
    
    
    
    
    
    
    (Thousands)Balances at July 3, 2010
    
    
    1,089
    
    
    
    3,186
    
    
    $
    8.78
    
    
    
    703
    
    
    $
    6.42Granted
    
    
    (1,095
    )
    
    
    718
    
    
    
    11.13
    
    
    
    354
    
    
    
    11.28Exercised or released
    
    
    
    
    
    
    (84
    )
    
    
    3.64
    
    
    
    (254
    )
    
    
    5.61Cancelled or forfeited
    
    
    41
    
    
    
    (84
    )
    
    
    6.84
    
    
    
    (90
    )
    
    
    6.91Increase in available for grant
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balances at January 1, 2011
    
    
    4,035
    
    
    
    3,736
    
    
    $
    8.84
    
    
    
    713
    
    
    $
    9.06
  Weighted-Weighted-
    
    Average
    
    AggregateAverage
    
    Remaining
    
    IntrinsicShares
    
    Exercise Price
    
    Contractual Life
    
    Value(Thousands)
    
    
    
    
    
    (Years)
    
    (Thousands)Options exercisable at January 1, 2011
    
    
    1,546
    
    
    $
    11.14
    
    
    
    6.6
    
    
    $
    9,632Options outstanding at January 1, 2011
    
    
    3,736
    
    
    
    8.84
    
    
    
    7.7
    
    
    
    22,829
  17




---



##### Table of Contents



Note 11. Stock-based Compensation
  Three Months Ended
    
    Six Months EndedJanuary 1,
    
    January 2,
    
    January 1,
    
    January 2,2011
    
    2010
    
    2011
    
    2010Expected life
    
    4.5 years
    
    4.5 years
    
    4.5 years
    
    4.5 yearsRisk-free interest rate
    
    
    1.0
    %
    
    
    2.1
    %
    
    
    1.2
    %
    
    
    2.2
    %Volatility
    
    
    97.2
    %
    
    
    95.6
    %
    
    
    96.7
    %
    
    
    99.9
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Three Months Ended
    
    
    Six Months EndedJanuary 1,
    
    
    January 2,
    
    
    January 1,
    
    
    January 2,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)Stock-based compensation by category of expense:Cost of revenues
    
    $
    350
    
    
    $
    219
    
    
    $
    660
    
    
    $
    414Research and development
    
    
    391
    
    
    
    290
    
    
    
    709
    
    
    
    499Selling, general and administrative
    
    
    933
    
    
    
    522
    
    
    
    1,663
    
    
    
    1,038$
    1,674
    
    
    $
    1,031
    
    
    $
    3,032
    
    
    $
    1,951Stock-based compensation by type of award:Stock options
    
    $
    907
    
    
    $
    838
    
    
    $
    1,670
    
    
    $
    1,628Restricted stock awards
    
    
    828
    
    
    
    258
    
    
    
    1,470
    
    
    
    437Inventory adjustment to cost of revenues
    
    
    (61
    )
    
    
    (65
    )
    
    
    (108
    )
    
    
    (114
    )$
    1,674
    
    
    $
    1,031
    
    
    $
    3,032
    
    
    $
    1,951
  Note 12. Income Taxes
  18




---



##### Table of Contents



Note 13. Net Income (Loss) Per Share
  Three Months Ended
    
    
    Six Months EndedJanuary 1,
    
    
    January 2,
    
    
    January 1,
    
    
    January 2,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands,except per share amounts)Net income (loss)
    
    $
    (213
    )
    
    $
    (2,479
    )
    
    $
    143
    
    
    $
    1,566Weighted-average shares  basic
    
    
    48,262
    
    
    
    37,980
    
    
    
    48,189
    
    
    
    37,624Effect of dilutive potential common shares from:Stock options
    
    
    
    
    
    
    
    
    
    
    1,615
    
    
    
    791Restricted stock awards
    
    
    
    
    
    
    
    
    
    
    773
    
    
    
    335Obligations under escrow agreement
    
    
    
    
    
    
    
    
    
    
    532
    
    
    
    80Weighted-average shares  diluted
    
    
    48,262
    
    
    
    37,980
    
    
    
    51,109
    
    
    
    38,830Basic net income (loss) per share
    
    $
    
    
    
    $
    (0.07
    )
    
    $
    
    
    
    $
    0.04Diluted net income (loss) per share
    
    $
    
    
    
    $
    (0.07
    )
    
    $
    
    
    
    $
    0.04
   Note 14. Operating Segments and Related Information
   19




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJanuary 1,
    
    
    January 2,
    
    
    January 1,
    
    
    January 2,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)Revenues:Telecom
    
    $
    108,274
    
    
    $
    82,178
    
    
    $
    216,096
    
    
    $
    156,444Advanced photonics solutions
    
    
    12,025
    
    
    
    11,396
    
    
    
    25,550
    
    
    
    22,240Consolidated revenues
    
    $
    120,299
    
    
    $
    93,574
    
    
    $
    241,646
    
    
    $
    178,684
  Three Months Ended
    
    
    Six Months EndedJanuary 1,
    
    
    January 2,
    
    
    January 1,
    
    
    January 2,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)United States
    
    $
    17,892
    
    
    $
    17,462
    
    
    $
    37,556
    
    
    $
    34,987Canada
    
    
    2,783
    
    
    
    3,748
    
    
    
    6,184
    
    
    
    8,739Europe
    
    
    34,859
    
    
    
    22,840
    
    
    
    70,283
    
    
    
    42,993Asia
    
    
    56,333
    
    
    
    42,998
    
    
    
    110,662
    
    
    
    78,558Rest of world
    
    
    8,432
    
    
    
    6,526
    
    
    
    16,961
    
    
    
    13,407$
    120,299
    
    
    $
    93,574
    
    
    $
    241,646
    
    
    $
    178,684
 Significant Customers and Concentration of Credit Risk
   20




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   21




---



##### Table of Contents



Results of Operations
  Three Months Ended
    
    
    
    
    
    
    IncreaseJanuary 1, 2011
    
    
    January 2, 2010
    
    
    Change
    
    
    (Decrease)(Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %Revenues
    
    $
    120,299
    
    
    
    100.0
    
    
    $
    93,574
    
    
    
    100.0
    
    
    $
    26,725
    
    
    
    28.6Cost of revenues
    
    
    84,556
    
    
    
    70.3
    
    
    
    68,715
    
    
    
    73.4
    
    
    
    15,841
    
    
    
    23.1Gross profit
    
    
    35,743
    
    
    
    29.7
    
    
    
    24,859
    
    
    
    26.6
    
    
    
    10,884
    
    
    
    43.8Operating expenses:Research and development
    
    
    15,696
    
    
    
    13.0
    
    
    
    9,675
    
    
    
    10.3
    
    
    
    6,021
    
    
    
    62.2Selling, general and
administrative
    
    
    15,149
    
    
    
    12.6
    
    
    
    14,835
    
    
    
    15.9
    
    
    
    314
    
    
    
    2.1Amortization of intangible assets
    
    
    739
    
    
    
    0.6
    
    
    
    125
    
    
    
    0.1
    
    
    
    614
    
    
    
    491.2Restructuring, acquisition and related costs
    
    
    903
    
    
    
    0.8
    
    
    
    3,040
    
    
    
    3.3
    
    
    
    (2,137
    )
    
    
    (70.3
    )Legal settlements
    
    
    1,678
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    1,678
    
    
    
    n/m
    (1)Gain on sale of property and
equipment
    
    
    (48
    )
    
    
    
    
    
    
    (71
    )
    
    
    (0.1
    )
    
    
    23
    
    
    
    (32.4
    )Total operating expenses
    
    
    34,117
    
    
    
    28.4
    
    
    
    27,604
    
    
    
    29.5
    
    
    
    6,513
    
    
    
    23.6Operating income (loss)
    
    
    1,626
    
    
    
    1.4
    
    
    
    (2,745
    )
    
    
    (2.9
    )
    
    
    4,371
    
    
    
    n/m
    (1)Other income (expense):Interest income
    
    
    9
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    7
    
    
    
    350.0Interest expense
    
    
    (479
    )
    
    
    (0.4
    )
    
    
    (33
    )
    
    
    
    
    
    
    (446
    )
    
    
    1,351.5Gain (loss) on foreign currency
translation
    
    
    (1,119
    )
    
    
    (0.9
    )
    
    
    793
    
    
    
    0.8
    
    
    
    (1,912
    )
    
    
    n/m
    (1)Other income
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    (28
    )
    
    
    (100.0
    )Total other income (expense)
    
    
    (1,589
    )
    
    
    (1.3
    )
    
    
    790
    
    
    
    0.8
    
    
    
    (2,379
    )
    
    
    n/m
    (1)Income (loss) from continuing operations
before income taxes
    
    
    37
    
    
    
    
    
    
    
    (1,955
    )
    
    
    (2.1
    )
    
    
    1,992
    
    
    
    n/m
    (1)Income tax provision
    
    
    250
    
    
    
    0.2
    
    
    
    524
    
    
    
    0.5
    
    
    
    (274
    )
    
    
    (52.3
    )Loss from continuing operations
    
    
    (213
    )
    
    
    (0.2
    )
    
    
    (2,479
    )
    
    
    (2.6
    )
    
    
    2,266
    
    
    
    (91.4
    )Income from discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (213
    )
    
    
    (0.2
    )
    
    $
    (2,479
    )
    
    
    (2.6
    )
    
    $
    2,266
    
    
    
    (91.4
    )
 
 (1)
    
    Not meaningful. 22




---



##### Table of Contents



Six Months Ended
    
    
    
    
    
    
    IncreaseJanuary 1, 2011
    
    
    January 2, 2010
    
    
    Change
    
    
    (Decrease)(Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %Revenues
    
    $
    241,646
    
    
    
    100.0
    
    
    $
    178,684
    
    
    
    100.0
    
    
    $
    62,962
    
    
    
    35.2Cost of revenues
    
    
    171,077
    
    
    
    70.8
    
    
    
    131,834
    
    
    
    73.8
    
    
    
    39,243
    
    
    
    29.8Gross profit
    
    
    70,569
    
    
    
    29.2
    
    
    
    46,850
    
    
    
    26.2
    
    
    
    23,719
    
    
    
    50.6Operating expenses:Research and development
    
    
    29,407
    
    
    
    12.2
    
    
    
    18,689
    
    
    
    10.4
    
    
    
    10,718
    
    
    
    57.3Selling, general and administrative
    
    
    29,962
    
    
    
    12.4
    
    
    
    27,798
    
    
    
    15.6
    
    
    
    2,164
    
    
    
    7.8Amortization of intangible assets
    
    
    1,358
    
    
    
    0.5
    
    
    
    250
    
    
    
    0.1
    
    
    
    1,108
    
    
    
    443.2Restructuring, acquisition and related
 costs
    
    
    1,573
    
    
    
    0.6
    
    
    
    4,539
    
    
    
    2.5
    
    
    
    (2,966
    )
    
    
    (65.3
    )Legal settlements
    
    
    1,678
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    1,678
    
    
    
    n/m
    (1)Gain on sale of property and
equipment
    
    
    (69
    )
    
    
    
    
    
    
    (603
    )
    
    
    (0.3
    )
    
    
    534
    
    
    
    (88.6
    )Total operating expenses
    
    
    63,909
    
    
    
    26.4
    
    
    
    50,673
    
    
    
    28.3
    
    
    
    13,236
    
    
    
    26.1Operating income (loss)
    
    
    6,660
    
    
    
    2.8
    
    
    
    (3,823
    )
    
    
    (2.1
    )
    
    
    10,483
    
    
    
    n/m
    (1)Other income (expense):Interest income
    
    
    16
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    (9
    )
    
    
    (36.0
    )Interest expense
    
    
    (1,052
    )
    
    
    (0.4
    )
    
    
    (121
    )
    
    
    (0.1
    )
    
    
    (931
    )
    
    
    769.4Loss on foreign exchange
    
    
    (4,706
    )
    
    
    (2.0
    )
    
    
    (483
    )
    
    
    (0.3
    )
    
    
    (4,223
    )
    
    
    874.3Other income (expense)
    
    
    
    
    
    
    
    
    
    
    5,295
    
    
    
    3.0
    
    
    
    (5,295
    )
    
    
    (100.0
    )Total other income (expense)
    
    
    (5,742
    )
    
    
    (2.4
    )
    
    
    4,716
    
    
    
    2.6
    
    
    
    (10,458
    )
    
    
    n/m
    (1)Income from continuing operations
before income taxes
    
    
    918
    
    
    
    0.4
    
    
    
    893
    
    
    
    0.5
    
    
    
    25
    
    
    
    2.8Income tax provision
    
    
    775
    
    
    
    0.3
    
    
    
    747
    
    
    
    0.4
    
    
    
    28
    
    
    
    3.7Income from continuing operations
    
    
    143
    
    
    
    0.1
    
    
    
    146
    
    
    
    0.1
    
    
    
    (3
    )
    
    
    (2.1
    )Income from discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    1,420
    
    
    
    0.8
    
    
    
    (1,420
    )
    
    
    (100.0
    )Net income
    
    $
    143
    
    
    
    0.1
    
    
    $
    1,566
    
    
    
    0.9
    
    
    $
    (1,423
    )
    
    
    (90.9
    )
 
 (1)
    
    Not meaningful. Revenues
    23




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##### Table of Contents



Cost of Revenues
  Restructuring Liabilities
  Gross Profit
  
 
 Research and Development Expenses
  24




---



##### Table of Contents



Selling, General and Administrative Expenses
    25




---



##### Table of Contents



Restructuring, Acquisition and Related Costs
     Legal Settlements
  Gain on Sale of Property and Equipment
  Other Income (Expense)
   26




---



##### Table of Contents



Income Tax Provision (Benefit)
    Income from Discontinued Operations
 Business
Combinations
 Recent Accounting Pronouncements
 Basis of Preparation
 Application of Critical Accounting Policies
   Liquidity and Capital Resources
 Cash Flows from Operating Activities
  27




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##### Table of Contents



Cash Flows from Investing Activities
   Cash Flows from Financing Activities
  Effect of Exchange Rates on Cash and Cash Equivalents for the Six Months Ended January 1, 2011
and January 2, 2010
   Credit Facility
  28




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##### Table of Contents



Future Cash Requirements
    Off-Balance Sheet Arrangements
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rates
  Foreign currency
  29




---



##### Table of Contents



Hedging Program
  
 Item 4 . Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  30




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##### Table of Contents



In re New Focus, Inc. Initial Public
Offering Securities Litigation
 In re Initial Public
Offering Securities Litigation
  QinetiQ Limited v. Oclaro, Inc
 et al.
 
 Item 1A. Risk Factors
 Investing in our common stock involves a high degree of risk. The risks described below are not the only ones facing us. Additional risks not currently known to us or that we currently believe are
immaterial also may impair our business, operations, liquidity and stock price materially and
adversely. You should carefully consider the risks and uncertainties described below in addition to
the other information included or incorporated by reference in this Quarterly Report on Form 10-Q.
If any of the following risks actually occur, our business, financial condition or results of
operations would likely suffer materially. In that case, the trading price of our common stock
could fall and you could lose all or part of your investment.
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Risks Related to Our Business
 Prior to the year ended July 3, 2010, we had a history of large operating losses and we may not be
able to sustain profitability in the future.
  We may not be able to maintain gross margin levels.
  Our business and results of operations may be negatively impacted by general economic and
financial market conditions and such conditions may increase the other risks that affect our
business.
   Our success will depend on our ability to anticipate and respond to evolving technologies and
customer requirements.
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We depend on a limited number of customers for a significant percentage of our revenues.
  The majority of our long-term customer contracts do not commit customers to specified buying
levels, and our customers may decrease, cancel or delay their buying levels at any time with
little or no advance notice to us.
  We may undertake mergers or acquisitions that do not prove successful.
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
    
    failure to realize the potential financial or strategic benefits of the acquisition;
    
    increased costs associated with acquired operations;
    
    economic dilution to gross and operating profit and earnings (loss) per share;
    
    failure to successfully further develop the combined, acquired or remaining technology,
which could, among other things, result in the impairment of amounts recorded as goodwill
or other intangible assets;
    
    unanticipated costs and liabilities and unforeseen accounting charges;
    
    difficulty in integrating product offerings;
    
    difficulty in coordinating and rationalizing research and development activities to
enhance introduction of new products and technologies with reduced cost;
    
    difficulty in coordinating and integrating the manufacturing activities of our acquired
businesses, including with respect to third-party manufacturers, including executing a
production capacity ramp up of our South Korea facility and our contract manufacturers to
support the potential revenue demand for the WSS-related products of Xtellus, managing the
manufacturing activities of the laser diode business acquired from Newport while these
activities are being transferred from Tucson, Arizona to Europe and Asia, and transferring
certain production of Mintera products to our internal facilities;
    
    delays and difficulties in delivery of products and services;
    
    failure to effectively integrate or separate management information systems, personnel,
research and development, marketing, sales and support operations;
    
    difficulty in maintaining internal control procedures and disclosure controls that
comply with the requirements of the Sarbanes-Oxley Act of 2002, or poor integration of a
targets procedures and controls;
    
    difficulty in preserving important relationships of our acquired businesses and
resolving potential conflicts between business cultures;
    
    uncertainty on the part of our existing customers, or the customers of an acquired
company, about our ability to operate effectively after a transaction, and the potential
loss of such customers;
    
    loss of key employees;
    
    difficulty in coordinating the international activities of our acquired businesses;
    
    the effect of tax laws due to increasing complexities of our global operating structure;
    
    the effect of employment law or regulations or other limitations in foreign
jurisdictions that could have an impact on timing, amounts or costs of achieving expected
synergies; and
    
    substantial demands on our management as a result of these transactions that may limit
their time to attend to other operational, financial, business and strategic issues.
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Sales of our products could decline if customer and/or supplier relationships are disrupted by our
recent acquisition activities.
    As a result of our recent business combinations, we have become a larger and more geographically
diverse organization, with greater available market opportunities. If our management is unable to
manage the combined organization efficiently, including the challenges of managing the growth
potentially available from expanded market opportunities, our operating results will suffer.
  We may not realize the anticipated benefits from the transfer of wafer production from our Tucson,
Arizona manufacturing operations we acquired from Newport to our European fabrication facilities.
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Our products are complex and may take longer to develop than anticipated and we may not recognize
revenues from new products until after long field testing and customer acceptance periods.
  As a result of our global operations, our business is subject to currency fluctuations that have
adversely affected our results of operations in recent quarters and may continue to do so in the
future.
    We have significant manufacturing operations in China, which exposes us to risks inherent in doing
business in China.
  
    
    qualify our manufacturing lines and the products we produce in Shenzhen, as required by
our customers;
    
    attract and retain qualified personnel to operate our Shenzhen facility; and
    
    attract and retain research and development employees at our Shenzhen and Shanghai
facilities.
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Our results of operations may suffer if we do not effectively manage our inventory, and we may
incur inventory-related charges.
  We depend on a limited number of suppliers who could disrupt our business if they stopped,
decreased, delayed or were unable to meet our demand for shipments of their products.
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We may record additional impairment charges that will adversely impact our results of operations.
   We may incur additional significant restructuring charges that will adversely affect our results
of operations.
   If our customers do not qualify our manufacturing lines or the manufacturing lines of our
subcontractors for volume shipments, our operating results could suffer.
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Delays, disruptions or quality control problems in manufacturing could result in delays in product
shipments to customers and could adversely affect our business.
  We may experience low manufacturing yields.
  Our intellectual property rights may not be adequately protected.
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Our products may infringe the intellectual property rights of others which could result in
expensive litigation or require us to obtain a license to use the technology from third parties,
or we may be prohibited from selling certain products in the future.
  QinetiQ Limited v.
Oclaro, Inc
  If we fail to obtain the right to use the intellectual property rights of others necessary to
operate our business, our business and results of operations will be materially and adversely
affected.
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The inability to obtain government licenses and approvals for desired international trading
activities or technology transfers may prevent the profitable operation of our business.
  The markets in which we operate are highly competitive, which could result in lost sales and lower
revenues.
   
    
    develop or respond to new technologies or technical standards;
    
    react to changing customer requirements and expectations;
    
    devote needed resources to the development, production, promotion and sale of products;
and
    
    deliver competitive products at lower prices.
   We generate a significant portion of our revenues internationally and therefore are subject to
additional risks associated with the extent of our international operations.
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
    
    currency fluctuations, which could result in increased operating expenses and reduced
revenues;
    
    greater difficulty in accounts receivable collection and longer collection periods;
    
    difficulty in enforcing or adequately protecting our intellectual property;
    
    ability to hire qualified candidates;
    
    foreign taxes;
    
    political, legal and economic instability in foreign markets;
    
    foreign regulations;
    
    changes in, or impositions of, legislative or regulatory requirements;
    
    trade restrictions, including restrictions imposed by the United States government on
trading with parties in foreign countries;
    
    transportation delays;
    
    epidemics and illnesses;
    
    terrorism and threats of terrorism;
    
    work stoppages and infrastructure problems due to adverse weather conditions or natural
disasters;
    
    work stoppages related to employee dissatisfaction;
    
    changes in import/export regulations, tariffs, and freight rates; and
    
    the effective protections of, and the ability to enforce, contractual arrangements.
  We may face product liability claims.
  If we fail to attract and retain key personnel, our business could suffer.
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Risks Related to Regulatory Compliance and Litigation
 Our business involves the use of hazardous materials, and we are subject to environmental and
import/export laws and regulations that may expose us to liability and increase our costs.
   A lack of effective internal control over our financial reporting could result in an inability to
report our financial results accurately, which could lead to a loss of investor confidence in our
financial reports and have an adverse effect on our stock price.
  Litigation may substantially increase our costs and harm our business.
 In re New Focus, Inc. Initial Public Offering Securities Litigation
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In re Initial Public
Offering Securities Litigation
  Our products may infringe the
intellectual property rights of others which could result in expensive litigation or require us to
obtain a license to use the technology from third parties, or we may be prohibited from selling
certain products in the future
  Risks Related to Our Common Stock
 A variety of factors could cause the trading price of our common stock to be volatile or to
decline and we may incur significant costs from class action litigation due to our expected stock
volatility.
  
    
    fluctuations in our results of operations, including our gross margins;
    
    changes in our business, operations or prospects;
    
    hiring or departure of key personnel;
    
    new contractual relationships with key suppliers or customers by us or our competitors;
    
    proposed acquisitions by us or our competitors;
    
    financial results or projections that fail to meet public market analysts expectations
and changes in stock market analysts recommendations regarding us, other optical
technology companies or the telecommunication industry in
general;
    
    future sales of common stock, or securities convertible into or exercisable for common
stock;
    
    adverse judgments or settlements obligating us to pay damages;
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
    
    future issuances of common stock in connection with acquisitions or other transactions;
    
    acts of war, terrorism, or natural disasters;
    
    industry, domestic and international market and economic conditions, including the
global macroeconomic downturn over the last two years;
    
    low trading volume in our stock;
    
    developments relating to patents or property rights; and
    
    government regulatory changes.
    Fluctuations in our operating results could adversely affect the market price of our common stock.
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We may not be able to raise capital when desired on favorable terms without dilution to our
stockholders, or at all.
   Because we do not intend to pay dividends, stockholders will benefit from an investment in our
common stock only if it appreciates in value.
  We can issue shares of preferred stock that may adversely affect your rights as a stockholder
of our common stock.
  
    
    adversely affect the voting power of the holders of our common stock;
    
    make it more difficult for a third-party to gain control of us;
    
    discourage bids for our common stock at a premium;
    
    limit or eliminate any payments that the holders of our common stock could expect to
receive upon our liquidation; or
    
    otherwise adversely affect the market price of our common stock.
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Delaware law and our charter documents contain provisions that could discourage or prevent a
potential takeover, even if such a transaction would be beneficial to our stockholders.
  
    
    authorizing the board of directors to issue preferred stock;
    
    prohibiting cumulative voting in the election of directors;
    
    limiting the persons who may call special meetings of stockholders;
    
    prohibiting stockholder actions by written consent;
    
    creating a classified board of directors pursuant to which our directors are elected
for staggered three-year terms;
    
    permitting the board of directors to increase the size of the board and to fill
vacancies;
    
    requiring a super-majority vote of our stockholders to amend our bylaws and certain
provisions of our certificate of incorporation; and
    
    establishing advance notice requirements for nominations for election to the board of
directors or for proposing matters that can be acted on by stockholders at stockholder
meetings.
   
 Item 6. Exhibits
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SIGNATURE
  OCLARO, INC.Date: February 10, 2011
    By:
    /s/ Jerry TurinJerry TurinChief Financial Officer
(Principal Financial and Accounting Officer) 48




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EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit2.1
    

    
    Agreement of
Merger, dated as of July 20, 2010, by and among Oclaro, Inc.,
Nikko Acquisition Corp., Mintera Corporation and Shareholder
Representative Services LLC (previously filed as Exhibit 2.1 to
our current report on Form 8-K, filed with the SEC on
July 26, 2010, and incorporated herein by reference).10.1
    

    
    Variable Pay Program (previously filed as Exhibit 5.02 to our current report on Form 8-K, filed with the SEC on August 2, 2010, and incorporated herein by reference)10.2
    

    
    Amended and Restated Employment Agreement, dated August 4, 2010, by and between Oclaro, Inc. and Alain Couder (previously filed as Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on August 10, 2010, and incorporated herein by reference).10.3
    

    
    Oclaro, Inc. Amended and Restated 2004 Stock Incentive Plan (previously filed as Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on October 28, 2010, and incorporated herein by reference).10.4(
    1)

    
    First Amendment to the Executive Severance and Retention Agreement, dated as of December 14, 2010, by and between Oclaro, Inc., a Delaware corporation, and Catherine Hunt Rundle (also known as Kate Rundle).10.5(
    1)

    
    First Amendment to the Executive Severance and Retention Agreement, dated as of December 14, 2010, by and between Oclaro, Inc., a Delaware corporation, and Jerry Turin.31.1(
    1)

    
    Certification of Chief Executive Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.31.2(
    1)

    
    Certification of Chief Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.32.1(
    1)

    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.32.2(
    1)

    
    Certification
of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350.
 
 (1)
    
    Filed herewith. 49