##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  FOR ANNUAL AND TRANSITION
    REPORTS
 PURSUANT TO SECTION 13 OR
    15(d) OF THE
 SECURITIES EXCHANGE ACT OF
    1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    July 2, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934  Commission File Number
    000-31581
    OPLINK COMMUNICATIONS,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

No. 77-0411346(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)46335 Landing Parkway,
    Fremont, CA(Address of principal
    executive offices)

94538(Zip
    Code)   Registrants telephone number, including area code:
 (510) 933-7200
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par
    value


The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      Documents
    Incorporated by Reference:




---



##### 



OPLINK
    COMMUNICATIONS, INC.
  Form 10-K
 July 2,
    2006
  
  TABLE OF
    CONTENTS
  PART IItem 1


Business


2Item 1A


Risk
    Factors


12Item 2


Properties


26Item 3


Legal
    Proceedings


26Item 4


Submission of
    Matters to a Vote of Security Holders


27PART IIItem 5


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


28Item 6


Selected Financial
    Data


29Item 7


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


30Item 7A


Quantitative and
    Qualitative Disclosures About Market Risk


48Item 8


Financial
    Statements and Supplementary Data


49Item 9


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


49Item 9A


Controls and
    Procedures


49PART IIIItem 10


Directors and
    Executive Officers of the Registrant


52Item 11


Executive
    Compensation


52Item 12


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


52Item 13


Certain
    Relationships and Related Transactions


52Item 14


Principal
    Accountant Fees and Services


52PART IVItem 15


Exhibits and
    Financial Statement Schedules


52SIGNATURES


55EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   1




---



##### Table of Contents



Part I  This report on
    Form 10-K
    contains forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended, and
    Section 21E of the Securities Exchange Act of 1934,
    including, without limitation, statements regarding our
    expectations, beliefs, intentions or future strategies that are
    signified by the words expect,
    anticipate, intend, believe,
    estimate or assume or similar language.
    All forward-looking statements included in this document are
    based on information available to us on the date hereof, and we
    assume no obligation to update any such forward-looking
    statements. Actual results could differ materially from those
    projected in the forward-looking statements. In evaluating our
    business, you should carefully consider the information set
    forth below and under the captions Risk Factors
    contained in Item 1A and Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations contained in Item 7. We caution you that
    our business and financial performance are subject to
    substantial risks and uncertainties. We undertake no obligation
    to update publicly any forward-looking statements, whether as a
    result of new information, future events or otherwise.
  Item 1.
    Business  Overview
      time-to-market
  ISO 9001-2000
   2




---



##### Table of Contents



Form 10-K Form 10-K.
  Form 10-K, Form 10-Q, Form 8-K, www.sec.gov 1-800-SEC-0330.
    one-for-seven
  Products
    and Technologies
    Bandwidth
    Creation Products
    Wavelength Expansion Products. :
  
    Dense Wavelength Division Multiplexers.  A
    dense wavelength division multiplexer, or DWDM, is a solution
    for scalable, reliable, protocol independent bandwidth creation.
    A DWDM multiplexer is an integrated optical module or subsystem
    that combines two or more wavelengths for transmission over a
    single fiber (multiplexing) or separates these wavelengths
    (demultiplexing) at the receiving end. Our DWDM module and
    subsystem solutions are derived from an array of high
    performance technologies including thin film filters and arrayed
    wave guides, or AWGs. Our solutions are available in a variety
    of channel spacings. 3




---



##### Table of Contents




    Coarse Wavelength
    Division Multiplexers.  A coarse wavelength
    division multiplexer, or CWDM, is a solution for cost-effective
    bandwidth creation in the access, cable TV and metro
    environments. A CWDM multiplexer is an integrated optical module
    or subsystem that combines two or more wavelengths, at a channel
    spacing that is many times wider than for standard DWDM channel
    spacing for multiplexing or demultiplexing.
    Band Wavelength
    Division Multiplexers.  Band wavelength
    division multiplexer, or BWDM, products help manage multiple
    International Telecommunication Union, or ITU, channels within
    multiplexer/demultiplexer (Mux/Demux) or optical add/drop
    applications. Our BWDMs pass a band of channels while isolating
    the channels adjacent to the band of channels sent. BWDM
    products facilitate the design of flexible (pay as you grow) low
    loss architectures as well as enable the design of complex mesh
    and ring networks. We offer a variety of BWDM products at 50,
    100 and 200 GHz spacing.
    DWDM Interleavers.  A DWDM interleaver is an
    optical component that combines light signals from two
    simultaneous sources over a single fiber, which effectively
    doubles the capacity of the optical network system, or separates
    a single light source into multiple signals.  Optical Amplification Products.
  
    Gain Blocks.  Gain blocks are integrated
    optical subsystem building blocks consisting of fiber and fiber
    optic components used in fiber optic amplifiers to boost the
    amplitude of an incoming optical signal.
    EDFAs.  Erbium Doped Fiber Amplifiers are
    optical subsystems that employ gain blocks, advanced
    electronics, firmware and software to control the optical gain
    of an incoming optical signal.
    WDM Pump/Signal Combiners.  Micro-optic WDM
    pump/signal combiners are components that provide power for the
    optical amplifier. They are used to efficiently combine light
    signals with pump laser sources. Pump lasers are active optical
    components used in optical amplifiers such as EDFAs to amplify
    or regenerate light signals that naturally suffer loss while
    traveling over distance within an optical network.
    Integrated Hybrid Components.  Optical
    amplifier systems can combine optical components, including
    isolators, tap couplers and WDM pump/signal combiners. The main
    advantage of hybrid components is that they minimize the
    amplifier package size, increase reliability and reduce
    manufacturing cost.
    WDM Pump Combiners.  WDM pump combiners are
    used to increase the power of an optical amplifier by combining
    multiple pump lasers into one common pump source for
    amplification.
    Polarization Beam Combiners.  Polarization beam
    combiners are optical components that combine two of the same or
    different wavelengths with opposing polarization to increase the
    power output of the optical amplifier.
    Gain Flattening Filters.  Gain flattening
    filters are used to ensure signals are amplified by equal
    amounts. Our thin film filter technology, or the technology in
    which layers of thin film separate optical signals, employs
    multiple layers of optical materials on glass to adjust optical
    output at different wavelengths to meet the needs of
    next-generation high power amplifiers. 4




---



##### Table of Contents




    Isolators.  Isolators are fiber optic devices
    that transmit light in only one direction, thus preventing a
    reflected light signal from returning to its laser source.
    Reflected light can interfere with a lasers process and
    create noise, which can impair system performance in optical
    networks.
    Tap Couplers.  Tap couplers transfer optical
    signals between fibers. They are widely used for system
    monitoring purposes and have very low insertion loss, or the
    power loss incurred when adding additional components to a fiber
    cable.  Bandwidth
    Management Products
    Wavelength Performance Monitoring and Protection
    Products.
    
    Supervisory Channel WDM.  Our supervisory
    channel WDM is an integrated component that separates the
    network supervisory channel from the signal channel that is used
    in monitoring the network performance.
    Integrated WDM Monitor Arrays.  Our integrated
    WDM monitor arrays convert optical signals into electrical
    signals for network selective wavelength power monitoring. This
    module combines multiple network performance monitoring
    functions in a single module and integrates WDM filters and
    third-party photo detectors, a device supplied by other optical
    component manufacturers that receives a light signal in an
    optical network and converts it into an electrical signal. These
    integrated modules allow communications service providers to
    monitor whether or not wavelengths are being transmitted
    properly through the network.
    Integrated Tap Monitor Arrays.  Our integrated
    tap monitor arrays convert optical signals into electrical
    signals for network signal power monitoring. This module
    integrates a tap coupler, a device that splits the light power,
    and third-party photo detectors, a device supplied by other
    optical component manufacturers that receives a light signal in
    an optical network and converts it into an electrical signal.
    These integrated modules allow communications service providers
    to monitor whether or not optical signals are being transmitted
    properly through the network.
    Wavelength Protection Subsystems.  Our
    multi-channel wavelength protection subsystems are integrated
    solutions that combine tap couplers, splitters, switches,
    electronics, firmware, software and third-party photo detectors.
    These subsystems integrate network switching protection
    functions and monitor optical signal quality such as optical
    power in response to unexpected disruption in the optical
    network. They provide redundant path protection with fast
    routing and switching with network fault management and
    diagnostic capability.  Optical Switching and Routing Products.
  
    Switches.  Optical switches are devices that
    can direct optical signals to different end destinations.
    Optical Add/Drop Multiplexers.  Optical
    add/drop multiplexers, or OADMs, are used when part of the
    information from an optical signal carried on the network is
    demultiplexed, or dropped, at an intermediate point and
    different information is multiplexed, or added, for subsequent
    transmission. The remaining traffic passes through the
    multiplexer without additional processing. The OADM is typically
    used for rerouting a 5




---



##### Table of Contents



number of specific optical wavelengths with different end
    destinations. OADMs can also include other optical components
    such as optical conditioning products or optical monitoring
    products for increased functionality.  
    Reconfigurable OADMs.  Reconfigurable OADMs
    combine OADM functionality, optical wavelength selective
    switching, or WSS, and conditioning products, electronic
    circuitry, integrated firmware and software to add remote
    configuration and provisioning flexibility to the network by
    allowing the dynamic add/drop of variable optical wavelengths
    having different amplitudes with different end destinations.
    Circulators.  Circulators consist of
    sophisticated micro-optic components that are used to direct
    optical signals between different fibers. Circulators are also
    used in optical amplifying applications and used in DWDM fiber
    grating based wavelength expansion products.  Wavelength Conditioning Products.
  
    Variable Optical Attenuators.  Variable optical
    attenuators, or VOAs, are optical devices that reduce the power
    of the optical signal in DWDM networks to ensure that all
    optical signals within a network have equal power. The amount of
    power reduction of a particular optical signal can be adjusted
    to match the power of other optical signals in the network
    thereby enhancing network performance and service quality.
    Variable Multiplexers.  Variable Multiplexers
    combine multiple ITU channel signals along with the function of
    adjusting the power level. The subsystems attenuate the power
    level of individual ITU signal to achieve equalization of the
    spectrum or blocking specific channel.
    Dynamic Band Equalization Products.  Dynamic
    band equalization products monitor and adjust power levels of
    multiple bands of ITU channels. These subsystems separate
    multiple ITU channels into bands of channels, and then monitor
    and control the power levels of these bands through standard
    telecommunication interfaces such as RS232 and then multiplex
    these multiple bands onto a single fiber. They are used for
    power equalization in various parts of the network including
    metro and long haul.  Customers
     6




---



##### Table of Contents



Backlog
    Marketing,
    Sales and Customer Support
    Product
    Development
      Manufacturing
     7




---



##### Table of Contents



Quality
  9001-1994 ISO 9001-2000
  Competition
    
    selling price;
    the quality of our manufacturing processes;
    the breadth of our product line;
    availability, performance and reliability of our products;
    our ability to participate in the growth of emerging
    technologies;
    the ability to win designs through prototyping;
    the compatibility of our products with existing communications
    networks; and
    manufacturing capacity and capability.     8




---



##### Table of Contents



Intellectual
    Property
        et al.
    Employees
   9




---



##### Table of Contents



Financial
    Information About Geographic Areas
    Years Ended June 30,2006


2005


2004Revenues:United States

$
14,750


$
5,323


$
3,534Europe


14,020



6,905



6,063Asia


18,636



11,255



8,998Canada


7,440



10,872



15,733Totals

$
54,846


$
34,355


$
34,328     June 30,2006


2005United States

$
5,604


$
7,037Peoples Republic of China


17,839



18,260Totals

$
23,443


$
25,297   Executive
    Officers
    Name

Age

PositionJoseph Y. Liu


55


Chief Executive Officer, President
    and DirectorBruce D. Horn


55


Chief Financial Officer and
    TreasurerChi-Min (James) Cheng


60


General Manager, China/MacauRiver Gong


43


Vice President, Sales   Joseph Y. Liu
  Bruce D. Horn
  Chi-Min (James) Cheng
 10




---



##### Table of Contents



River Gong
  Directors
    Name

Age

PositionJoseph Y. Liu


55


Chief Executive Officer, President
    and DirectorLeonard J. LeBlanc


65


Chairman of the Board of DirectorsChieh Chang


54


DirectorJesse W. Jack


70


DirectorHua Lee


54


Director   Joseph Y. Lius
  Leonard J. LeBlanc
  Chieh Chang
  Jesse W. Jack
  Hua Lee
 11




---



##### Table of Contents



Item 1A.  Risk
    Factors    We
    have incurred significant losses in the past, and if we are
    unable to continue to increase our revenues while controlling
    our costs and operating expenses, we may be unable to sustain
    our profitability.
    We
    depend upon a small number of customers for a substantial
    portion of our revenues, and any decrease in revenues from, or
    loss of, these customers without a corresponding increase in
    revenues from other customers would harm our operating
    results.
    The
    optical networking component industry is experiencing declining
    average selling prices, which could cause our gross margins to
    decline and harm our operating results.
    Because
    none of our customers are obligated to purchase our products,
    they may cancel or defer their purchases at any time and on
    short notice, which could harm our operating
    results.
    
    may stop purchasing our products or defer their purchases at any
    time without penalty;
    are free to purchase products from our competitors; 12




---



##### Table of Contents




    are not required to make minimum purchases; and
    may cancel orders that they place with us.    Our
    quarterly revenues and operating results are difficult to
    predict and may continue to fluctuate significantly from quarter
    to quarter and, therefore, may vary from public market
    analysts or investors expectations, which could
    cause our stock price to drop.
    
    fluctuations in demand for, and sales of, our products;
    changes in customer, geographic or product mix and the average
    selling prices of our products;
    impact on our sales and margins as a result of our customers
    continued migration to contract manufacturers and the extent to
    which we engage in contract manufacturing activities;
    the availability of raw materials used in our products,
    increases in the price of these raw materials or to the extent a
    greater degree of the raw material content of our product is
    from third parties;
    economic conditions specific to the communications and related
    industries and the development and size of the markets for our
    products;
    our inability to cut costs quickly in the event of market or
    demand downturns, due to the fact that a high percentage of our
    expenses, including those related to manufacturing, engineering,
    research and development, sales and marketing and general and
    administrative functions, is fixed in the short term;
    cancellations or delays of orders or shipment rescheduling by
    our customers;
    the lingering effects of the recent economic downturn and
    resulting uncertainty of the fiber optic industry;
    the ability of our manufacturing operations in China to timely
    produce and deliver products in the quantity and of the quality
    our customers require;
    our ability to successfully improve our manufacturing
    capabilities and achieve acceptable production yields in our
    facilities in China;
    the tendency of communications equipment suppliers to
    sporadically place large orders with short lead times;
    competitive factors in the fiber optic components and subsystems
    market, including introductions of new products, new
    technologies and product enhancements by competitors,
    consolidation of competitors, customers and service provider end
    users and pricing pressures;
    our ability to develop, introduce, manufacture and ship new and
    enhanced optical networking products in a timely manner and in
    production quantities without defects or other quality issues; 13




---



##### Table of Contents




    with respect to new products, a mismatching of research and
    development expenses and sales and marketing expenses that are
    incurred in one quarter with revenues that are not recognized,
    if at all, until a subsequent quarter when the new products are
    introduced and commercially accepted; and
    costs associated with, and the outcomes of, any intellectual
    property or other litigation to which we are, or may become, a
    party.  quarter-to-quarter
  If we
    fail to effectively manage our manufacturing capability, produce
    products that meet our customers quality requirements and
    achieve acceptable production yields in China, we may not be
    able to deliver sufficient quantities of products that meet all
    of our customers order requirements in a timely manner,
    which would harm our operating results.
            
    our ability to procure the necessary raw materials and equipment
    on a timely basis;
    a potential lack of availability of qualified management and
    manufacturing personnel;
    our ability to maintain quality;
    our ability to effectively manage headcount, particularly if we
    undertake to expand our manufacturing operations; and 14




---



##### Table of Contents




    our ability to quickly and efficiently implement an adequate set
    of financial controls to effectively track and control inventory
    levels and inventory mix and to accurately predict inventory
    requirements.    Our
    products may have defects that are not detected until full
    deployment of a customers equipment, which could result in
    a loss of customers, damage to our reputation and substantial
    costs.
    
    loss of customers;
    loss of or delay in revenues;
    loss of market share;
    damage to our brand and reputation;
    inability to attract new customers or achieve market acceptance;
    diversion of development resources;
    increased service and warranty costs;
    legal actions by our customers; and
    increased insurance costs.    We
    depend on the growth and success of the communications industry,
    which is subject to severe fluctuations in economic activity and
    is also experiencing consolidation and realignment, as well as a
    trend towards outsourced manufacturing.
     15




---



##### Table of Contents



Because
    we depend on third parties to supply some of our raw materials
    and equipment, we may not be able to obtain sufficient
    quantities of these materials and equipment, or these materials
    may become unavailable due to technological changes, which could
    limit our ability to fill customer orders and harm our operating
    results.
    We
    compete in a highly competitive industry, and if we are unable
    to compete successfully or develop new products and product
    enhancements that achieve market acceptance, our revenues could
    decline, which would harm our operating results.
     16




---



##### Table of Contents



If our
    liability for U.S. and foreign taxes is greater than we have
    anticipated and reserved for, our operating results may
    suffer.
  non-U.S. tax
   17




---



##### Table of Contents



If we
    are unable to successfully integrate acquired businesses or
    technologies, our operating results may be harmed.
    
    additional operating expenses without additional revenues;
    potential dilutive issuances of equity securities;
    the incurrence of debt and contingent liabilities;
    amortization of other intangibles;
    research and development write-offs; and
    other acquisition-related expenses.    Disruption
    to commercial activities in the United States or in other
    countries, particularly in China, may adversely impact our
    results of operations, our ability to raise capital or our
    future growth.
    
    disruptions to commercial activities or damage to our facilities
    as a result of natural disasters, political unrest, war,
    terrorism, labor strikes, and work stoppages;
    difficulties and costs of staffing and managing foreign
    operations with personnel who have expertise in optical network
    technology;
    unexpected changes in regulatory or certification requirements
    for optical systems or networks;
    disruptions in the transportation of our products and other
    risks related to the infrastructure of foreign countries;
    economic instability.
    any future outbreak of severe acute respiratory syndrome, avian
    influenza and other epidemics or illnesses; and
    power shortages at our manufacturing facilities in China, which
    may lead to production delays.     18




---



##### Table of Contents



We are
    exposed to currency rate fluctuations and exchange controls that
    could adversely impact our operating results.
       19




---



##### Table of Contents



If tax
    benefits available to our subsidiaries located in China are
    reduced or repealed or our China subsidiaries fail to meet the
    requirements for utilizing such tax benefits, our financial
    condition and operating results could suffer.
    Our
    wavelength expansion products have accounted for a majority of
    our revenues, and our revenues could be harmed if the price of,
    or demand for, these products further declines or if these
    products fail to achieve broader market
    acceptance.
    If we
    are unable to protect our proprietary technology, our ability to
    succeed will be harmed.
   20




---



##### Table of Contents



We may
    be involved in intellectual property disputes in the future,
    which will divert managements attention and could cause us
    to incur significant costs and prevent us from selling or using
    the challenged technology.
        
    obtain from the owner of the infringed intellectual property
    right a license to sell or use the relevant technology, which
    license may not be available on reasonable terms, or at all;
    stop selling, incorporating or using our products that use the
    challenged intellectual property;
    pay substantial money damages; or
    redesign the products that use the technology.   21




---



##### Table of Contents



We are
    the target of a securities class action complaint and are at
    risk of securities class action litigation, which could result
    in costs and divert management attention and
    resources.
    Our
    lengthy and variable qualification and sales cycle requires us
    to incur substantial costs to make a sale, and if the sale does
    not occur then we will have incurred these expenses without
    obtaining increased sales.
      We
    depend on key personnel to manage our business effectively in a
    rapidly changing market, and if we are unable to retain our key
    employees and hire additional personnel, our ability to sell our
    products could be harmed.
     22




---



##### Table of Contents



Because
    some of our third-party sales representatives and distributors
    carry products of one or more of our competitors, they may not
    recommend our products over competitors
    products.
    Our
    failure to comply with governmental regulations could subject us
    to liability.
         23




---



##### Table of Contents



Enacted
    and proposed changes in securities laws and regulations have
    increased and are likely to continue to increase our
    costs.
    Failure
    to maintain effective internal controls in accordance with
    Section 404 of the Sarbanes-Oxley Act of 2002 could impair
    the reliability of our financial statements, cause us to delay
    filing our periodic reports with the SEC, harm our reputation
    and adversely affect our stock price.
  Form 10-K Form 10-K. Form 10-K Form 10-K
  Changes
    in existing financial accounting standards or practices may
    adversely affect our results of operations.
   24




---



##### Table of Contents



Because
    of the rapid changes taking place in the fiber optics industry,
    we expect to experience significant volatility in our stock
    price, which could cause you to lose all or part of your
    investment.
    
    economic downturn in the fiber optics industry;
    preannouncement of financial results;
    quarterly variations in our operating results;
    changes in financial estimates by securities analysts and our
    failure to meet estimates;
    changes in market values of comparable companies;
    announcements by our competitors or us of new products or of
    significant acquisitions, strategic partnerships or joint
    ventures;
    any loss by us of a major customer;
    the outcome of, and costs associated with, any litigation to
    which we are or may become a party;
    additions or departures of key management or engineering
    personnel; and
    future sales of our common stock.    Provisions
    of our charter documents and Delaware law and other arrangements
    may have anti-takeover effects that could prevent any change in
    control, which could negatively affect your
    investment.
    
    issue preferred stock with rights senior to those of the common
    stock without any further vote or action by the stockholders;
    provide for a classified board of directors;
    eliminate the right of the stockholders to call a special
    meeting of stockholders;
    eliminate the right of stockholders to act by written
    consent; and 25




---



##### Table of Contents




    impose various procedural and other requirements, which could
    make it difficult for stockholders to effect certain corporate
    actions.      Item 2.
    Properties          Item 3.
    Legal
    Proceedings  In re Oplink
    Communications, Inc. Initial Public Offering Securities
    Litigation No. 01-CV-9904.
     26




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders.   27




---



##### Table of Contents



Part II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    for Registrants Common Equity
    High


LowFiscal 2006:Quarter ended June 30, 2006

$
20.53


$
15.55Quarter ended March 31, 2006

$
19.29


$
13.86Quarter ended December 31,
    2005

$
15.36


$
9.59Quarter ended September 30,
    2005

$
12.18


$
10.01Fiscal 2005:Quarter ended June 30, 2005

$
12.04


$
9.24Quarter ended March 31, 2005

$
13.86


$
9.80Quarter ended December 31,
    2004

$
15.89


$
11.41Quarter ended September 30,
    2004

$
15.75


$
10.22     Use of
    Proceeds From Sales of Registered Securities
  Form S-1 (No. 333-41506).
  Repurchases
    of Equity Securities
  Rule 10b5-1
 28




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K. Form 10-K. 53-week Form 10-K.
  Years Ended June 30,2006


2005


2004


2003


2002(In thousands, except per share data)Consolidated Statement of
    Operations Data:Revenues

$
54,846


$
34,355


$
34,328


$
22,743


$
37,939Cost of revenues:Cost of revenues


39,121



24,709



22,736



23,080



48,512Stock compensation expense
    (recovery)


248



27



177



(415
)


342Total cost of revenues


39,369



24,736



22,913



22,665



48,854Gross profit (loss)


15,477



9,619



11,415



78



(10,915
)Operating expenses:Research and development:Research and development


6,140



7,173



7,056



8,765



13,927Stock compensation expense


557



2



448



42



984Total research and development


6,697



7,175



7,504



8,807



14,911Sales and marketing:Sales and marketing


4,092



3,629



3,329



4,235



8,079Stock compensation expense
    (recovery)


580



84



53



172



(328
)Total sales and marketing


4,672



3,713



3,382



4,407



7,751General and administrative:General and administrative


6,300



6,160



6,619



7,009



7,247Stock compensation expense


1,279



110



1,011



2,074



3,716Total general and administrative


7,579



6,270



7,630



9,083



10,963Impairment charge






322







2,825



Restructuring costs and other
    charges


(72
)






452



14,123



28,908Merger fees






(904
)






1,300



1,844In-process research and development


1,120







1,565







Amortization of goodwill,
    intangible and other assets


72



185



56



78



168Total operating expenses


20,068



16,761



20,589



40,623



64,545Loss from operations


(4,591
)


(7,142
)


(9,174
)


(40,545
)


(75,460
)Interest and other income, net


7,060



4,591



2,665



4,016



4,713(Loss) gain on sale of assets


(458
)


(96
)


68



(258
)


2,373Income (loss) before provision for
    income taxes


2,011



(2,647
)


(6,441
)


(36,787
)


(68,374
)Provision for income taxes


73















Net income (loss)

$
1,938


$
(2,647
)

$
(6,441
)

$
(36,787
)

$
(68,374
)Net income (loss) per share:Basic

$
0.09


$
(0.13
)

$
(0.31
)

$
(1.62
)

$
(2.94
)Diluted

$
0.09


$
(0.13
)

$
(0.31
)

$
(1.62
)

$
(2.94
)Shares used in per share
    calculation:Basic


21,353



21,153



20,783



22,683



23,241Diluted


22,184



21,153



20,783



22,683



23,241  29




---



##### Table of Contents



June 30,2006


2005


2004


2003


2002(In thousands)Consolidated Balance Sheet
    Data:Cash, cash equivalents, and
    short-term and long-term investments

$
188,280


$
186,133


$
190,443


$
188,103


$
224,749Working capital


138,276



132,260



137,268



185,138



218,683Total assets


237,955



228,273



232,941



233,793



303,287Long-term liabilities


83







104



1,555



6,894Total stockholders equity


227,140



218,571



219,740



218,766



273,374     one-for-seven
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  This discussion contains forward-looking statements within
    the meaning of Section 27A of the Securities Act of 1933,
    as amended, and Section 21E of the Securities Exchange Act
    of 1934, including, without limitation, statements regarding our
    anticipated revenues, gross margins and expense levels for
    future periods, and other statements reflecting our
    expectations, beliefs, intentions or future strategies that are
    signified by the words expect,
    anticipate, intend, believe,
    estimate or assume or similar language.
    All forward-looking statements included herein are based on
    information available to us on the date hereof, and we assume no
    obligation to update any such forward-looking statements. We
    caution you that our business and financial performance are
    subject to substantial risks and uncertainties. Actual results
    could differ materially from those projected in the
    forward-looking statements. In evaluating our business, you
    should also carefully consider the information set forth under
    the caption Risk Factors contained in Item 1A
    above in addition to the information contained in this
    Item 7. We undertake no obligation to update publicly any
    forward-looking statements, whether as a result of new
    information, future events or otherwise.
    53-week
    Overview
   30




---



##### Table of Contents



REVENUES.
  COST OF REVENUES.
  RESEARCH AND DEVELOPMENT EXPENSES.
  SALES AND MARKETING EXPENSES.
  GENERAL AND ADMINISTRATIVE EXPENSES.
 31




---



##### Table of Contents



STOCK COMPENSATION EXPENSE.
  fair-value-based
  No. 96-18,
  ACQUISITIONS.
 32




---



##### Table of Contents



Use of
    Estimates and Critical Accounting Policies
    Revenue
    Recognition and Product Returns
    Warranty
    Obligations
    Allowance
    for Doubtful Accounts
   33




---



##### Table of Contents



Excess
    and Obsolete Inventory
    Long-Lived
    Asset Valuation
    Business
    Combination
   34




---



##### Table of Contents



Deferred
    Taxes
    Stock
    Compensation
        Results
    of Operations
  For Each
    of the Years Ended June 30, 2006, 2005 and 2004
  REVENUES
  Years Ended








Years EndedJune 30,





Percentage


June 30,





Percentage2006


2005


Change


Change


2005


2004


Change


Change(In thousands, except percentages)Revenues

$
54,846


$
34,355


$
20,491



59.6
%

$
34,355


$
34,328


$
27



0.1
%    35




---



##### Table of Contents



GROSS
    PROFIT
  Years Ended








Years EndedJune 30,





Percentage


June 30,





Percentage2006


2005


Change


Change


2005


2004


Change


Change(In thousands, except percentages)Gross profit

$
15,477


$
9,619


$
5,858



60.9
%

$
9,619


$
11,415


$
(1,796
)


(15.7
)%Gross profit margin


28.2
%


28.0
%










28.0
%


33.3
%            36




---



##### Table of Contents



RESEARCH
    AND DEVELOPMENT
  Years Ended








Years EndedJune 30,





Percentage


June 30,





Percentage2006


2005


Change


Change


2005


2004


Change


Change(In thousands, except percentages)Research and development

$
6,697


$
7,175


$
(478
)


(6.7
)%

$
7,175


$
7,504


$
(329
)


(4.4
)%         SALES AND
    MARKETING
  Years Ended








Years EndedJune 30,





Percentage


June 30,





Percentage2006


2005


Change


Change


2005


2004


Change


Change(In thousands, except percentages)Sales and marketing

$
4,672


$
3,713


$
959



25.8
%

$
3,713


$
3,382


$
331



9.8
%         GENERAL
    AND ADMINISTRATIVE
  Years Ended








Years EndedJune 30,





Percentage


June 30,





Percentage2006


2005


Change


Change


2005


2004


Change


Change(In thousands, except percentages)General and administrative

$
7,579


$
6,270


$
1,309



20.9
%

$
6,270


$
7,630


$
(1,360
)


(17.8
)%   Sarbanes-Oxley
   37




---



##### Table of Contents



STOCK
    COMPENSATION EXPENSE
  Years Ended








Years EndedJune 30,





Percentage


June 30,





Percentage2006


2005


Change


Change


2005


2004


Change


Change(In thousands, except percentages)Stock compensation expense

$
2,664


$
223


$
2,441



1094.6
%

$
223


$
1,689


$
(1,466
)


(86.8
)%     fair-value-based
  No. 96-18,
 38




---



##### Table of Contents



IMPAIRMENT CHARGE.
  RESTRUCTURING COSTS AND OTHER CHARGES.
  Consolidation ofWorkforce


Excess FacilitiesReduction


and Other Charges


TotalBalance at June 30, 2003

$
176


$
4,314


$
4,490Less: accrued restructuring costs,
    current










3,018Accrued restructuring costs, non
    current









$
1,472Additional restructuring charge in
    the fourth quarter of fiscal 2004






452



452Adjustment


99



(99
)


Cash payments


(275
)


(2,768
)


(3,043
)Balance at June 30, 2004






1,899


$
1,899Less: accrued restructuring costs,
    current










1,795Accrued restructuring costs, non
    current









$
104Cash payments






(1,836
)


(1,836
)Balance at June 30, 2005






63


$
63Cash payments






(63
)


(63
)Balance at June 30, 2006

$



$



$
       MERGER FEES.
 39




---



##### Table of Contents



IN-PROCESS RESEARCH AND DEVELOPMENT. hardware/software
              AMORTIZATION OF INTANGIBLE AND OTHER
    ASSETS.
  INTEREST
    AND OTHER INCOME, NET
  Years Ended








Years EndedJune 30,





Percentage


June 30,





Percentage2006


2005


Change


Change


2005


2004


Change


Change(In thousands, except percentages)Interest and other income,
    net

$
7,060


$
4,591


$
2,469



53.8
%

$
4,591


$
2,665


$
1,926



72.3
%  40




---



##### Table of Contents



GAIN (LOSS) ON SALE OF ASSETS.
  PROVISION FOR INCOME TAXES.
 41




---



##### Table of Contents



Quarterly
    Results of Operations
    Three Months EndedJune 30,


Mar. 31,


Dec. 31,


Sept. 30,2006


2006


2005


2005(In thousands, except per share data)(Unaudited)Revenues

$
16,915


$
14,597


$
12,651


$
10,683Cost of revenues:Cost of revenues


11,676



10,223



9,164



8,058Stock compensation expense


72



55



66



55Total cost of revenues


11,748



10,278



9,230



8,113Gross profit


5,167



4,319



3,421



2,570Operating expenses:Research and development:Research and development


1,767



1,547



1,338



1,488Stock compensation expense


109



141



154



153Total research and development


1,876



1,688



1,492



1,641Sales and marketing:Sales and marketing


1,238



1,083



886



885Stock compensation expense


176



121



141



142Total sales and marketing


1,414



1,204



1,027



1,027General and administrative:General and administrative


1,512



1,451



1,701



1,636Stock compensation expense


472



278



282



247Total general and administrative


1,984



1,729



1,983



1,883Restructuring costs and other
    charges


(72
)










Amortization of intangible and
    other assets


27



27



18



In-process research and development










1,120



Total operating expenses


5,229



4,648



5,640



4,551Loss from operations


(62
)


(329
)


(2,219
)


(1,981
)Interest and other income, net


2,024



1,843



1,633



1,560Gain (loss) on sale of assets


14



(445
)


(8
)


(19
)Income (loss) before provision for
    income taxes


1,976



1,069



(594
)


(440
)Provision for income taxes


32



41







Net income (loss)

$
1,944


$
1,028


$
(594
)

$
(440
)Net income (loss) per share(2):Basic

$
0.09


$
0.05


$
(0.03
)

$
(0.02
)Diluted

$
0.09


$
0.05


$
(0.03
)

$
(0.02
)Shares used in per share
    calculation(2):Basic


21,466



21,355



21,318



21,274Diluted


22,508



22,234



21,318



21,274  42




---



##### Table of Contents



Three Months EndedJune 30,


Mar. 31,


Dec. 31,


Sept. 30,2005(1)


2005


2004


2004(In thousands, except per share data)(Unaudited)Revenues

$
8,882


$
8,421


$
8,144


$
8,908Cost of revenues:Cost of revenues


5,557



6,260



6,939



5,953Stock compensation expense














27Total cost of revenues


5,557



6,260



6,939



5,980Gross profit


3,325



2,161



1,205



2,928Operating expenses:Research and development:Research and development


1,544



1,929



1,795



1,905Stock compensation expense














2Total research and development


1,544



1,929



1,795



1,907Sales and marketing:Sales and marketing


819



935



1,042



833Stock compensation expense










79



5Total sales and marketing


819



935



1,121



838General and administrative:General and administrative


1,336



1,517



1,556



1,751Stock compensation expense


17



22



26



45Total general and administrative


1,353



1,539



1,582



1,796Impairment charge


322











Merger fees






(904
)






Amortization of intangible and
    other assets


47



46



46



46Total operating expenses


4,085



3,545



4,544



4,587Loss from operations


(760
)


(1,384
)


(3,339
)


(1,659
)Interest and other income, net


1,547



1,193



1,050



801Gain (loss) on sale of assets


81



(168
)


7



(16
)Net income (loss)

$
868


$
(359
)

$
(2,282
)

$
(874
)Net income (loss) per share(2):Basic

$
0.04


$
(0.02
)

$
(0.11
)

$
(0.04
)Diluted

$
0.04


$
(0.02
)

$
(0.11
)

$
(0.04
)Shares used in per share
    calculation(2):Basic


21,229



21,174



21,140



21,073Diluted


21,869



21,174



21,140



21,073     (1)
    
    Net income for the quarter ended June 30, 2005 included a
    one time benefit of $1.3 million related to the resolution
    of vendor liabilities.(2)
    
    On November 7, 2005, we announced a
    one-for-seven
    reverse split of our common stock. The effective date of the
    reverse stock split was November 9, 2005. All share, share
    equivalent and per share amounts have been adjusted to reflect
    the reverse stock split. 43




---



##### Table of Contents




    economic downturn and uncertainty of the fiber optic industry;
    economic conditions specific to the communications and related
    industries and the development and size of the markets for our
    products;
    fluctuations in demand for, and sales of, our products;
    our inability to cut costs quickly in the event of market or
    demand downturns, due to the fact that a high percentage of our
    expenses, including those related to manufacturing, engineering,
    research and development, sales and marketing and general and
    administrative functions, is fixed in the short term;
    cancellations of orders and shipment rescheduling;
    the ability of our manufacturing operations in China to timely
    produce and deliver products
    and          
    components in the quantity and of the quality our customers
    require;
    the availability of raw materials used in our products and
    increases in the price of these raw materials;
    our ability to successfully improve our manufacturing capability
    and achieve acceptable production yields in our facilities in
    China;
    the practice of communication equipment suppliers to
    sporadically place large orders with short lead times;
    the mix of products, including products that may contain a
    greater degree of raw material from third parties, and the
    average selling prices of the products we sell;
    competitive factors in the fiber optic components and subsystems
    market, including introductions of new products, new
    technologies and product enhancements by competitors,
    consolidation of competitors and pricing pressures;
    consolidation of our customers
    and/or the
    service provider end users may cause cancellation or delay of
    orders;
    our ability to develop, introduce, manufacture and ship new and
    enhanced optical networking products in a timely manner without
    defects;
    with respect to new products, a mismatching of research and
    development expenses and sales and marketing expenses that are
    incurred in one quarter with revenues that are not recognized,
    if at all, until a subsequent quarter when the new products are
    introduced and commercially accepted; and
    costs associated with and the outcomes of any intellectual
    property or other litigation to which we are, or may become, a
    party.  quarter-to-quarter
  Liquidity
    and Capital Resources
     44




---



##### Table of Contents



Fiscal
    2006
                     45




---



##### Table of Contents



Fiscal
    2005
                  Fiscal
    2004
         46




---



##### Table of Contents



Contractual
    Obligations
    Contractual Obligations Due by PeriodLess Than


1-3


4-5


AfterContractual Obligations

Total


1 Year


Years


Years


5 YearsPurchase obligations

$
5,957


$
5,943


$
14


$



$
Operating leases


640



333



307







Total

$
6,597


$
6,276


$
321


$



$
   Recent
    Accounting Pronouncements
         47




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest
    Rate Exposure
      held-to-maturity
  Carrying


Average Rate


Carrying


Average RateValue at


of Return at


Value at


of Return atJune 30,


June 30,


June 30,


June 30,2006


2006


2005


2005(Annualized)





(Annualized)Investment Securities:Cash equivalents 
    variable rate

$
1,195



5.0
%

$
26,464



3.1
%Short-term investments 
    variable rate


24,669



4.0
%


68,676



3.3
%Short-term investments 
    fixed rate


92,726



4.2
%


27,020



2.1
%Long-term investments 
    fixed rate


63,029



4.9
%


60,727



3.4
%Total

$
181,619






$
182,887   48




---



##### Table of Contents



Expected Fiscal Year Maturity Date2007


2008


2009


Total


Fair ValueLong-term investments 
    fixed rate

$



$
63,029


$



$
63,029


$
62,497Average interest rate






4.9
%






4.9
%   Foreign
    Currency Exchange Rate Exposure
        Item 8.
    Financial
    Statements and Supplementary Data  page F-1,
  Item 9.
    Changes
    In and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Managements
    Annual Report on Internal Control Over Financial
    Reporting
   49




---



##### Table of Contents



Internal Control 
    Integrated Framework.
    Changes
    in Internal Controls
   50




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated
    Framework
          ,
  
    51




---



##### Table of Contents



Part III  Item 10.
    Directors
    and Executive Officers of the Registrant  Form 10-K
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   Part IV  Item 15.
    Exhibits
    and Financial Statement Schedules.    Financial Statements
    Financial Statement Schedules
   52




---



##### Table of Contents



Exhibits
  Exhibit No.

Description3
.1(1)

Amended and Restated Certificate
    of Incorporation of Oplink.3
.2(1)

Bylaws of Oplink.3
.3(2)

Certificate of Designation of
    Series A Junior Participating Preferred Stock.3
.4(3)

Certificate of Amendment to
    Amended and Restated Certificate of Incorporation of the
    Registrant.4
.1(1)(2)

Reference is made to
    Exhibits 3.1, 3.2 and 3.3.4
.2(1)

Third Amended and Restated Rights
    Agreement, dated as of February 7, 2000 by and among Oplink
    and the investors listed on Exhibit A attached thereto.4
.3(2)

Rights Agreement, dated as of
    March 18, 2002, between Oplink Communications, Inc. and The
    Bank of New York.10
.2(1)

State-owned Land Use Rights
    Assignment Contract dated May 16, 2000 by and between
    Oplink Communications Inc. and Zhuhai Bonded Area Management
    Committee.10
.6(1)(5)

Oplinks 2000 Equity
    Incentive Plan.10
.7(1)(5)

Oplinks 2000 Employee Stock
    Purchase Plan.10
.8(1)(5)

Oplinks 1995 Stock Plan.10
.9(1)(5)

Oplinks 1998 Stock Plan.10
.10(1)(5)

Oplink Form of Indemnity Agreement.10
.14(3)(5)

Form of Stock Option Agreement
    between Oplink and Chieh Chang, Herbert Chang and Leonard
    LeBlanc.10
.22(4)(5)

Amended and Restated Executive
    Corporate Event Agreement, dated February 20, 2003, by and
    between the Registrant and Bruce Horn.10
.24(4)(5)

Executive Corporate Event
    Agreement, dated February 24, 2003, by and between the
    Registrant and River Gong.10
.25(4)(5)

Executive Corporate Event
    Agreement, dated March 21, 2003, by and between the
    Registrant and Joseph Y. Liu.10
.27(5)(6)

Consulting Agreement dated as of
    January 17, 2004, by and between the Registrant and Allen
    Hsu.10
.29(7)

Building Purchase Agreement dated
    April 15, 2004 by and between the Registrant and
    Dianne S. Gagos & Mitchell S. Gagos,
    Trustees, The Dianne S. Gagos Survivors Trust, U/I/D
    April 8, 1992.10
.30(8)

Amendment to Amended and Restated
    Executive Corporate Event Agreement between the Registrant and
    Bruce Horn, dated August 14, 2003.10
.31(8)

Amendment to Executive Corporate
    Event Agreement between the Registrant and River Gong, dated
    August 14, 2003.21
.1

Subsidiaries of Oplink.23
.1

Consent of Burr, Pilger &
    Mayer LLP.23
.2

Consent of PricewaterhouseCoopers
    LLP.24
.1

Power of Attorney is contained on
    the Signatures page.31
.1

Certification of Chief Executive
    Officer Required under
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    of the Securities Exchange Act of 1934, as amended.31
.2

Certification of Chief Financial
    Officer Required under
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    of the Securities Exchange Act of 1934, as amended.32
.1*

Certification of Chief Executive
    Officer Required under
    Rule 13a-14(b)
    or
    Rule 15d-14(b)
    of the Securities Exchange Act of 1934, as amended, and
    18 U.S.C. Section 1350.32
.2*

Certification of Financial Officer
    Required under
    Rule 13a-14(b)
    or
    Rule 15d-14(b)
    of the Securities Exchange Act of 1934, as amended, and
    Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. Section 1350).  53




---



##### Table of Contents



(1)
    
    Previously filed as an Exhibit to the Registrants
    Registration Statement on
    Form S-1
    No. 333-41506,
    as amended, filed on September 20, 2000 and incorporated
    herein by reference.(2)
    
    Previously filed as an Exhibit to the Registrants Report
    on
    Form 8-K
    filed on March 22, 2002 and incorporated herein by
    reference.(3)
    
    Previously filed as an Exhibit to the Registrants Annual
    Report on Form
    10-K filed
    on September 30, 2002 and incorporated herein by reference.(4)
    
    Previously filed as an Exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed on filed on May 13, 2003 and incorporated herein by
    reference.(5)
    
    Management contract or compensatory plan or arrangement.(6)
    
    Previously filed as an Exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed on May 11, 2004 and incorporated herein by reference.(7)
    
    Previously filed as an Exhibit to the Registrants Annual
    Report on
    Form 10-K
    filed on September 10, 2004 and incorporated herein by
    reference.(8)
    
    Previously filed as an Exhibit to the Registrants Annual
    Report on
    Form 10-K
    filed on September 23, 2005 and incorporated herein by
    reference.*
    
    The certifications attached as Exhibits 32.1 and 32.2
    accompany this Annual Report on
    Form 10-K
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    and shall not be deemed filed by Oplink for purposes
    of Section 18 of the Securities Exchange Act of 1934, as
    amended. 54




---



##### Table of Contents



SIGNATURES      By:
    /s/  Bruce
    D. Horn      attorneys-in-fact, Form 10-K, attorneys-in-fact,
    Signature

Title

Date/s/  Joseph
    Y. LiuJoseph
    Y. Liu

Chief Executive Officer and
    President (Principal Executive Officer)

September 15, 2006/s/  Bruce
    D. HornBruce
    D. Horn

Chief Financial Officer
    (Principal Financial and
    Accounting Officer)

September 15, 2006/s/  Leonard
    J. LeBlancLeonard
    J. LeBlanc

Chairman of the Board

September 15, 2006/s/  Chieh
    ChangChieh
    Chang

Director

September 15, 2006/s/  Jesse
    W. JackJesse
    W. Jack

Director

September 15, 2006/s/  Hua
    LeeHua
    Lee

Director

September 15, 2006  55




---



##### Table of Contents



Oplink
    Communications, Inc.
  Index to Financial Statements
  PageReport of Burr,
    Pilger & Mayer LLP


F-2Report of
    PricewaterhouseCoopers LLP


F-3Consolidated
    Balance Sheets


F-4Consolidated
    Statements of Operations


F-5Consolidated
    Statements of Stockholders Equity


F-6Consolidated
    Statements of Cash Flows


F-7Notes to
    Consolidated Financial Statements


F-8Report of
    PricewaterhouseCoopers LLP on Financial Statement
    Schedule


F-37Schedule II 
    Valuation and Qualifying Accounts


F-38  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
         Internal Control  Integrated
    Framework
  
    F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
         F-3




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  CONSOLIDATED BALANCE SHEETS
  June 30,2006


2005(In thousands, except share and per share data)ASSETSCurrent assets:Cash and cash equivalents

$
7,856


$
29,710Short-term investments


117,395



95,696Accounts receivable, net


13,369



7,127Inventories, net


7,953



6,999Prepaid expenses and other current
    assets


2,435



2,430Total current assets


149,008



141,962Long-term investments


63,029



60,727Property, plant and equipment, net


23,443



25,297Goodwill and intangible assets, net


1,694



Other assets


781



287Total assets

$
237,955


$
228,273LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,516


$
3,658Accrued liabilities


6,216



6,044Total current liabilities


10,732



9,702Non-current liabilities


83



Total liabilities


10,815



9,702Commitments and contingencies
    (Note 12)Stockholders equity:Common stock, $0.001 par
    value, 400,000,000 shares authorized; 21,521,989 and
    21,251,873 shares issued and outstanding as of
    June 30, 2006 and 2005, respectively


22



21Additional paid-in capital


451,030



445,612Treasury stock, at cost
    (1,248 shares as of June 30, 2006)


(11
)


Deferred stock compensation






(37
)Accumulated other comprehensive
    income


1,248



62Accumulated deficit


(225,149
)


(227,087
)Total stockholders equity


227,140



218,571Total liabilities and
    stockholders equity

$
237,955


$
228,273    F-4




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS
  Years Ended June 30,2006


2005


2004(In thousands, except per share data)Revenues

$
54,846


$
34,355


$
34,328Cost of revenues:Cost of revenues


39,121



24,709



22,736Stock compensation expense


248



27



177Total cost of revenues


39,369



24,736



22,913Gross profit


15,477



9,619



11,415Operating expenses:Research and development:Research and development


6,140



7,173



7,056Stock compensation expense


557



2



448Total research and development


6,697



7,175



7,504Sales and marketing:Sales and marketing


4,092



3,629



3,329Stock compensation expense


580



84



53Total sales and marketing


4,672



3,713



3,382General and administrative:General and administrative


6,300



6,160



6,619Stock compensation expense


1,279



110



1,011Total general and administrative


7,579



6,270



7,630Impairment charge






322



Restructuring costs and other
    charges


(72
)






452Merger fees






(904
)


In-process research and development


1,120







1,565Amortization of intangible and
    other assets


72



185



56Total operating expenses


20,068



16,761



20,589Loss from operations


(4,591
)


(7,142
)


(9,174
)Interest and other income, net


7,060



4,591



2,665(Loss) gain on sale of assets


(458
)


(96
)


68Income (loss) before provision for
    income taxes


2,011



(2,647
)


(6,441
)Provision for income taxes


73







Net income (loss)

$
1,938


$
(2,647
)

$
(6,441
)Net income (loss) per share:Basic

$
0.09


$
(0.13
)

$
(0.31
)Diluted

$
0.09


$
(0.13
)

$
(0.31
)Shares used in per share
    calculation:Basic


21,353



21,153



20,783Diluted


22,184



21,153



20,783    F-5




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
  AccumulatedAdditional





Deferred


Other





TotalCommon Stock


Paid in


Treasury


Stock


Comprehensive


Accumulated


StockholdersShares


Amount


Capital


Stock


Compensation


Income (Loss)


Deficit


Equity(In thousands, except share data)Balance at June 30, 2003


20,298,382


$
20


$
463,571


$
(25,276
)

$
(1,521
)

$
(29
)

$
(217,999
)

$
218,766Exercise of stock options


539,871



1



3,233



















3,234Issuance of common stock from ESPP


143,586







785



















785Retirement of treasury stock










(25,276
)


25,276















Stock compensation










412



















412Amortization of deferred
    compensation










(86
)






1,363











1,277Issuance of common stock in
    connection with acquisition


85,714







1,612



















1,612Components of comprehensive loss:Net loss


























(6,441
)


(6,441
)Change in cumulative translation
    adjustments






















57







57Unrealized gain on investments






















38







38Total comprehensive loss






























(6,346
)Balance at June 30, 2004


21,067,553



21



444,251







(158
)


66



(224,440
)


219,740Exercise of stock options


39,267







263



















263Issuance of common stock from ESPP


145,053







996



















996Stock compensation










102



















102Amortization of deferred
    compensation


















121











121Components of comprehensive loss:Net loss


























(2,647
)


(2,647
)Change in cumulative translation
    adjustments






















(7
)






(7
)Unrealized gain on investments






















3







3Total comprehensive loss






























(2,651
)Balance at June 30, 2005


21,251,873



21



445,612







(37
)


62



(227,087
)


218,571Exercise of stock options


180,433



1



1,959



















1,960Issuance of common stock from ESPP


90,931







803



















803Repurchase of common stock


(1,248
)










(11
)














(11
)Reclassification of deferred stock
    compensation balance










(37
)






37











Stock compensation










2,672



















2,672Tax benefit arising from
    disqualifying dispositions of stock options










21



















21Components of comprehensive income:Net income


























1,938



1,938Change in cumulative translation
    adjustments






















1,293







1,293Unrealized loss on investments






















(107
)






(107
)Total comprehensive income






























3,124Balance at June 30, 2006


21,521,989


$
22


$
451,030


$
(11
)

$



$
1,248


$
(225,149
)

$
227,140    F-6




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended June 30,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income (loss)

$
1,938


$
(2,647
)

$
(6,441
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:Depreciation and amortization of
    property and equipment


6,169



7,697



8,221Amortization of intangible and
    other assets


217



185



56Stock compensation expense


2,664



223



1,689Amortization of premium on
    investments


241



955



394Loss (gain) on sale or disposal of
    assets


458



96



(68
)In-process research and development


1,120







1,565Impairment charge






322



Restructuring costs and other
    charges


(72
)






Other


(10
)


(8
)


(3
)Change in assets and liabilities:Accounts receivable


(6,024
)


418



(2,829
)Inventories


(328
)


(2,232
)


(1,268
)Prepaid expenses and other current
    assets


(403
)


(78
)


(598
)Other assets


156



141



207Accounts payable


487



(1,268
)


102Accrued liabilities and accrued
    restructuring costs


(830
)


(1,433
)


(1,572
)Net cash provided by (used in)
    operating activities


5,783



2,371



(545
)Cash flows from investing
    activities:Purchases of
    available-for-sale
    investments


(46,030
)


(99,072
)


(113,508
)Sales and maturities of
    available-for-sale
    investments


63,266



113,450



148,279Purchases of
    held-to-maturity
    investments


(77,285
)


(48,000
)


(79,275
)Maturities of
    held-to-maturity
    investments


37,000



10,000



24,000Proceeds from sales of property and
    equipment


130



434



588Purchase of property and equipment


(1,662
)


(6,636
)


(305
)Acquisition of businesses, net of
    cash acquired


(5,871
)


(717
)


404Net cash used in investing
    activities


(30,452
)


(30,541
)


(19,817
)Cash flows from financing
    activities:Proceeds from issuance of common
    stock


2,763



1,259



4,019Repurchase of common stock


(11
)






Payments received on notes
    receivable






12



15Repayment of capital lease
    obligations






(81
)


(1,480
)Net cash provided by financing
    activities


2,752



1,190



2,554Effect of exchange rate changes on
    cash


63







Net decrease in cash and cash
    equivalents


(21,854
)


(26,980
)


(17,808
)Cash and cash equivalents,
    beginning of year


29,710



56,690



74,498Cash and cash equivalents, end of
    year

$
7,856


$
29,710


$
56,690Supplemental disclosures of cash
    flow information:Cash paid during the period for
    income taxes

$
25


$



$
Cash paid during the period for
    interest

$



$
6


$
37Supplemental non-cash investing
    and financing activities:Issuance of common stock in
    connection with acquisitions

$



$



$
1,612Unrealized (loss) gain on
    investments

$
(107
)

$
3


$
38    F-7




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1 
    THE COMPANY:
  The
    Company
      Risks
    and Uncertainties
    Fiscal
    Year
  53-week
 F-8




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Reclassifications
    NOTE 2 
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
  Basis
    of presentation
  non-U.S. subsidiaries,
  one-for-seven
  Use of
    estimates
    Cash
    and cash equivalents
    Investments
  held-to-maturity available-for-sale. Held-to-maturity Available-for-sale held-to-maturity
 F-9




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale held-to-maturity
  Revenue
    recognition
    Foreign
    currency translations
    Fair
    value of financial instruments
  and/or
  Concentration
    of credit risk
     F-10




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Years Ended June 30,2006


2005


2004Customer A


21
%


16
%


*Customer B


12
%


26
%


21
%Customer C


*



*



20
%Customer D


*



*



14
%     *
    
    Less than 10%.    Inventories
  first-in,
  Accounts
    Receivable and Allowance for Doubtful Accounts
    Property,
    plant and equipment
   F-11




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Long-lived
    assets
    Goodwill
    and Intangible Assets
    Income
    taxes
    Research
    and development costs
    Stock
    compensation
   F-12




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Prior to
    the Adoption of SFAS No. 123(R)
      Years EndedJune 30,2005


2004Net loss as reported

$
(2,647
)

$
(6,441
)Stock-based employee compensation
    expense included in reported net loss


144



1,689Pro forma stock compensation
    expense computed under the fair value method for all awards


(3,198
)


(6,415
)Pro forma net loss

$
(5,701
)

$
(11,167
)Basic and diluted net loss per
    share, as reported

$
(0.13
)

$
(0.31
)Pro forma basic and diluted net
    loss per share

$
(0.27
)

$
(0.54
)   Impact of
    the Adoption of SFAS No. 123(R)
    Year EndedJune 30,2006Stock-based compensation expense
    by type of award:Employee stock options

$
2,227Employee stock purchase plan


445Net change of amounts capitalized
    as inventory


(8
)Total stock-based compensation


2,664Tax effect on stock-based
    compensation


Net effect on net loss

$
2,664Effect on net income (loss) per
    share:Basic

$
(0.12
)Diluted

$
(0.12
)   paid-in-capital
 F-13




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Valuation
    Assumptions
    Years Ended June 30,2006


2005


2004Risk-free interest rate


4.73
%


3.59
%


3.32
%Expected term


4.7 years



4.0 years



4.0 yearsExpected dividends


0
%


0
%


0
%Volatility


47
%


54
%


70
%     Years Ended June 30,2006


2005


2004Risk-free interest rate


4.44
%


3.33
%


1.98
%Expected term


1.3 years



2.0 years



2.0 yearsExpected dividends


0
%


0
%


0
%Volatility


45
%


52
%


70
%    F-14




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  post-vesting 24-month
    Equity
    Incentive Program
     F-15




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     WeightedNumber of


AverageShares Available


Options


Exercisefor Grant


Outstanding


PriceBalance, June 30, 2003


5,509,959



2,922,945


$
15.1193Options granted


(678,100
)


678,100



14.7826Options exercised






(539,871
)


5.9745Options canceled


233,413



(233,413
)


24.1297Balance, June 30, 2004


5,065,272



2,827,761



15.8655Options granted


(674,929
)


674,929



11.1804Options exercised






(39,267
)


6.6619Options canceled


399,934



(399,934
)


18.7215Balance, June 30, 2005


4,790,277



3,063,489



14.5481Options granted


(1,075,567
)


1,075,567



17.7316Options exercised






(180,433
)


10.8641Options canceled


317,294



(317,294
)


19.5404Expired(1)


(5,837
)






Balance, June 30, 2006


4,026,167



3,641,329


$
15.2351     (1)
    
    The Companys 1995 Stock Option Plan terminated ten years
    after its adoption by the Companys board of directors and
    the shares not granted at the time of termination have expired.    Options Outstanding at June 30, 2006


Options Vested and Exercisable at June 30, 2006Weighted











WeightedAverage


Weighted








Average


WeightedRemaining


Average


Aggregate





Remaining


Average


AggregateNumber


Contractual


Exercise


Intrinsic


Number


Contractual


Exercise


IntrinsicRange of Exercise Price

Outstanding


Life


Price


Value


Outstanding


Life


Price


Value(In years)





(In thousand)





(In years)





(In thousand)$ 0.0001 - $  2.0000


84,159



1.0


$
0.2050


$
1,524



84,159



1.0


$
0.2050


$
1,524$ 4.0001 - $  5.0000


882,779



6.2



4.6227



12,083



823,255



6.2



4.6214



11,269$ 5.0001 - $ 10.0000


121,019



5.6



7.9274



1,256



118,430



5.5



7.9192



1,231$10.0001 - $ 11.0000


393,677



8.8



10.2450



3,175



81,304



8.5



10.1324



665$12.0001 - $ 13.0000


356,685



8.6



12.3228



2,136



81,386



7.4



12.6029



464$13.0001 - $ 15.0000


230,009



7.2



13.5297



1,100



151,721



7.0



13.5299



725$15.0001 - $ 17.0000


89,047



5.3



15.7263



230



80,761



4.8



15.6377



216$17.0001 - $ 19.0000


402,250



6.2



18.0217



165



292,618



5.1



17.8778



134$20.0001 - $ 21.0000


700,000



9.9



20.2500



















$28.0001 - $ 37.0000


299,650



4.1



35.5272







299,650



4.1



35.5272



$42.0001 - $140.0000


82,054



4.2



65.9050







82,054



4.2



65.9050



3,641,329



7.1


$
15.2351


$
21,669



2,095,338



5.6


$
14.8949


$
16,228Vested and expected to vest


3,363,744



0.6


$
15.1001


$
20,953  F-16




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     in-the-money
    Employee
    Stock Purchase Plan
      Derivative
    financial instruments and hedging activities
    Comprehensive
    income (loss)
    Net
    income (loss) per share
   F-17




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended June 30,2006


2005


2004Numerator:Net income (loss)

$
1,938


$
(2,647
)

$
(6,441
)Denominator:Weighted average shares
    outstanding  basic


21,353



21,153



20,783Effect of dilutive potential shares


831







Weighted average shares
    outstanding  diluted


22,184



21,153



20,783Net income (loss) per
    share  basic

$
0.09


$
(0.13
)

$
(0.31
)Net income (loss) per
    share  diluted

$
0.09


$
(0.13
)

$
(0.31
)Antidilutive stock options not
    included in net income (loss) per share calculation


2,184



3,063



2,828   Recently
    issued accounting standards
       F-18




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        NOTE 3 
    SHORT-TERM AND LONG-TERM INVESTMENTS
     F-19




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     June 30, 2006Gross


GrossCarrying


Amortized


Unrealized


Unrealized


EstimatedValue


Cost


Gains


Losses


Fair ValueShort-term investments:Certificates of deposit

$
390


$
390


$



$



$
390Obligations of states and
    political subdivisions


18,400



18,400











18,400Corporate securities


43,618



43,677



1



(180
)


43,498United States government agencies


54,987



55,001







(440
)


54,561Total short-term investments


117,395



117,468



1



(620
)


116,849Long-term investments:Corporate securities


3,029



3,029







(7
)


3,022United States government agencies


60,000



60,000







(525
)


59,475Total long-term investments


63,029



63,029







(532
)


62,497Total investments

$
180,424


$
180,497


$
1


$
(1,152
)

$
179,346   June 30, 2005Gross


GrossCarrying


Amortized


Unrealized


Unrealized


EstimatedValue


Cost


Gains


Losses


Fair ValueShort-term investments:Obligations of states and
    political subdivisions

$
46,400


$
46,400


$



$



$
46,400U.S. corporate securities


27,296



27,317







(29
)


27,288United States government agencies


22,000



22,000







(192
)


21,808Total short-term investments


95,696



95,717







(221
)


95,496Long-term investments:U.S. corporate securities


5,719



5,719







(126
)


5,593United States government agencies


55,008



55,008



2



(339
)


54,671Total long-term investments


60,727



60,727



2



(465
)


60,264Total investments

$
156,423


$
156,444


$
2


$
(686
)

$
155,760  F-20




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   available-for-sale held-to-maturity
  June 30, 2006Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueAvailable-for-sale
    investments:Certificates of deposit

$
390


$



$



$
390Obligations of states and
    political subdivisions


18,400











18,400Corporate securities


23,867



1



(60
)


23,808United States government agencies


5,000







(14
)


4,986Total
    available-for-sale
    investments


47,657



1



(74
)


47,584Held-to-maturity
    investments:Corporate securities


22,839







(127
)


22,712United States government agencies


110,001







(951
)


109,050Total
    held-to-maturity
    investments


132,840







(1,078
)


131,762Total investments

$
180,497


$
1


$
(1,152
)

$
179,346   June 30, 2005Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueAvailable-for-sale
    investments:Obligations of states and
    political subdivisions

$
46,400


$



$



$
46,400U.S. corporate securities


17,296







(21
)


17,275Total
    available-for-sale
    investments


63,696







(21
)


63,675Held-to-maturity
    investments:U.S. corporate securities


15,740







(134
)


15,606United States government agencies


77,008



2



(531
)


76,479Total
    held-to-maturity
    investments


92,748



2



(665
)


92,085Total investments

$
156,444


$
2


$
(686
)

$
155,760  F-21




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   available-for-sale available-for-sale held-to-maturity
  June 30, 2006In Loss Position


In Loss Position< 12 Months


12 Months and Longer


Total in Loss PositionGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesAvailable-for-sale
    investments:Corporate securities

$
17,929


$
(60
)

$



$



$
17,929


$
(60
)United States government agencies


4,986



(14
)










4,986



(14
)Total
    available-for-sale
    investments:


22,915



(74
)










22,915



(74
)Held-to-maturity
    investments:Corporate securities


17,189



(66
)


5,523



(61
)


22,712



(127
)United States government agencies


54,544



(457
)


54,506



(494
)


109,050



(951
)Total
    held-to-maturity
    investments


71,733



(523
)


60,029



(555
)


131,762



(1,078
)Total investments in loss position

$
94,648


$
(597
)

$
60,029


$
(555
)

$
154,677


$
(1,152
)   June 30, 2005In Loss Position


In Loss Position< 12 Months


12 Months and Longer


Total in Loss PositionGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesAvailable-for-sale
    investments:U.S. corporate securities

$
7,825


$
(21
)

$



$



$
7,825


$
(21
)Held-to-maturity
    investments:U.S. corporate securities


4,999



(1
)


10,607



(133
)


15,606



(134
)United States government agencies


49,669



(339
)


21,808



(192
)


71,477



(531
)Total
    held-to-maturity
    investments


54,668



(340
)


32,415



(325
)


87,083



(665
)Total investments in loss position

$
62,493


$
(361
)

$
32,415


$
(325
)

$
94,908


$
(686
)  F-22




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     June 30, 2006


June 30, 2005Amortized


Estimated


Amortized


EstimatedCost


Fair Value


Cost


Fair ValueAvailable-for-sale
    investments:Due in one year or less

$
28,357


$
28,284


$
12,596


$
12,575Due in one year to five years














Due in five years to ten years














Due after ten years


19,300



19,300



51,100



51,100Total
    available-for-sale
    investments


47,657



47,584



63,696



63,675Held-to-maturity
    investments:Due in one year or less


69,811



69,265



32,021



31,821Due in one year to five years


63,029



62,497



60,727



60,264Total
    held-to-maturity
    investments


132,840



131,762



92,748



92,085Total investments

$
180,497


$
179,346


$
156,444


$
155,760   available-for-sale held-to-maturity available-for-sale held-to-maturity
 F-23




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 4 
    RESTRUCTURING COSTS AND OTHER CHARGES
    Consolidation ofWorkforce


Excess FacilitiesReduction


and Other Charges


TotalBalance at June 30, 2003

$
176


$
4,314


$
4,490Less: accrued restructuring costs,
    current










3,018Accrued restructuring costs, non
    current









$
1,472Additional restructuring charge in
    the fourth quarter of fiscal 2004






452



452Adjustment


99



(99
)


Cash payments


(275
)


(2,768
)


(3,043
)Balance at June 30, 2004






1,899


$
1,899Less: accrued restructuring costs,
    current










1,795Accrued restructuring costs, non
    current









$
104Cash payments






(1,836
)


(1,836
)Balance at June 30, 2005






63


$
63Cash payments






(63
)


(63
)Balance at June 30, 2006

$



$



$
       NOTE 5 
    ACQUISITIONS
  Acquisitions
    in fiscal 2006
     F-24




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      F3


FibercomCash

$
4,615


$
2,000Transaction costs


40



16Purchase price


4,655



2,016Liabilities assumed


800



Total purchase price and
    liabilities assumed

$
5,455


$
2,016Assets acquired:Cash and cash equivalents

$
279


$
Short-term investments


1,198



Other current assets


246



218Fixed assets


338



1,568Other non-current assets


593



In-process research and development


1,120



Customer relationships


163



90Trade name


163



Technology


871



50Goodwill


484



90Total

$
5,455


$
2,016       first-mile
   F-25




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Years Ended June 30,2006


2005


2004Net revenues

$
58,648


$
37,467


$
38,152Net income (loss)

$
820


$
(4,744
)

$
(8,571
)Net income (loss) per share:Basic

$
0.04


$
(0.22
)

$
(0.41
)Diluted

$
0.04


$
(0.22
)

$
(0.41
)Shares used in per share
    calculation:Basic


21,353



21,153



20,783Diluted


22,184



21,153



20,783       Acquisitions
    in fiscal 2004
     F-26




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       RedClover


Accumux


GigabitCash

$
250


$



$
1,150Value of securities issued






1,612



Transaction costs


70



50



37Purchase price


320



1,662



1,187Liabilities assumed


1,135



81



Total purchase price and assumed
    liabilities

$
1,455


$
1,743


$
1,187Assets acquired:Cash and cash equivalents

$



$
1,054


$
Inventories


11







53Fixed assets


583



393



172In-process research and development


861



251



453Patent






45



Technology










509Total

$
1,455


$
1,743


$
1,187          F-27




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         NOTE 6 
    GOODWILL AND INTANGIBLE ASSETS, NET
    Estimated


Gross


AccumulatedJune 30, 2006

Useful Life


Amount


Amortization


Net(In years)Technology


4


$
921


$
145


$
776Trade name


3



163



36



127Customer relationships


3



253



36



217Total





$
1,337


$
217


$
1,120     Years Ended June 30,Reported as:

2006


2005


2004Cost of revenues

$
145


$



$
Operating expenses


72



185



56Total

$
217


$
185


$
56     Fiscal Years Ending June 30,

Amount2007

$
3692008


3692009


2972010


85$
1,120    F-28




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 7 
    BALANCE SHEET COMPONENTS (IN THOUSANDS)
  June 30,2006


2005Accounts receivable, net:Accounts receivable

$
13,547


$
7,271Less: Allowance for doubtful
    accounts


(178
)


(144
)$
13,369


$
7,127Prepaid expenses and other assets:Prepaid expenses

$
2,435


$
1,970Assets held for sale






460$
2,435


$
2,430Inventories, net:Raw materials

$
11,108


$
11,895Work-in-process


5,640



4,656Finished goods


309



1,28517,057



17,836Less: Reserves for excess and
    obsolete inventory


(9,104
)


(10,837
)$
7,953


$
6,999Property, plant and equipment, net:Production and engineering
    equipment

$
32,277


$
31,153Computer hardware and software


6,464



6,207Building and leasehold improvements


15,151



14,708Land


1,949



1,94955,841



54,017Less: Accumulated depreciation and
    amortization


(32,398
)


(28,720
)$
23,443


$
25,297Accrued liabilities:Payroll and related expenses

$
1,489


$
1,175Accrued sales commission


469



325Accrued warranty


405



560Accrued restructuring costs






63Accrued professional fees


975



1,062Remaining amounts payable for
    acquisitions


510



33Other


2,368



2,826$
6,216


$
6,044  F-29




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 8 
    ACCRUED WARRANTY
      Balance at June 30, 2004

$
700Accruals for warranties issued
    during the year


477Adjustments related to
    pre-existing warranties including expirations and changes in
    estimates


(200
)Cost of warranty repair


(417
)Balance at June 30, 2005


560Accruals for warranties issued
    during the year


242Adjustments related to
    pre-existing warranties including expirations and changes in
    estimates


(168
)Cost of warranty repair


(229
)Balance at June 30, 2006

$
405   NOTE 9 
    INCOME TAXES
  non-U.S. income non-U.S. loss
  Years Ended June 30,2006


2005


2004Current tax expense:Federal

$
73


$



$
State










Foreign










$
73


$



$
Deferred tax benefit:Federal

$



$



$
State










Foreign










$



$



$
  F-30




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     June 30,2006


2005Deferred tax assets:Net operating loss carryforwards

$
40,095


$
42,372Accruals and reserves


5,115



8,305Research and development credit
    carryforwards


4,693



4,727Gross deferred tax assets


49,903



55,404Valuation allowance


(49,513
)


(55,404
)Net deferred tax assets


390



Deferred tax liability:Deferred tax liability arising
    from acquired intangible assets


(390
)


Total net deferred tax
    assets/liability

$



$
     June 30,2006


2005


2004Tax at federal statutory rate


34
%


(34
)%


(34
)%State, net of federal benefit


0



15



19Research credit carryforward


(1
)


(1
)


1Stock compensation


28



2



10In-process research and development


19







1Foreign rate differences


(32
)


47



19Change in valuation allowance


(47
)


(29
)


(15
)Other


3







(1
)Effective tax rate


4
%



%



%          F-31




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      NOTE 10 
    STOCKHOLDERS EQUITY
  Authorized
    shares
      Purchase
    Rights Plan
      Repurchase
    of Common Stock
   F-32




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 11 
    RELATED PARTY TRANSACTIONS
  Investor
    Rights Agreement
    Indemnification
    Agreements
    Loan
    to Officers
      NOTE 12 
    COMMITMENTS AND CONTINGENCIES
  Purchase
    Obligations
   F-33




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Operating
    Leases
    Year Ending
    June 30,2007

$
3332008


2642009


43$
640     Litigation
  In re Oplink
    Communications, Inc. Initial Public Offering Securities
    Litigation No. 01-CV-9904.
     F-34




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        NOTE 13 
    SEGMENT REPORTING
  and/or
    Years Ended June 30,2006


2005


2004Revenues:United States

$
14,750


$
5,323


$
3,534Europe


14,020



6,905



6,063Asia


18,636



11,255



8,998Canada


7,440



10,872



15,733Totals

$
54,846


$
34,355


$
34,328  F-35




---



##### Table of Contents



OPLINK
    COMMUNICATIONS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     June 30,2006


2005United States

$
5,604


$
7,037Peoples Republic of China


17,839



18,260Totals

$
23,443


$
25,297   NOTE 14 
    401(K) PLAN
   F-36




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
    FINANCIAL STATEMENT SCHEDULE      Form 10-K Form 10-K
      F-37




---



##### Table of Contents



Schedule II



Oplink Communications, Inc.



Valuation and Qualifying Accounts

For the Years ended June 30, 2006, 2005 and 2004 Balance at


Charged toBeginning


Costs and





Balance atof Year


Expenses


Deductions(1)


End of Year(In thousands)Allowance for doubtful accountsYear Ended June 30, 2006

$
144


$
87


$
53


$
178Year Ended June 30, 2005

$
441


$
(147
)

$
150


$
144Year Ended June 30, 2004

$
598


$
22


$
179


$
441Inventory reserveYear Ended June 30, 2006

$
10,837


$
608


$
2,341


$
9,104Year Ended June 30, 2005

$
13,858


$
551


$
3,572


$
10,837Year Ended June 30, 2004

$
18,442


$
303


$
4,887


$
13,858Accrued restructuring costsYear Ended June 30, 2006

$
63


$



$
63


$
Year Ended June 30, 2005

$
1,899


$



$
1,836


$
63Year Ended June 30, 2004

$
4,490


$
452


$
3,043


$
1,899Product returnsYear Ended June 30, 2006

$
390


$
(150
)

$



$
240Year Ended June 30, 2005

$
332


$
58


$



$
390Year Ended June 30, 2004

$
200


$
132


$



$
332     (1)
    
    Deductions represent costs charged or amounts written off
    against the reserve or allowance. F-38




---



##### Table of Contents



INDEX TO
    EXHIBITS
  Exhibit No.

Description3
.1(1)

Amended and Restated Certificate
    of Incorporation of Oplink.3
.2(1)

Bylaws of Oplink.3
.3(2)

Certificate of Designation of
    Series A Junior Participating Preferred Stock.3
.4(3)

Certificate of Amendment to
    Amended and Restated Certificate of Incorporation of the
    Registrant.4
.1(1) (2)

Reference is made to Exhibits 3.1,
    3.2 and 3.3.4
.2(1)

Third Amended and Restated Rights
    Agreement, dated as of February 7, 2000 by and among Oplink and
    the investors listed on Exhibit A attached thereto.4
.3(2)

Rights Agreement, dated as of
    March 18, 2002, between Oplink Communications, Inc. and The Bank
    of New York.10
.2(1)

State-owned Land Use Rights
    Assignment Contract dated May 16, 2000 by and between Oplink
    Communications Inc. and Zhuhai Bonded Area Management Committee.10
.6(1)(5)

Oplinks 2000 Equity
    Incentive Plan.10
.7(1)(5)

Oplinks 2000 Employee Stock
    Purchase Plan.10
.8(1)(5)

Oplinks 1995 Stock Plan.10
.9(1)(5)

Oplinks 1998 Stock Plan.10
.10(1)(5)

Oplink Form of Indemnity Agreement.10
.14(3)(5)

Form of Stock Option Agreement
    between Oplink and Chieh Chang, Herbert Chang and Leonard
    LeBlanc.10
.22(4)(5)

Amended and Restated Executive
    Corporate Event Agreement, dated February 20, 2003, by and
    between the Registrant and Bruce Horn.10
.24(4)(5)

Executive Corporate Event
    Agreement, dated February 24, 2003, by and between the
    Registrant and River Gong.10
.25(4)(5)

Executive Corporate Event
    Agreement, dated March 21, 2003, by and between the Registrant
    and Joseph Y. Liu.10
.27(5)(6)

Consulting Agreement dated as of
    January 17, 2004, by and between the Registrant and Allen Hsu.10
.29(7)

Building Purchase Agreement dated
    April 15, 2004 by and between the Registrant and Dianne S. Gagos
    & Mitchell S. Gagos, Trustees, The Dianne S. Gagos Survivors
    Trust, U/I/D April 8, 1992.10
.30(8)

Amendment to Amended and Restated
    Executive Corporate Event Agreement between the Registrant and
    Bruce Horn, dated August 14, 2003.10
.31(8)

Amendment to Executive Corporate
    Event Agreement between the Registrant and River Gong, dated
    August 14, 2003.21
.1

Subsidiaries of Oplink.23
.1

Consent of Burr, Pilger &
    Mayer LLP.23
.2

Consent of PricewaterhouseCoopers
    LLP.24
.1

Power of Attorney is contained on
    the Signatures page.31
.1

Certification of Chief Executive
    Officer Required under Rule 13a-14(a) or Rule 15d-14(a) of the
    Securities Exchange Act of 1934, as amended.31
.2

Certification of Chief Financial
    Officer Required under Rule 13a-14(a) or Rule 15d-14(a) of the
    Securities Exchange Act of 1934, as amended.32
.1*

Certification of Chief Executive
    Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the
    Securities Exchange Act of 1934, as amended, and 18 U.S.C.
    Section 1350.32
.2*

Certification of Financial Officer
    Required under Rule 13a-14(b) or Rule 15d-14(b) of the
    Securities Exchange Act of 1934, as amended, and Section 1350 of
    Chapter 63 of Title 18 of the United States Code (18 U.S.C.
    Section 1350).     (1)
    
    Previously filed as an Exhibit to the Registrants
    Registration Statement on
    Form S-1
    No. 333-41506,
    as amended, filed on September 20, 2000 and incorporated
    herein by reference.




---



##### Table of Contents



(2)
    
    Previously filed as an Exhibit to the Registrants Report
    on
    Form 8-K
    filed on March 22, 2002 and incorporated herein by
    reference.(3)
    
    Previously filed as an Exhibit to the Registrants Annual
    Report on Form
    10-K filed
    on September 30, 2002 and incorporated herein by reference.(4)
    
    Previously filed as an Exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed on filed on May 13, 2003 and incorporated herein by
    reference.(5)
    
    Management contract or compensatory plan or arrangement.(6)
    
    Previously filed as an Exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed on May 11, 2004 and incorporated herein by reference.(7)
    
    Previously filed as an Exhibit to the Registrants Annual
    Report on
    Form 10-K
    filed on September 10, 2004 and incorporated herein by
    reference.(8)
    
    Previously filed as an Exhibit to the Registrants Annual
    Report on
    Form 10-K
    filed on September 23, 2005 and incorporated herein by
    reference.*
    
    The certifications attached as Exhibits 32.1 and 32.2
    accompany this Annual Report on
    Form 10-K
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    and shall not be deemed filed by Oplink for purposes
    of Section 18 of the Securities Exchange Act of 1934, as
    amended.