##### 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 April 2, 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
 
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



OCLARO, INC.
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1.Financial Statements (Unaudited):Condensed Consolidated Balance Sheets as of April 2, 2011 and July 3, 2010
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended
April 2, 2011 and April 3, 2010
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended April 2,
2011 and April 3, 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
    
    
    30Item 4.Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    31Item 1A.Risk Factors
    
    
    32Item 6.Exhibits
    
    
    48Signature
    
    
    49EX-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)
 April 2, 2011
    
    
    July 3, 2010(Thousands, except par value)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    74,851
    
    
    $
    107,176Restricted cash
    
    
    854
    
    
    
    4,458Accounts receivable, net
    
    
    96,447
    
    
    
    93,412Inventories
    
    
    87,519
    
    
    
    62,570Prepaid expenses and other current assets
    
    
    17,141
    
    
    
    14,905Total current assets
    
    
    276,812
    
    
    
    282,521Property and equipment, net
    
    
    64,786
    
    
    
    37,516Other intangible assets, net
    
    
    20,423
    
    
    
    10,610Goodwill
    
    
    30,904
    
    
    
    20,000Other non-current assets
    
    
    10,041
    
    
    
    10,148Total assets
    
    $
    402,966
    
    
    $
    360,795LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    64,993
    
    
    $
    50,103Accrued expenses and other liabilities
    
    
    47,042
    
    
    
    35,404Total current liabilities
    
    
    112,035
    
    
    
    85,507Deferred gain on sale-leaseback
    
    
    13,176
    
    
    
    12,969Other non-current liabilities
    
    
    15,894
    
    
    
    9,785Total liabilities
    
    
    141,105
    
    
    
    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;
50,460 and 49,396 shares issued and outstanding at April 2,
2011 and July 3, 2010, respectively
    
    
    505
    
    
    
    494Additional paid-in capital
    
    
    1,312,179
    
    
    
    1,304,779Accumulated other comprehensive income
    
    
    38,507
    
    
    
    26,907Accumulated deficit
    
    
    (1,089,330
    )
    
    
    (1,079,646
    )Total stockholders equity
    
    
    261,861
    
    
    
    252,534Total liabilities and stockholders equity
    
    $
    402,966
    
    
    $
    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
    
    
    Nine Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands, except per share amounts)Revenues
    
    $
    115,681
    
    
    $
    101,152
    
    
    $
    357,327
    
    
    $
    279,836Cost of revenues
    
    
    87,269
    
    
    
    73,322
    
    
    
    258,346
    
    
    
    205,156Gross profit
    
    
    28,412
    
    
    
    27,830
    
    
    
    98,981
    
    
    
    74,680Operating expenses:Research and development
    
    
    17,220
    
    
    
    11,288
    
    
    
    46,627
    
    
    
    29,977Selling, general and administrative
    
    
    16,087
    
    
    
    14,451
    
    
    
    46,049
    
    
    
    42,249Amortization of intangible assets
    
    
    722
    
    
    
    347
    
    
    
    2,080
    
    
    
    597Restructuring, acquisition and related costs
    
    
    1,019
    
    
    
    1,610
    
    
    
    2,592
    
    
    
    6,149Legal settlements
    
    
    
    
    
    
    
    
    
    
    1,678
    
    
    
    (Gain) loss on sale of property and equipment
    
    
    4
    
    
    
    101
    
    
    
    (65
    )
    
    
    (502
    )Total operating expenses
    
    
    35,052
    
    
    
    27,797
    
    
    
    98,961
    
    
    
    78,470Operating income (loss)
    
    
    (6,640
    )
    
    
    33
    
    
    
    20
    
    
    
    (3,790
    )Other income (expense):Interest income
    
    
    
    
    
    
    11
    
    
    
    16
    
    
    
    36Interest expense
    
    
    (487
    )
    
    
    (134
    )
    
    
    (1,539
    )
    
    
    (255
    )Gain (loss) on foreign exchange
    
    
    (2,032
    )
    
    
    794
    
    
    
    (6,738
    )
    
    
    311Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,295Total other income (expense)
    
    
    (2,519
    )
    
    
    671
    
    
    
    (8,261
    )
    
    
    5,387Income (loss) from continuing operations
before income taxes
    
    
    (9,159
    )
    
    
    704
    
    
    
    (8,241
    )
    
    
    1,597Income tax provision
    
    
    668
    
    
    
    499
    
    
    
    1,443
    
    
    
    1,246Income (loss) from continuing operations
    
    
    (9,827
    )
    
    
    205
    
    
    
    (9,684
    )
    
    
    351Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,420Net income (loss)
    
    $
    (9,827
    )
    
    $
    205
    
    
    $
    (9,684
    )
    
    $
    1,771Basic net income (loss) per share:Income (loss) per share from continuing operations
    
    $
    (0.20
    )
    
    $
    
    
    
    $
    (0.20
    )
    
    $
    0.01Income per share from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.04Basic net income (loss) per share
    
    $
    (0.20
    )
    
    $
    
    
    
    $
    (0.20
    )
    
    $
    0.05Diluted net income (loss) per share:Income (loss) per share from continuing operations
    
    $
    (0.20
    )
    
    $
    
    
    
    $
    (0.20
    )
    
    $
    0.01Income per share from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.03Diluted net income (loss) per share
    
    $
    (0.20
    )
    
    $
    
    
    
    $
    (0.20
    )
    
    $
    0.04Shares used in computing net income (loss) per share:Basic
    
    
    48,587
    
    
    
    41,095
    
    
    
    48,321
    
    
    
    38,752Diluted
    
    
    48,587
    
    
    
    43,829
    
    
    
    48,321
    
    
    
    40,331
 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)
 Nine Months EndedApril 2, 2011
    
    
    April 3, 2010(Thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (9,684
    )
    
    $
    1,771Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Amortization of deferred gain on sale-leaseback
    
    
    (693
    )
    
    
    (643
    )Depreciation and amortization
    
    
    12,788
    
    
    
    8,667Gain on bargain purchase
    
    
    
    
    
    
    (5,267
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    (1,420
    )Stock-based compensation expense
    
    
    4,629
    
    
    
    3,175Other non-cash adjustments
    
    
    (65
    )
    
    
    (851
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    6,817
    
    
    
    (18,677
    )Inventories
    
    
    (17,908
    )
    
    
    6,481Prepaid expenses and other current assets
    
    
    (1,018
    )
    
    
    (16
    )Other non-current assets
    
    
    141
    
    
    
    1,559Accounts payable
    
    
    10,204
    
    
    
    10,788Accrued expenses and other liabilities
    
    
    (3,792
    )
    
    
    (7,213
    )Net cash provided by (used in) operating activities
    
    
    1,419
    
    
    
    (1,646
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (32,881
    )
    
    
    (5,945
    )Proceeds from sales of property and equipment
    
    
    75
    
    
    
    691Sales and maturities of available-for-sale investments
    
    
    
    
    
    
    9,258Transfer (to) from restricted cash
    
    
    3,703
    
    
    
    (103
    )Purchase of intangibles and equipment from an asset purchase
    
    
    
    
    
    
    (250
    )Cash (paid for) received from business combinations
    
    
    (10,482
    )
    
    
    3,277Net cash provided by (used in) investing activities
    
    
    (39,585
    )
    
    
    6,928Cash flows from financing activities:Proceeds from issuance of common stock, net
    
    
    2,645
    
    
    
    137Proceeds from borrowings under line of credit
    
    
    
    
    
    
    2,500Repayment of loans
    
    
    
    
    
    
    (52
    )Net cash provided by financing activities
    
    
    2,645
    
    
    
    2,585Effect of exchange rate on cash and cash equivalents
    
    
    3,196
    
    
    
    (952
    )Net increase (decrease) in cash and cash equivalents
    
    
    (32,325
    )
    
    
    6,915Cash and cash equivalents at beginning of period
    
    
    107,176
    
    
    
    44,561Cash and cash equivalents at end of period
    
    $
    74,851
    
    
    $
    51,476
 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
  Comprehensive Income (Loss)
  6




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Three Months Ended
    
    
    Nine Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)Net income (loss)
    
    $
    (9,827
    )
    
    $
    205
    
    
    $
    (9,684
    )
    
    $
    1,771Other comprehensive income (loss):Unrealized gain (loss) on currency
instruments
designated as cash flow hedges
    
    
    149
    
    
    
    (210
    )
    
    
    184
    
    
    
    121Currency translation adjustments
    
    
    4,062
    
    
    
    (1,766
    )
    
    
    11,454
    
    
    
    (1,320
    )Unrealized loss on marketable securities
    
    
    (38
    )
    
    
    
    
    
    
    (38
    )
    
    
    Unrealized loss on short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Comprehensive income (loss)
    
    $
    (5,654
    )
    
    $
    (1,771
    )
    
    $
    1,916
    
    
    $
    565
 Note 2. Fair Value
  Level 1 
 Level 2 
 Level 3 
  e
 Business Combinations
 7




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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
    
    $
    40,197
    
    
    $
    
    
    
    $
    
    
    
    $
    40,197Prepaid expenses and other current assets:Unrealized gain on currency instruments
designated as cash flow hedges
    
    
    
    
    
    
    233
    
    
    
    
    
    
    
    233Other non-current assets:Marketable securities
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    267Total assets measured at fair value
    
    $
    40,464
    
    
    $
    233
    
    
    $
    
    
    
    $
    40,697Liabilities:Accrued expenses and other liabilities:Escrow liability for Xtellus acquisition (2)
    
    $
    
    
    
    $
    6,883
    
    
    $
    
    
    
    $
    6,883Earnout liability for Mintera acquisition (2)
    
    
    
    
    
    
    
    
    
    
    4,541
    
    
    
    4,541Other non-current liabilities:Earnout liability for Mintera acquisition (2)
    
    
    
    
    
    
    
    
    
    
    11,328
    
    
    
    11,328Total liabilities measured at fair value
    
    $
    
    
    
    $
    6,883
    
    
    $
    15,869
    
    
    $
    22,752
 
 (1)
    
    Excludes $34.7 million in cash held in our bank accounts at April 2, 2011.(2)
    
    Includes interest expense
accrued during the nine months ended April 2, 2011.  Fair Value Measured andRecorded UsingSignificant UnobservableInputs (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
    
    
    203
    
    
    
    518Balance at April 2, 2011
    
    $
    4,541
    
    
    $
    11,328
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Derivative Financial Instruments
  Note 3. Business Combinations
  Sale of the New Focus Business and Acquisition of Newports High Power Laser Diodes Business
  Acquisition of Xtellus
    Business Combinations
 9




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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 earnout liabilities
    
    
    15,148Total consideration
    
    $
    25,630
  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
 10




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Unaudited Pro Forma Financial Information
  Three Months Ended
    
    
    Nine Months EndedApril 2, 2011
    
    
    April 3, 2010
    
    
    April 2, 2011
    
    
    April 3, 2010(Thousands)
    
    
    (Thousands)Revenues
    
    $
    115,681
    
    
    $
    104,037
    
    
    $
    357,795
    
    
    $
    296,445Loss from continuing operations
    
    $
    (9,827
    )
    
    $
    (4,438
    )
    
    $
    (12,042
    )
    
    $
    (7,186
    )Net loss
    
    $
    (9,827
    )
    
    $
    (4,438
    )
    
    $
    (12,042
    )
    
    $
    (5,766
    )Net loss per share  basic
    
    $
    (0.20
    )
    
    $
    (0.11
    )
    
    $
    (0.25
    )
    
    $
    (0.15
    )Net loss per share  diluted
    
    $
    (0.20
    )
    
    $
    (0.11
    )
    
    $
    (0.25
    )
    
    $
    (0.15
    )Shares used in computing net loss
per share  basic
    
    
    48,587
    
    
    
    41,095
    
    
    
    48,321
    
    
    
    38,752Shares used in computing net loss
per share  diluted
    
    
    48,587
    
    
    
    41,095
    
    
    
    48,321
    
    
    
    38,752
  Note 4. Balance Sheet Details
  April 2, 2011
    
    
    July 3, 2010(Thousands)Cash and cash equivalents:Cash-in-bank
    
    $
    34,654
    
    
    $
    23,962Money market funds
    
    
    40,197
    
    
    
    83,214$
    74,851
    
    
    $
    107,176
  April 2, 2011
    
    
    July 3, 2010(Thousands)Inventories:Raw materials
    
    $
    32,905
    
    
    $
    17,732Work-in-process
    
    
    35,035
    
    
    
    32,491Finished goods
    
    
    19,579
    
    
    
    12,347$
    87,519
    
    
    $
    62,570
  11




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##### Table of Contents



April 2, 2011
    
    
    July 3, 2010(Thousands)Property and equipment, net:Buildings
    
    $
    16,660
    
    
    $
    16,104Plant and machinery
    
    
    134,756
    
    
    
    97,186Fixtures, fittings and equipment
    
    
    1,627
    
    
    
    1,142Computer equipment
    
    
    13,729
    
    
    
    12,232166,772
    
    
    
    126,664Less: Accumulated depreciation
    
    
    (101,986
    )
    
    
    (89,148
    )$
    64,786
    
    
    $
    37,516
  April 2, 2011
    
    
    July 3, 2010(Thousands)Accrued expenses and other liabilities:Trade payables
    
    $
    7,379
    
    
    $
    4,464Compensation and benefits related accruals
    
    
    9,899
    
    
    
    8,688Warranty accrual
    
    
    2,010
    
    
    
    2,437Restructuring accrual
    
    
    366
    
    
    
    4,338Escrow liability for Xtellus acquisition (1)
    
    
    6,883
    
    
    
    Earnout liability for Mintera acquisition (2)
    
    
    4,541
    
    
    
    Other accruals
    
    
    15,964
    
    
    
    15,477$
    47,042
    
    
    $
    35,404
 
 (1)
    
    Includes interest expense accrued during the nine months ended April 2, 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 nine months ended April 2, 2011.  April 2, 2011
    
    
    July 3, 2010(Thousands)Other non-current liabilitiesEscrow liability for Xtellus acquisition (1)
    
    $
    
    
    
    $
    6,324Earnout liability for Mintera acquisition (2)
    
    
    11,328
    
    
    
    Other non-current liabilities
    
    
    4,566
    
    
    
    3,461$
    15,894
    
    
    $
    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 nine months ended April 2, 2011. 12




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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
    
    
    
    
    
    
    
    
    
    
    (2,080
    )
    
    
    (2,080
    )Exchange rate adjustment
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    153Balance at April 2, 2011
    
    $
    30,904
    
    
    $
    24,708
    
    
    $
    (4,285
    )
    
    $
    20,423
  April 2,
    
    
    July 3,2011
    
    
    2010(Thousands)Other intangible assets, netCore and current technology
    
    $
    10,939
    
    
    $
    4,909Development agreement
    
    
    3,350
    
    
    
    Supply agreements
    
    
    3,209
    
    
    
    3,056Customer relationships
    
    
    3,200
    
    
    
    1,760Patent portfolio
    
    
    2,910
    
    
    
    2,780Manufacturing software
    
    
    680
    
    
    
    Tradename
    
    
    280
    
    
    
    200Backlog
    
    
    140
    
    
    
    11024,708
    
    
    
    12,815Less: Accumulated amortization
    
    
    (4,285
    )
    
    
    (2,205
    )$
    20,423
    
    
    $
    10,610
  Note 6. Restructuring Liabilities
  13




---



##### Table of Contents



Accrued
    
    
    Amounts
    
    
    
    
    
    
    
    
    
    
    AccruedRestructuring
    
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    RestructuringCosts at July
    
    
    Restructuring
    
    
    Amounts
    
    
    
    
    
    
    Costs at April3, 2010
    
    
    Costs
    
    
    Paid
    
    
    Adjustments
    
    
    2, 2011(Thousands)Lease cancellations and commitments
and other charges
    
    $
    4,107
    
    
    $
    
    
    
    $
    (3,200
    )
    
    $
    (541
    )
    
    $
    366Employee separation costs
    
    
    231
    
    
    
    1,103
    
    
    
    (1,091
    )
    
    
    (243
    )
    
    
    Total accrued restructuring charges
    
    $
    4,338
    
    
    $
    1,103
    
    
    $
    (4,291
    )
    
    $
    (784
    )
    
    $
    366
  Note 7. Credit Facility
  Note 8. Post-Retirement Benefits
 Switzerland Defined Benefit Plan (Swiss Plan)
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedApril 2,
    
    
    April 2,2011
    
    
    2011(Thousands)Service cost
    
    $
    447
    
    
    $
    1,302Interest cost
    
    
    188
    
    
    
    547Expected return on plan assets
    
    
    (248
    )
    
    
    (721
    )Net periodic pension costs
    
    $
    387
    
    
    $
    1,128
  14




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##### Table of Contents



Note 9. Commitments and Contingencies
 Guarantees
   Warranty accrual
   Three Months Ended
    
    
    Nine Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)Warranty provision  beginning of period
    
    $
    2,241
    
    
    $
    2,486
    
    
    $
    2,437
    
    
    $
    2,228Warranties assumed in acquisitions
    
    
    
    
    
    
    
    
    
    
    357
    
    
    
    248Warranties issued
    
    
    450
    
    
    
    1,162
    
    
    
    1,326
    
    
    
    2,862Warranties utilized or expired
    
    
    (741
    )
    
    
    (687
    )
    
    
    (2,221
    )
    
    
    (2,351
    )Currency translation adjustment
    
    
    60
    
    
    
    (82
    )
    
    
    111
    
    
    
    (108
    )Warranty provision  end of period
    
    $
    2,010
    
    
    $
    2,879
    
    
    $
    2,010
    
    
    $
    2,879
 Litigation
 In re New Focus, Inc. Initial Public Offering Securities Litigation
 In re Initial Public
Offering Securities Litigation
 15




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##### Table of Contents



QinetiQ Limited v. Oclaro, Inc
 et al.
 Note 10. Stockholders Equity
 Warrants
  Weighted-Warrants
    
    
    AverageOutstanding
    
    
    Exercise Price(Thousands)Balance at July 3, 2010
    
    
    1,616
    
    
    $
    18.78Expired on January 13, 2011
    
    
    (217
    )
    
    
    35.00Balance at April 2, 2011
    
    
    1,399
    
    
    $
    16.27
  16




---



##### Table of Contents



Accumulated Other Comprehensive Income
  April 2, 2011
    
    
    July 3, 2010(Thousands)Accumulated other comprehensive income:Currency translation adjustments
    
    $
    39,465
    
    
    $
    28,011Unrealized gain on currency instruments designated as
cash flow hedges
    
    
    233
    
    
    
    49Unrealized loss on marketable securities
    
    
    (38
    )
    
    
    Swiss defined benefit plan
    
    
    (1,153
    )
    
    
    (1,153
    )$
    38,507
    
    
    $
    26,907
 Note 11. 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
    
    
    (1,376
    )
    
    
    837
    
    
    
    11.58
    
    
    
    484
    
    
    
    8.25Exercised or released
    
    
    
    
    
    
    (502
    )
    
    
    4.68
    
    
    
    (250
    )
    
    
    5.37Cancelled or forfeited
    
    
    58
    
    
    
    (109
    )
    
    
    9.34
    
    
    
    (112
    )
    
    
    6.25Increase in available for grant
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balances at April 2, 2011
    
    
    3,771
    
    
    
    3,412
    
    
    $
    9.46
    
    
    
    825
    
    
    $
    9.69
  Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Value(Thousands)
    
    
    
    
    
    
    (Years)
    
    
    (Thousands)Options exercisable at April 2, 2011
    
    
    1,337
    
    
    $
    12.24
    
    
    
    6.5
    
    
    $
    5,431Options outstanding at April 2, 2011
    
    
    3,412
    
    
    
    9.46
    
    
    
    7.7
    
    
    
    13,064
 17




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##### Table of Contents



Note 12. Stock-based Compensation
  Three Months Ended
    
    Nine Months EndedApril 2,
    
    April 3,
    
    April 2,
    
    April 3,2011
    
    2010
    
    2011
    
    2010Expected life
    
    4.5 years
    
    4.5 years
    
    4.5 years
    
    4.5 yearsRisk-free interest rate
    
    
    1.9
    %
    
    
    2.2
    %
    
    
    1.3
    %
    
    
    2.3
    %Volatility
    
    
    97.8
    %
    
    
    95.9
    %
    
    
    96.8
    %
    
    
    99.8
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Three Months Ended
    
    
    Nine Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)Stock-based compensation by category of expense:Cost of revenues
    
    $
    352
    
    
    $
    226
    
    
    $
    1,012
    
    
    $
    640Research and development
    
    
    344
    
    
    
    332
    
    
    
    1,053
    
    
    
    831Selling, general and administrative
    
    
    901
    
    
    
    666
    
    
    
    2,564
    
    
    
    1,704$
    1,597
    
    
    $
    1,224
    
    
    $
    4,629
    
    
    $
    3,175Stock-based compensation by type of award:Stock options
    
    $
    988
    
    
    $
    629
    
    
    $
    2,658
    
    
    $
    2,257Restricted stock awards
    
    
    639
    
    
    
    741
    
    
    
    2,109
    
    
    
    1,178Inventory adjustment to cost of revenues
    
    
    (30
    )
    
    
    (146
    )
    
    
    (138
    )
    
    
    (260
    )$
    1,597
    
    
    $
    1,224
    
    
    $
    4,629
    
    
    $
    3,175
  Note 13. Income Taxes
  18




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##### Table of Contents



Note 14. Net Income (Loss) Per Share
  Three Months Ended
    
    
    Nine Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands,except per share amounts)Net income (loss)
    
    $
    (9,827
    )
    
    $
    205
    
    
    $
    (9,684
    )
    
    $
    1,771Weighted-average shares  basic
    
    
    48,587
    
    
    
    41,095
    
    
    
    48,321
    
    
    
    38,752Effect of dilutive potential common shares from:Stock options
    
    
    
    
    
    
    1,472
    
    
    
    
    
    
    
    914Restricted stock awards
    
    
    
    
    
    
    760
    
    
    
    
    
    
    
    473Obligations under escrow agreement
    
    
    
    
    
    
    502
    
    
    
    
    
    
    
    192Weighted-average shares  diluted
    
    
    48,587
    
    
    
    43,829
    
    
    
    48,321
    
    
    
    40,331Basic net income (loss) per share
    
    $
    (0.20
    )
    
    $
    
    
    
    $
    (0.20
    )
    
    $
    0.05Diluted net income (loss) per share
    
    $
    (0.20
    )
    
    $
    
    
    
    $
    (0.20
    )
    
    $
    0.04
   Note 15. Operating Segments and Related Information
   19




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2011
    
    
    2010
    
    
    2011
    
    
    2010(Thousands)United States
    
    $
    18,222
    
    
    $
    19,542
    
    
    $
    55,778
    
    
    $
    54,529Canada
    
    
    3,838
    
    
    
    3,563
    
    
    
    10,022
    
    
    
    12,302Europe
    
    
    30,744
    
    
    
    23,424
    
    
    
    101,027
    
    
    
    66,417Asia
    
    
    58,558
    
    
    
    47,234
    
    
    
    169,220
    
    
    
    125,792Rest of world
    
    
    4,319
    
    
    
    7,389
    
    
    
    21,280
    
    
    
    20,796$
    115,681
    
    
    $
    101,152
    
    
    $
    357,327
    
    
    $
    279,836
 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
    
    
    
    
    
    
    IncreaseApril 2, 2011
    
    
    April 3, 2010
    
    
    Change
    
    
    (Decrease)(Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %Revenues
    
    $
    115,681
    
    
    
    100.0
    
    
    $
    101,152
    
    
    
    100.0
    
    
    $
    14,529
    
    
    
    14.4Cost of revenues
    
    
    87,269
    
    
    
    75.4
    
    
    
    73,322
    
    
    
    72.5
    
    
    
    13,947
    
    
    
    19.0Gross profit
    
    
    28,412
    
    
    
    24.6
    
    
    
    27,830
    
    
    
    27.5
    
    
    
    582
    
    
    
    2.1Operating expenses:Research and development
    
    
    17,220
    
    
    
    14.9
    
    
    
    11,288
    
    
    
    11.2
    
    
    
    5,932
    
    
    
    52.6Selling, general and administrative
    
    
    16,087
    
    
    
    13.9
    
    
    
    14,451
    
    
    
    14.3
    
    
    
    1,636
    
    
    
    11.3Amortization of intangible assets
    
    
    722
    
    
    
    0.6
    
    
    
    347
    
    
    
    0.3
    
    
    
    375
    
    
    
    108.1Restructuring, acquisition and
related costs
    
    
    1,019
    
    
    
    0.9
    
    
    
    1,610
    
    
    
    1.6
    
    
    
    (591
    )
    
    
    (36.7
    )Legal settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss on sale of property and
equipment
    
    
    4
    
    
    
    
    
    
    
    101
    
    
    
    0.1
    
    
    
    (97
    )
    
    
    (96.0
    )Total operating expenses
    
    
    35,052
    
    
    
    30.3
    
    
    
    27,797
    
    
    
    27.5
    
    
    
    7,255
    
    
    
    26.1Operating income (loss)
    
    
    (6,640
    )
    
    
    (5.7
    )
    
    
    33
    
    
    
    
    
    
    
    (6,673
    )
    
    
    n/m
    (1)Other income (expense):Interest income
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    (11
    )
    
    
    (100.0
    )Interest expense
    
    
    (487
    )
    
    
    (0.4
    )
    
    
    (134
    )
    
    
    (0.1
    )
    
    
    (353
    )
    
    
    263.4Gain (loss) on foreign exchange
    
    
    (2,032
    )
    
    
    (1.8
    )
    
    
    794
    
    
    
    0.8
    
    
    
    (2,826
    )
    
    
    n/m
    (1)Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total other income (expense)
    
    
    (2,519
    )
    
    
    (2.2
    )
    
    
    671
    
    
    
    0.7
    
    
    
    (3,190
    )
    
    
    n/m
    (1)Income (loss) from continuing operations
before income taxes
    
    
    (9,159
    )
    
    
    (7.9
    )
    
    
    704
    
    
    
    0.7
    
    
    
    (9,863
    )
    
    
    n/m
    (1)Income tax provision
    
    
    668
    
    
    
    0.6
    
    
    
    499
    
    
    
    0.5
    
    
    
    169
    
    
    
    33.9Income (loss) from continuing operations
    
    
    (9,827
    )
    
    
    (8.5
    )
    
    
    205
    
    
    
    0.2
    
    
    
    (10,032
    )
    
    
    n/m
    (1)Income from discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (9,827
    )
    
    
    (8.5
    )
    
    $
    205
    
    
    
    0.2
    
    
    $
    (10,032
    )
    
    
    n/m
    (1)
 
 (1)
    
    Not meaningful. 22




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##### Table of Contents



Nine Months Ended
    
    
    
    
    
    
    IncreaseApril 2, 2011
    
    
    April 3, 2010
    
    
    Change
    
    
    (Decrease)(Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %
    
    
    (Thousands)
    
    
    %Revenues
    
    $
    357,327
    
    
    
    100.0
    
    
    $
    279,836
    
    
    
    100.0
    
    
    $
    77,491
    
    
    
    27.7Cost of revenues
    
    
    258,346
    
    
    
    72.3
    
    
    
    205,156
    
    
    
    73.3
    
    
    
    53,190
    
    
    
    25.9Gross profit
    
    
    98,981
    
    
    
    27.7
    
    
    
    74,680
    
    
    
    26.7
    
    
    
    24,301
    
    
    
    32.5Operating expenses:Research and development
    
    
    46,627
    
    
    
    13.0
    
    
    
    29,977
    
    
    
    10.7
    
    
    
    16,650
    
    
    
    55.5Selling, general and administrative
    
    
    46,049
    
    
    
    12.9
    
    
    
    42,249
    
    
    
    15.1
    
    
    
    3,800
    
    
    
    9.0Amortization of intangible assets
    
    
    2,080
    
    
    
    0.6
    
    
    
    597
    
    
    
    0.2
    
    
    
    1,483
    
    
    
    248.4Restructuring, acquisition and
related costs
    
    
    2,592
    
    
    
    0.7
    
    
    
    6,149
    
    
    
    2.2
    
    
    
    (3,557
    )
    
    
    (57.8
    )Legal settlements
    
    
    1,678
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    1,678
    
    
    
    n/m
    (1)Gain on sale of property and
equipment
    
    
    (65
    )
    
    
    
    
    
    
    (502
    )
    
    
    (0.1
    )
    
    
    437
    
    
    
    (87.1
    )Total operating expenses
    
    
    98,961
    
    
    
    27.7
    
    
    
    78,470
    
    
    
    28.1
    
    
    
    20,491
    
    
    
    26.1Operating income (loss)
    
    
    20
    
    
    
    
    
    
    
    (3,790
    )
    
    
    (1.4
    )
    
    
    3,810
    
    
    
    n/m
    (1)Other income (expense):Interest income
    
    
    16
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    (20
    )
    
    
    (55.6
    )Interest expense
    
    
    (1,539
    )
    
    
    (0.4
    )
    
    
    (255
    )
    
    
    (0.1
    )
    
    
    (1,284
    )
    
    
    503.5Gain (loss) on foreign exchange
    
    
    (6,738
    )
    
    
    (1.9
    )
    
    
    311
    
    
    
    0.1
    
    
    
    (7,049
    )
    
    
    n/m
    (1)Other income
    
    
    
    
    
    
    
    
    
    
    5,295
    
    
    
    1.9
    
    
    
    (5,295
    )
    
    
    (100.0
    )Total other income (expense)
    
    
    (8,261
    )
    
    
    (2.3
    )
    
    
    5,387
    
    
    
    1.9
    
    
    
    (13,648
    )
    
    
    n/m
    (1)Income (loss) from continuing operations
before income taxes
    
    
    (8,241
    )
    
    
    (2.3
    )
    
    
    1,597
    
    
    
    0.5
    
    
    
    (9,838
    )
    
    
    n/m
    (1)Income tax provision
    
    
    1,443
    
    
    
    0.4
    
    
    
    1,246
    
    
    
    0.4
    
    
    
    197
    
    
    
    15.8Income (loss) from continuing operations
    
    
    (9,684
    )
    
    
    (2.7
    )
    
    
    351
    
    
    
    0.1
    
    
    
    (10,035
    )
    
    
    n/m
    (1)Income from discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    1,420
    
    
    
    0.5
    
    
    
    (1,420
    )
    
    
    (100.0
    )Net income (loss)
    
    $
    (9,684
    )
    
    
    (2.7
    )
    
    $
    1,771
    
    
    
    0.6
    
    
    $
    (11,455
    )
    
    
    n/m
    (1)
 
 (1)
    
    Not meaningful. Revenues
    23




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##### Table of Contents



Cost of Revenues
    Gross Profit
    24




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##### Table of Contents



Research and Development Expenses
    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
    Income from Discontinued Operations
 Business
Combinations,
 Recent Accounting Pronouncements
 Basis of Preparation
 Application of Critical Accounting Policies
   27




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows from Operating Activities
   Cash Flows from Investing Activities
   Cash Flows from Financing Activities
   28




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##### Table of Contents



Effect of Exchange Rates on Cash and Cash Equivalents for the Nine Months Ended April 2, 2011
and April 3, 2010
   Credit Facility
  Future Cash Requirements
    Off-Balance Sheet Arrangements
   29




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rates
  Foreign currency
   Hedging Program
  
 Item 4 . Controls and Procedures
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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 In re New Focus, Inc. Initial Public Offering Securities Litigation
 In re Initial Public
Offering Securities Litigation
  QinetiQ Limited v. Oclaro, Inc
 et al.
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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.
 Risks Related to Our Business
 We have a history of large operating losses and we may not be able to achieve 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.
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Our success will depend on our ability to anticipate and respond to evolving technologies and
customer requirements.
  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.
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We may undertake mergers or acquisitions that do not prove successful.
    
    
    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;
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
    
    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.
  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.
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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.
   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.
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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.
      Our results of operations may suffer if we do not effectively manage our inventory, and we may
incur inventory-related charges.
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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.
    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.
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If our customers do not qualify our manufacturing lines or the manufacturing lines of our
subcontractors for volume shipments, our operating results could suffer.
  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.
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Our intellectual property rights may not be adequately protected.
   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.
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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.
  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.
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We generate a significant portion of our revenues internationally and therefore are subject to
additional risks associated with the extent of our international operations.
  
    
    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.
  Changes in effective tax rates or adverse outcomes resulting from examination of our income tax
returns could adversely affect our results.
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We may face product liability claims.
  If we fail to attract and retain key personnel, our business could suffer.
   Our business and operating results may be adversely affected by natural disasters or other
catastrophic events beyond our control.
  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.
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We are subject to anti-corruption laws in the jurisdictions in which we operate, including
the U.S. Foreign Corrupt Practices Act, or the FCPA. Our failure to comply with these laws could
result in penalties which could harm our reputation and have a material adverse effect on our
business, results of operations and financial condition.
  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
 In re Initial Public
Offering Securities Litigation
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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
  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;
    
    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.
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Fluctuations in our operating results could adversely affect the market price of our common stock.
   We may not be able to raise capital when desired on favorable terms without dilution to our
stockholders, or at all.
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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.
  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;
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
    
    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: May 11, 2011
    By:
    /s/ Jerry TurinJerry TurinChief Financial Officer
(Principal Financial and Accounting Officer) 49




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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
    
    
    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).10.2
    
    
    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) (previously filed as Exhibit 10.4 to our quarterly report on Form 10-Q, filed with the SEC on
February 10, 2011, and incorporated herein by reference).10.3
    
    
    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 (previously filed as Exhibit 10.5
to our quarterly report on Form 10-Q, filed with the SEC on February 10, 2011, and incorporated
herein by reference).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. 50