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FORM 10-Q

|xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|----------------------------------------------------------------------------------------
|                                                                                        
|                                                                                        

Commission File
Number: 000-31851

MULTILINK TECHNOLOGY CORPORATION(Exact Name of Registrant as Specified in its Charter)

|California                                                        |  | 95-4522566                          
|----------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of Incorporation or organization)    |  | (I.R.S. Employer Identification No.)
|                                                                  |  |                                     
|300 Atrium Drive, 2nd Floor, Somerset, New Jersey       08873    
|(Address of principal executive offices)(Zip Code)               
|                                                                  |  |                                     
|Registrants telephone number, including area code:(732) 537-3700
|                                                                  |  |                                     

Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YesxNo o

As of August 9, 2002, the number of shares of the Registrants common stock, $0.0001 par value per
share, issued and outstanding, were: 49,831,736 shares of Class A Common Stock and 26,000,000 shares of Class B Common Stock.

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MULTILINK TECHNOLOGY CORPORATION

FORM 10-Q

INDEX

|         |                                                                                                           | PAGE
|-------- | --------------------------------------------------------------------------------------------------------- | ----
|         |                                                                                                           |     
|PART I.  | FINANCIAL INFORMATION                                                                                     |     
|         |                                                                                                           |     
|Item 1.  | Financial Statements (unaudited):                                                                         |     
|         |                                                                                                           |     
|         | Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001                           | 1   
|         |                                                                                                           |     
|         | Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001 | 2   
|         |                                                                                                           |     
|         | Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001           | 3   
|         |                                                                                                           |     
|         | Notes to Unaudited Condensed Consolidated Financial Statements                                            | 4   
|         |                                                                                                           |     
|Item 2.  | Managements Discussion and Analysis of Financial Condition and Results of Operations                     | 10  
|         |                                                                                                           |     
|Item 3.  | Quantitative and Qualitative Disclosures about Market Risk                                                | 33  
|         |                                                                                                           |     
|PART II. | OTHER INFORMATION                                                                                         |     
|         |                                                                                                           |     
|Item 1.  | Legal Proceedings                                                                                         | 36  
|         |                                                                                                           |     
|Item 2.  | Changes in Securities and Use of Proceeds                                                                 | 36  
|         |                                                                                                           |     
|Item 3.  | Defaults Upon Senior Securities                                                                           | 36  
|         |                                                                                                           |     
|Item 4.  | Submission of Matters to a Vote of Security Holders                                                       | 36  
|         |                                                                                                           |     
|Item 5.  | Other Information                                                                                         | 37  
|         |                                                                                                           |     
|Item 6.  | Exhibits and Reports on Form 8-K                                                                          | 37  





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Part I.
FINANCIAL INFORMATION

Item 1.
Financial Statements

MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except for per share amounts)(unaudited)

|                                                        |                                                  |  |                                            |         |   | June 30, 2002 |         | December 31, 2001 |        
|------------------------------------------------------- | ------------------------------------------------ |  | ------------------------------------------ | ------- | - | ------------- | ------- | ----------------- | -------
|                                                        |                                                  |  |                                            |         |   |               |         |                   |        
|ASSETS                                                  |                                                  |  |                                            |         |   |               |        
|Current assets                                          |                                                  |  |                                            |         |   |               |        
|                                                        | Cash and cash equivalents                        |  | $                                          | 45,832  |   | $             | 49,779  |                  
|                                                        | Short term investments                           |  |                                            | 33,882  |   |               | 42,903  |                  
|                                                        | Accounts receivable, net                         |  |                                            | 1,524   |   |               | 19,849  |                  
|                                                        | Inventories                                      |  |                                            | 2,866   |   |               | 8,735   |                  
|                                                        | Prepaid expenses and other current assets        |  |                                            | 3,939   |   |               | 10,485  |                  
|                                                        |                                                  |  |                                            |         |   |               |         |                  
|                                                        |                                                  |  | Total current assets                       |         |   | 88,043        |         |                   | 131,751
|                                                        |                                                  |  |                                            |         |   |               |         |                   |        
|Property and equipment, net                             |                                                  |  | 35,245                                     |         |   | 28,160        |        
|Deferred income taxes                                   |                                                  |  |                                           |         |   | 22,790        |        
|Other assets                                            |                                                  |  | 4,271                                      |         |   | 4,352         |        
|                                                        |                                                  |  |                                            |         |   |               |        
|                                                        | Total assets                                     |  | $                                          | 127,559 |   | $             | 187,053 |                  
|                                                        |                                                  |  |                                            |         |   |               |         |                  
|                                                        |                                                  |  |                                            |         |   |               |         |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                    |                                                  |  |                                            |         |   |               |        
|Current liabilities:                                    |                                                  |  |                                            |         |   |               |        
|                                                        | Accounts payable                                 |  | $                                          | 5,715   |   | $             | 8,366   |                  
|                                                        | Accrued expenses                                 |  |                                            | 13,199  |   |               | 20,506  |                  
|                                                        | Accrued warranty costs                           |  |                                            | 793     |   |               | 1,293   |                  
|                                                        | Software and equipment financing-current portion |  |                                            | 4,944   |   |               | 1,995   |                  
|                                                        | Lease obligations-current portion                |  |                                            | 1,506   |   |               | 1,060   |                  
|                                                        | Income taxes payable                             |  |                                            | 926     |   |               |        |                  
|                                                        |                                                  |  |                                            |         |   |               |         |                  
|                                                        |                                                  |  | Total current liabilities                  |         |   | 27,083        |         |                   | 33,220 
|                                                        |                                                  |  |                                            |         |   |               |         |                   |        
|Lease obligations-net of current portion                |                                                  |  |                                           |         |   | 221           |        
|Software and equipment financing-net of current portion |                                                  |  | 7,230                                      |         |   | 1,452         |        
|                                                        |                                                  |  |                                            |         |   |               |        
|Commitments and contingencies                           |                                                  |  |                                            |         |   |               |        
|Shareholders equity:                                   |                                                  |  |                                            |         |   |               |        
|                                                        | Common stock, $.0001 par value:                  |  |                                            |         |   |               |         |                  
|                                                        |                                                  |  | Class A                                    |         |   | 5             |         |                   | 4      
|                                                        |                                                  |  | Class B                                    |         |   | 3             |         |                   | 3      
|                                                        | Additional paid-in-capital                       |  |                                            | 184,529 |   |               | 192,212 |                  
|                                                        | Deferred stock compensation                      |  |                                            | (11,856 | ) |               | (15,207 | )                
|                                                        | Accumulated deficit                              |  |                                            | (79,362 | ) |               | (24,851 | )                
|                                                        | Accumulated other comprehensive income           |  |                                            | 528     |   |               | 117     |                  
|                                                        | Shareholder loan                                 |  |                                            | (483    | ) |               |        |                  
|                                                        | Treasury stock, at cost                          |  |                                            | (118    | ) |               | (118    | )                
|                                                        |                                                  |  |                                            |         |   |               |         |                  
|                                                        |                                                  |  | Total shareholders equity                 |         |   | 93,246        |         |                   | 152,160
|                                                        |                                                  |  |                                            |         |   |               |         |                   |        
|                                                        |                                                  |  | Total liabilities and shareholders equity |         | $ | 127,559       |         | $                 | 187,053
|                                                        |                                                  |  |                                            |         |   |               |         |                   |        

See accompanying notes to condensed consolidated financial statements.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except for per share amounts)(unaudited)

|                                                                                  |  |                                                                                                                                                                    |         |                           |        | Three Months Ended June 30, |        | Six Months Ended June 30, |        
|--------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------- | ------------------------- | ------ | --------------------------- | ------ | ------------------------- | -------
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|                                                                                  |  |                                                                                                                                                                    |         |                           |        | 2002                        |        | 2001                      |        
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Total revenues.                                                                   |  | $                                                                                                                                                                  | 4,959   |                           | $      | 35,103                      |        | $                         | 15,050 
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Cost of revenues                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|                                                                                  |  | Product.                                                                                                                                                           |         |                           | 2,092  |                             |        | 12,721                    |        
|                                                                                  |  | Inventory write down and related charges.                                                                                                                          |         |                           | 5,307  |                             |        |                          |        
|                                                                                  |  | Fixed asset impairment.                                                                                                                                            |         |                           | 1,051  |                             |        |                          |        
|                                                                                  |  | Deferred stock compensation.                                                                                                                                       |         |                           | 324    |                             |        | 445                       |        
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Total cost of revenues.                                                           |  |                                                                                                                                                                    | 8,774   |                           |        | 13,166                      |        |                           | 14,783 
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Gross (loss) profit.                                                              |  |                                                                                                                                                                    | (3,815  | )                         |        | 21,937                      |        |                           | 267    
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Operating expenses:                                                               |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|                                                                                  |  | Research and development, excluding deferred stock compensation                                                                                                    |         |                           | 11,949 |                             |        | 13,259                    |        
|                                                                                  |  | Sales and marketing, excluding deferred stock compensation.                                                                                                        |         |                           | 3,720  |                             |        | 4,507                     |        
|                                                                                  |  | General and administrative, excluding deferred stock compensation                                                                                                  |         |                           | 2,068  |                             |        | 3,310                     |        
|                                                                                  |  | Deferred stock compensation.                                                                                                                                       |         |                           | 2,501  |                             |        | 2,303                     |        
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|                                                                                  |  |                                                                                                                                                                    |         | Total operating expenses. |        |                             | 20,238 |                           |        
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Operating loss.                                                                   |  |                                                                                                                                                                    | (24,053 | )                         |        | (1,442                      | )      |                           | (41,303
|Other income and expenses                                                         |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|                                                                                  |  | Interest expense.                                                                                                                                                  |         |                           | (194   | )                           |        | (88                       | )      
|                                                                                  |  | Other income (including $256 and $314 of equity losses in affiliate during the three and six months in 2002, respectively and $77 and $207 in 2001,
respectively). |         |                           | 289    |                             |        | 132                       |        
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Loss before provision (benefit) for income taxes..                                |  |                                                                                                                                                                    | (23,958 | )                         |        | (1,398                      | )      |                           | (40,817
|Provision (benefit) for income taxes.                                             |  |                                                                                                                                                                    | 20,062  |                           |        | (545                        | )      |                           | 13,694 
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Net loss.                                                                         |  |                                                                                                                                                                    | (44,020 | )                         |        | (853                        | )      |                           | (54,511
|Accretion of redeemable convertible preferred stock to redemption value           |  |                                                                                                                                                                    |        |                           |        |                            |        |                           |       
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Net loss attributable to common shareholders.                                     |  | $                                                                                                                                                                  | (44,020 | )                         | $      | (853                        | )      | $                         | (54,511
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Net loss per share, basic and diluted.                                            |  | $                                                                                                                                                                  | (0.60   | )                         | $      | (0.03                       | )      | $                         | (0.76  
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Weighted average shares of common stock, basic and diluted.                       |  |                                                                                                                                                                    | 72,911  |                           |        | 33,688                      |        |                           | 71,807 
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|The composition of the amortization of deferred stock compensation is as follows: |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|Research and development.                                                         |  | $                                                                                                                                                                  | 1,522   |                           | $      | 1,146                       |        | $                         | 2,885  
|Sales and marketing.                                                              |  |                                                                                                                                                                    | 392     |                           |        | 429                         |        |                           | 663    
|General and administrative.                                                       |  |                                                                                                                                                                    | 587     |                           |        | 728                         |        |                           | 1,166  
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        
|                                                                                  |  | Total.                                                                                                                                                             |         | $                         | 2,501  |                             | $      | 2,303                     |        
|                                                                                  |  |                                                                                                                                                                    |         |                           |        |                             |        |                           |        

See accompanying notes to condensed consolidated financial statements.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)

|                                                                                              |                                                                             |                                        |                                            |         |        | Six Months Ended June 30, |        
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------- | ------------------------------------------ | ------- | ------ | ------------------------- | -------
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              |                                                                             |                                        |                                            |         |        | 2002                      |        
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|Cash flows from operating activities:                                                         |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              | Net loss.                                                                   |                                        | $                                          | (54,511 | )      | $                         | (5,304 
|                                                                                              | Adjustments to reconcile net loss to net cash used in operating activities: |                                        |                                            |         |        |                           |        
|                                                                                              |                                                                             | Depreciation and amortization.         |                                            |         | 6,449  |                           |        
|                                                                                              |                                                                             | Fixed asset impairment charge          |                                            |         | 1,051  |                           |        
|                                                                                              |                                                                             | Inventory write down & related charges |                                            |         | 5,307  |                           |        
|                                                                                              |                                                                             | Deferred stock compensation.           |                                            |         | 5,602  |                           |        
|                                                                                              |                                                                             | Deferred income taxes.                 |                                            |         | 14,396 |                           |        
|                                                                                              |                                                                             | Equity losses in affiliate.            |                                            |         | 314    |                           |        
|                                                                                              |                                                                             | Changes in working capital items, net. |                                            |         | 13,484 |                           |        
|                                                                                              |                                                                             | Other.                                 |                                            |         | 302    |                           |        
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              |                                                                             |                                        | Net cash used in operating activities      |         |        | (7,606                    | )      
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|Cash flows from investing activities:                                                         |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              | Proceeds from sale of property and equipment.                               |                                        |                                            | 13      |        |                           |       
|                                                                                              | Purchases of property and equipment.                                        |                                        |                                            | (6,168  | )      |                           | (10,073
|                                                                                              | Purchases of non-marketable securities.                                     |                                        |                                            |        |        |                           | (1,667 
|                                                                                              | Proceeds from sales of marketable securities.                               |                                        |                                            | 39,144  |        |                           |       
|                                                                                              | Purchases of marketable securities.                                         |                                        |                                            | (30,175 | )      |                           |       
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              | Net cash provided by (used in) investing activities.                        |                                        |                                            | 2,814   |        |                           | (11,740
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|Cash flows from financing activities:                                                         |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              | Issuance of common stock, net.                                              |                                        |                                            |        |        |                           | 77,004 
|                                                                                              | Proceeds from stock option exercises.                                       |                                        |                                            | 1,159   |        |                           | 481    
|                                                                                              | Proceeds from credit facility.                                              |                                        |                                            | 2,970   |        |                           |       
|                                                                                              | Payments on lease obligations and software and equipment  financing.        |                                        |                                            | (2,730  | )      |                           | (1,339 
|                                                                                              | Treasury stock purchase.                                                    |                                        |                                            |        |        |                           | (118   
|                                                                                              | Shareholder loan.                                                           |                                        |                                            | (483    | )      |                           |       
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              |                                                                             |                                        | Net cash provided by financing activities. |         |        | 916                       |        
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|Effect of exchange rate changes on cash.                                                      |                                                                             |                                        | (71                                        | )       |        | (24                       | )      
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|Net (decrease) increase in cash and cash equivalents.                                         |                                                                             |                                        | (3,947                                     | )       |        | 61,193                    |        
|Cash and cash equivalents, beginning of period.                                               |                                                                             |                                        | 49,779                                     |         |        | 29,159                    |        
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|Cash and cash equivalents, end of period.                                                     |                                                                             | $                                      | 45,832                                     |         | $      | 90,352                    |        
|                                                                                              |                                                                             |                                        |                                            |         |        |                           |        
|Supplemental disclosures of cash flow information-Cash paid (received) during the period for: |                                                                             |                                        |                                            |         |        |                           |        
|                                                                                              | Income taxes.                                                               |                                        | $                                          | (3,515  | )      | $                         | 2,050  
|                                                                                              | Interest.                                                                   |                                        | $                                          | 271     |        | $                         | 185    

See accompanying notes to condensed consolidated financial
statements.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and
regulations.  In the opinion of management, all adjustments consisting of normal recurring items considered necessary for the fair presentation have been included.  The results of operations for the three and six months ended June 30, 2002
are not necessarily indicative of the results to be expected for the entire year.

The financial statements included herein have been
prepared with the understanding that the users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year.  Accordingly, these financial statements should be read in
conjunction with the audited financial statements and the related notes thereto contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2001.

Derivative Financial Instruments  During the six months ended June 30, 2002, the Company utilized foreign currency forward contracts. The Company
is exposed to market risk from changes in foreign currency exchange rates associated with forecasted foreign currency-denominated expenses. The Company uses foreign currency forward contracts designated as cash flow hedges to hedge this exposure and
the fair value changes of the forward contracts related to the effective portion of the hedges are initially recorded as a component of other comprehensive income. The Company utilizes these foreign currency forward contracts to hedge its
variability in U.S. dollar cash flows associated with probable forecasted foreign inter-company Euro denominated expenses because the Company reimburses its German subsidiary for such expenses. Unrealized and realized gains and losses on cash flow
hedges accumulate in other comprehensive income and are reclassified into earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. Gains and losses on derivatives that are terminated prior to
their maturity are also reclassified into earnings when the underlying hedged items impact earnings, unless it is no longer probable that the hedged forecasted transaction will occur, whereby such gains and losses are recognized immediately in
earnings. The Company hedges forecasted exposures up to 12 months in the future. For the three and six months ended June 30, 2002, hedge ineffectiveness associated with instruments designated as cash flow hedges was not significant. For the three
and six months ended June 30, 2002, net gains of less than $0.1 million were reclassified into earnings as an adjustment to research and development expense. These net gains were offset by gains and losses on the transactions being hedged. At June
30, 2002, less than $0.2 million of net derivative gains/losses included in accumulated other comprehensive income will be reclassified into earnings within twelve months from that date. The unrealized amounts in accumulated other comprehensive
income will fluctuate based on changes in fair value of open contracts at each reporting period. At June 30, 2002, the Companys liability of less than $0.3 million relating to these forward contracts is included in accrued expenses in the
accompanying condensed consolidated balance sheet.

Reclassifications Certain prior period amounts have been
reclassified in order to conform to the current period presentation.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

2.   EARNINGS PER SHARE

Basic net income or loss per share excludes dilution for
potentially dilutive securities and is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income or loss per share reflects the
potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from the computation of diluted net income or loss per share
when their inclusion would be antidilutive. A reconciliation between basic and diluted weighted average shares outstanding is as follows:

|(Amounts in thousands)                                        |  | Three Months Ended June 30, |   | Six Months Ended June 30, |  
|------------------------------------------------------------- |  | --------------------------- | - | ------------------------- | -
|                                                              |  |                             |   |                           |  
|                                                              |  | 2002                        |   | 2001                      |  
|                                                              |  |                             |   |                           |  
|Weighted average shares outstanding, basic                    |  | 72,911                      |   | 33,688                    |  
|Dilutive shares issuable in connection with stock plans.      |  | 13,914                      |   | 19,356                    |  
|Dilutive shares issuable in connection with warrants granted. |  | 358                         |   | 3,382                     |  
|Conversion of preferred stock to common stock                 |  |                            |   | 24,405                    |  
|                                                              |  |                             |   |                           |  
|Weighted average shares outstanding, diluted.                 |  | 87,183                      | * | 80,831                    | *
|                                                              |  |                             |   |                           |  

* Since there was a loss attributable to common shareholders in these periods, the basic weighted average shares outstanding were used in
calculating diluted loss per share, as inclusion of the incremental shares shown in this calculation would be antidilutive.  During the three months ended June 30, 2002, stock options and warrants totaling 22,310,247 were excluded from the
computation of diluted shares outstanding due to their antidilutive effect.

3.   INVENTORIES

Inventories consisted of the following:

| | (Amounts in thousands) |  | June 30, 2002 |       | December 31, 2001 |   |      
| | ---------------------- |  | ------------- | ----- | ----------------- | - | -----
| |                        |  |               |       |                   |   |      
| | Finished goods.        |  | $             | 804   |                   | $ | 2,007
| | Work-in-progress.      |  |               | 206   |                   |   | 1,577
| | Raw materials.         |  |               | 1,856 |                   |   | 5,151
| |                        |  |               |       |                   |   |      
| | Total                  |  | $             | 2,866 |                   | $ | 8,735
| |                        |  |               |       |                   |   |      

During the six months ended June 30, 2002, the Company recorded a charge of $5.3
million to reduce inventories to their net realizable value and to write off an advance made to a supplier. Included in the $5.3 million is a $4.8 million inventory write-down.  The inventory was written down to its net realizable value based
upon the Companys determination that excess quantities existed of certain modules and raw materials.  The excess quantities of the modules are the result of forecasted demand not developing as expected and the introduction of two new
modules.  The Company also wrote off an advance made to a finished good supplier of $0.5 million.

During the six months ended June
30, 2001, the Company recorded a charge of $4.9 million to reduce inventories to their net realizable value. $4.3 million of this charge resulted primarily from order cancellations as customers are transitioning from certain Gallium Arsenide
products to Silicon Germanium products and $0.6 million relates to inventory shrink and lower than expected production yields at three of the Companys finished good suppliers.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

4.   SEGMENT INFORMATION AND CONCENTRATION OF REVENUES

Revenues to geographic locations are as follows:

| | (Amounts in thousands) |  | Three Months Ended June 30, |       | Six Months Ended June 30, |   |       
| | ---------------------- |  | --------------------------- | ----- | ------------------------- | - | ------
| |                        |  |                             |       |                           |   |       
| |                        |  | 2002                        |       | 2001                      |   | 2002  
| |                        |  |                             |       |                           |   |       
| | North America          |  | $                           | 3,790 |                           | $ | 23,519
| | Europe                 |  |                             | 1,160 |                           |   | 11,584
| | Asia                   |  |                             | 9     |                           |   |      
| |                        |  |                             |       |                           |   |       
| |                        |  | $                           | 4,959 |                           | $ | 35,103
| |                        |  |                             |       |                           |   |       

Revenues to certain geographic locations within Europe are
as follows:

| | France         |  | $ | 664 |  | $ | 4,738 |  |  | * |  | $ | 12,715 |  | 
| | -------------- |  | - | --- |  | - | ----- |  |  | - |  | - | ------ |  | 
| |                |  |   |     |  |   |       |  |  |   |  |   |        |  | 
| | United Kingdom |  |   | *   |  | $ | 5,617 |  |  | * |  | $ | 7,110  |  | 
| |                |  |   |     |  |   |       |  |  |   |  |   |        |  | 

The following is a summary of the percentage of revenues
from major customers:

| |         |  | Three Months Ended June 30, |   | Six Months Ended June 30, |   |     
| | ------- |  | --------------------------- | - | ------------------------- | - | ----
| |         |  |                             |   |                           |   |     
| |         |  | 2002                        |   | 2001                      |   | 2002
| |         |  |                             |   |                           |   |     
| | Alcatel |  | 24                          | % | 30                        | % | 22  
| | Xtera   |  | 20                          | % | *                         |   | *   
| | Algety  |  | 11                          | % | *                         |   | *   
| | TyCom   |  | *                           |   | 29                        | % | 30  
| | Marconi |  | *                           |   | 16                        | % | *   
| | Lucent  |  | *                           |   | *                         |   | 13  

* Customers or countrys revenues represents less than 10% of total revenue in the respective period.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

5.   COMPREHENSIVE LOSS

The components of comprehensive loss, net of tax, are as
follows:

|(Amounts in thousands)                                          |  | Three Months Ended June 30, |         | Six Months Ended June 30, |  
|--------------------------------------------------------------- |  | --------------------------- | ------- | ------------------------- | -
|                                                                |  |                             |         |                           |  
|                                                                |  | 2002                        |         | 2001                      |  
|                                                                |  |                             |         |                           |  
|Net loss                                                        |  | $                           | (44,020 | )                         | $
|Change in net unrealized loss on available-for-sale investments |  |                             | 41      |                           |  
|Cash flow hedge reclassification adjustments                    |  |                             | 174     |                           |  
|Foreign currency translation adjustment                         |  |                             | 318     |                           |  
|                                                                |  |                             |         |                           |  
|Comprehensive loss                                              |  | $                           | (43,487 | )                         | $
|                                                                |  |                             |         |                           |  

6.   COMMITMENTS AND CONTINGENCIES

In May 2002, a complaint was filed in Los Angeles Superior Court against the Company, its Chief Executive Officer and its former Executive Vice President arising out
of an alleged oral joint venture agreement between the plaintiff, the Company and the named officers in connection with the development of a subsidiary of the Company in Israel. The action claims that the Company and the named officers breached an
oral agreement to deliver to the plaintiff a warrant to purchase at least 100,000 shares of the Companys stock at a price of $1.30 per share, and seeks damages in excess of $1.0 million. Although the Company has denied the allegations in the
complaint and believes that they are without merit, it cannot predict the outcome of the litigation.

The Company, in the ordinary course
of its business, is the subject of, or party to, various pending or threatened legal actions. The Company believes that an ultimate liability arising from these actions will not have a material adverse effect on its financial position, results of
operations or cash flows.

7.   RELATED PARTY TRANSACTIONS

During the three and six months ended June 30, 2002, the Company paid $0.1 million and $0.3 million, respectively, to IPAG.  Also during the three and six months
ended June 30, 2002, the Company paid $0.3 million and $0.4 million, respectively, to ASIP.  These payments were made under existing development agreements with these entities.

The Company made no purchases during the three months ended June 30, 2002 and made less than $0.1 million of purchases during six months ended June 30, 2002 from
TRW.   During the three and six months ended June 30, 2002, the Company made $0.3 million and $0.8 million of purchases from IBM.

In January 2002, the Company entered into a fullrecourse promissory note with its Executive Vice President and CoChairman, to assist the officer with the
purchase of a new home upon his transfer from the Companys European headquarters in Germany to its California facility. The note is for $0.5 million, bears interest at 5.5% per annum and is due in January 2007 (including all accrued and unpaid
interest). The note is secured by a portion of the officers Class B common stock pursuant to a pledge agreement between the Company and the officer and is payable upon the earlier of the stated due date or 30 days after the officers
employment with the Company ceases.  On August 8, 2002, the Company announced that the officer will depart from the Company on December 31, 2002, which will result in the note becoming payable on or before January 30, 2003.

8.   CREDIT FACILITY

During April 2002, the Company entered into an
unsecured $6.0 million credit facility with Comerica Bank-California.  All amounts drawn down under this facility must be used for the purchase of capital assets.  The amount drawn down under the facility from May 2002 through October 2002
will be converted into a 30-month term loan (referred to as Tranche A).  The amount drawn down under the facility from November 2002 through April 2003 will also be converted into a 30-month term loan (referred to as Tranche B).  The
Tranche A and B term loans will have a fixed interest rate determined at 150 basis points above the three year Treasury Note at the time such amounts are converted into their respective term loan.  During each six-month draw down period, only
monthly interest payments are due.  During this period, interest is calculated at the London Interbank Offered Rate (LIBOR) plus 150 basis points.  The agreement requires that the Company maintain i) a liabilities to tangible
net worth ratio of .50 to 1, ii) a minimum cash balance of $50 million and iii) at least $12 million invested at Comerica Bank-California.

For the three and six months ended June 30, 2002, $3.0 million was drawn down under Tranche A described above, of which $0.8 million, plus interest, is due within the
next 12 months.

9.   INCOME TAXES

On a quarterly basis, the
Company assesses the recoverability of its deferred tax assets by reviewing a number of factors, including operating trends, the scheduled reversal of deferred tax liabilities and future projections of taxable income, to determine whether a
valuation allowance is required to reduce such deferred tax assets to an amount that is more likely than not to be realized.  The Company considered the following factors that occurred during the three months ended June 30, 2002 in assessing
the recoverability of its deferred tax assets: (i) further announced reductions in 2002 capital spending by the major telecommunication service providers and industry analysts forecasting a further reduction in capital spending in 2003, (ii)
significant workforce reductions within the telecommunications and related industries, (iii) continued poor visibility of customer orders, (iv) a depressed capital market which makes obtaining new capital difficult and (v) a lower than expected
demand for 10 gigabit products.

Based on the revised projections for future taxable income over the periods in which
the deferred tax assets are realizable, management believes that significant uncertainty exists surrounding the recoverability of the deferred tax assets.  Accordingly, during the three months ended June 30, 2002, the Company recorded a
valuation allowance equal to its deferred tax assets.  As a result of recording the valuation allowance, $20.8 million was charged to income tax expense and $12.2 million was charged against additional paid-in capital.  The $12.2 million
charge against additional paid-in capital represents deferred tax assets that were originally recorded as a credit to additional paid-in capital as a result of employee stock option and warrant exercises.

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

10.   STOCK OPTION EXCHANGE OFFER

In June 2002 and as amended in July 2002, the
Company initiated a voluntary stock option exchange program to its employees, officers and board members located in the United States and Europe. The program commenced on June 24, 2002, and as amended, participants will be able to tender for
cancellation stock options to purchase the Companys Class A common stock that have an exercise price equal to or greater than $1.35 per share for replacement options to purchase Class A common stock to be granted on a date which is at least
six months plus one day from the date of cancellation of the tendered options.   The cancellation date is currently expected to be August 30, 2002.  The exercise price of the replacement options will be equal to 100 percent of the
market price of the Companys Class A common stock on the grant date of the replacement options. The terms and conditions of the replacement options, including the vesting schedules, will be substantially the same as the terms and conditions of
the options cancelled.  During the third quarter ending September 30, 2002, the deferred stock compensation associated with the stock options that are tendered in connection with this offer will be accelerated into the statement of
operations.

11.   ASSET IMPAIRMENT

During 2000 and 2001, the
Company expanded its manufacturing capacity in order to meet demand. As a result of the sharp decrease in product demand during 2002, the Company recorded a charge of approximately $1.1 million during the three months ended June 30, 2002 for the
elimination of certain excess manufacturing equipment.  The Company reviewed the future undiscounted cash flows related to this equipment and concluded that an impairment charge was necessary to write down these assets to their fair
value.  The remaining net book value of this equipment after the impairment charge is $1.1 million.  The Company intends to sell this equipment within the next twelve months.

12.   SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS

During the three and six months ended June
30, 2002, the Company financed the acquisition of equipment or software in the amount of $1.0 million and $8.4 million, respectively.  During the three and six months ended June 30, 2001, the Company financed the acquisition of equipment or
software in the amount of $0.9 million and $1.8 million, respectively.

During the three and six months ended June 30, 2002, the Company
issued approximately 595,000 and 1.8 million shares of restricted Class A common stock, respectively, and recorded $0.4 million and $3.0 million of deferred stock compensation, respectively.  Such shares were issued to its employees with
vesting periods from 6 months to immediate vesting upon the attainment of certain performance criteria in 2002.  Approximately 442,000 shares of the restricted Class A common stock issued during the three months ended June 30, 2002 were issued
to the Companys executive team and the shares completely vest on January 1, 2003.  Also during the three and six months ended June 30, 2002, a shareholder converted 1.0 million and 2.0 million shares, respectively, of the Companys
Class B common stock into the same number of shares of Class A common stock.

13.   RECENTLY ISSUED OR ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations.  Statement No. 143, which is effective for the Company on January 1, 2003, requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset.  The Company does not expect that the adoption of this standard will have a
material impact on its financial position, results of operations or cash flows.

Effective January 1, 2002, the Company adopted SFAS No.
142, Goodwill and Other Intangible Assets. With the adoption of Statement 142, goodwill is no longer subject to amortization over its estimated useful life.  Rather, goodwill is subject to at least an annual assessment for
impairment by applying a fair-value-based test.  Similarly, goodwill associated with equity method investments is no longer amortized.  Equity method goodwill is

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MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-continued

not, however, subject to the new impairment rules; the impairment guidance in existing rules for equity method investments continues to apply.  The adoption of this standard did not have a material impact on the
Companys financial position or results of operations.  As of June 30, 2002, the Company had $0.7 million of unamortized goodwill recorded resulting from one of its equity investments.

In July 2002, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards (SFAS) No. 146, Accounting for
Costs Associated with Exit or Disposal Activities.  This statement requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred.  This differs from prior guidance,
which required the liability to be recognized when a commitment plan was put into place.   Statement No. 146 also establishes that fair value is the objective for initial measurement of the liability.  This statement is effective for
exit or disposal activities that are initiated after December 31, 2002.  The Company does not expect that the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

14.   SUBSEQUENT EVENTS

In July, 2002, the Company was notified by Nasdaq
that, based upon its review of price data for the Companys Class A common stock, the closing bid price for the Class A common stock was less than $1.00 per share during the relevant review period of thirty consecutive trading days, which is a
requirement for continued inclusion of the Class A common stock on the Nasdaq National Market.  If the Company is unable to demonstrate compliance with this requirement for ten consecutive trading days during the 90 calendar days ending
September 30, 2002, the Class A common stock may be delisted.  On July 18, 2002, the Companys board of directors authorized an amendment to the Companys articles of incorporation to effect a reverse stock split for the purpose of
increasing the market price of the Companys Class A common stock above the Nasdaq minimum of $1.00.  Under the proposed amendment, each outstanding 5, 6, 7, 8, 9 or 10 shares of the Companys Class A common stock and Class B common
stock would be converted into one share of Class A common stock or Class B common stock, as applicable.  The proposed reverse stock split is subject to shareholder approval, and the board of directors has the authority to determine which, if
any, of the conversion ratios within this range will be used.  On August 6, 2002, the Company filed a definitive proxy statement that scheduled a September 5, 2002 special meeting of shareholders to address the reverse stock split.

On August 8, 2002, the Company announced a corporate realignment plan that will be initiated during the third quarter of 2002 and will be
substantially completed by December 31, 2002.  The plan includes workforce reductions, the consolidation of facilities through closure of certain locations, a reduction in the level of activity at other locations and potential asset impairment
charges.  The Company has estimated the total third quarter charge to be in the range of $13.0 million to $15.0 million and annual cash savings are estimated at $16 to $18 million.

During August 2002, the Companys Senior Vice President of Finance and Chief Financial Officer resigned from the Company to pursue other interests.  Also in
August 2002, the Company announced that its Co-chairman and Executive Vice President will depart from the Company on December 31, 2002.  According to the terms of the loan agreement with the Companys Co-chairman and Executive Vice
President, such loan and accrued interest is due in full 30 days after employment with the Company ceases.  As a result, the note will become payable on or before January 30, 2003.

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

The following discussion should be read in conjunction with our condensed
consolidated financial statements included elsewhere in this Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors including those set forth under Risk Factors herein.

OVERVIEW

We design, develop and market advanced integrated circuits, modules, transponders and higher-level assemblies that enable next generation optical networking systems.
We outsource substantially all of our semiconductor fabrication and focus our efforts on the design, development and marketing of our products.

From our inception on July 26, 1994 through December 31, 1996, our operations consisted primarily of start-up activities, including development of our initial
products. During 1996, we began generating development revenues through technology development contracts with several of our customers. In July 1997, we began shipping our first product for customer evaluation. During the first quarter of 1998, we
recognized our first significant product revenues and further invested in research and development, sales and marketing, operations and our general and administrative infrastructure.

To date, we have generated a substantial portion of our revenues from a limited number of customers. Our top three customers for the three months ended June 30, 2002,
Alcatel, Xtera and Algety, representing 24%, 20% and 11% of our revenues, respectively.   Our top three customers for the six months ended June 30, 2002 were TyCom, Alcatel and Lucent, representing 30%, 22% and 13% of our revenues,
respectively.  During the year ended December 31, 2001, TyCom with 34% and Alcatel with 29% accounted for more than 10% of our revenues and four other customers each accounted for greater than 5% of our revenues.

A number of telecommunication service providers have curtailed the level of their capital expenditures on their infrastructure build-out, which has
significantly reduced the demand for our products by communications equipment manufacturers, including these principal customers. Our revenues declined substantially in the second quarter of 2002 compared with the first quarter of 2002 and all
quarters of 2001.  We anticipate that third quarter of 2002 revenues will decrease further compared with the second quarter of 2002 revenues.  Due to general economic conditions and slowdowns in purchases of optical networking equipment,
it has become increasingly difficult for us to predict the purchasing activities of our customers and we expect that our operating results will fluctuate substantially in the future.  In particular, we expect our revenues to be lower and loss
per share to be greater for fiscal 2002 than in fiscal 2001. We expect that in future periods our customer base will become less concentrated both generally and within our top three customers.  During August 2002, we announced a significant
corporate realignment plan that includes workforce reductions, the consolidation of facilities through closure of certain locations, a reduction in the level of activity at other locations and potential asset impairment charges.  We expect to
record a charge during the third quarter of 2002 in the range of $13.0 million to $15.0 million as a result of this plan.  Although we have, and continue to, align headcount based upon the current business environment, we are committed to i)
maintaining superior customer service, ii) building our product portfolio, iii) performing industry leading research and development activities, iv) expanding into new markets and v) developing strong customer relationships.

We have focused our sales and marketing efforts on North American and European communications equipment manufacturers. We are in the process of establishing
a sales organization in Asia and have developed relationships with most of the major communications equipment manufacturers within Asia.  During the three and six months ended June 30, 2002, we derived 76% and 83%, respectively, of our total
revenues from communications equipment manufacturers in North America compared with 67% and 63%, respectively, during the comparable periods in 2001.  We currently sell through our direct sales force in North America and Europe as well as 
through selected independent sales representatives in the United States, Canada, Germany, the United Kingdom, Italy, France, Israel, China, Korea and Japan. We have built an infrastructure to support an internal international sales force by opening
sales offices in Canada, Italy, and the United Kingdom.  International revenues are denominated in

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U.S. dollars, which reduces our exposure to foreign currency risks. We expect international revenues to continue to account for a significant percentage of total
revenues.

Revenues.We recognize product revenues at the time of shipment. Our customers are not obligated by long-term
contracts to purchase our products and can generally cancel or reschedule orders on short notice. The slowdown in the build-out of the communications infrastructure has caused our revenues to decrease as compared with prior years.  Our revenues
declined in the second quarter of 2002, compared to the first quarter of 2002 and all quarters in 2001, and we recently announced that we expect our revenues to decrease during the third quarter of 2002 as compared with the second quarter of
2002.  In the ordinary course of business, we receive order cancellations and rescheduled shipments.  To the extent possible, we pursue order cancellation fees from our customers.  Depending upon the facts and circumstances
surrounding these cancellation fees, the receipt of such fees may have an immediate impact on revenues in the period that such fees are collected or the fees may need to be deferred and then recognized as revenue over some future period.  We
cannot ensure that we will be able to collect an order cancellation fee for each order canceled and we cannot project how such fees will affect revenue.

Cost of Revenues.Cost of revenues consists of component and materials cost, direct labor, deferred stock compensation relating to manufacturing labor,
manufacturing, overhead costs and estimated warranty costs. Cost of revenues also includes adjustments to write down inventory to its net realizable value resulting from such items as customer order cancellations and excess and obsolete
inventory.  We outsource substantially all of the fabrication and assembly, and a portion of the testing, of our products. Accordingly, a significant portion of our cost of revenues consists of payments to our third-party manufacturers. If
revenues increase, we believe favorable trends should occur in manufacturing costs due to our ability to absorb overhead costs over higher volumes. However, there is a fixed component to cost of revenues, and the announced decline in our revenues in
2002, as compared with 2001, has adversely affected our gross margins.

Research and Development.Research and development
expenses consist primarily of salaries and related personnel costs, equipment, material, third-party costs and fees related to the development and prototyping of our products and depreciation associated with engineering and design software costs. We
expense our research and development costs as they are incurred, except for the purchase of engineering and design software licenses, which are capitalized and depreciated over their estimated useful life. Research and development is key to our
future success and we will continue to strategically invest in research and development in order to maximize our product offerings.  We expect that research and development expenses will decrease during the third quarter of 2002 in absolute
dollar amounts as we execute on our previously announced corporate realignment plan.

Sales and Marketing.Sales and
marketing expenses consist primarily of salaries, commissions and related expenses for personnel engaged in sales, marketing, customer service and application engineering support functions. We expect that sales and marketing expenses will decrease
during the third quarter of 2002 in absolute dollar amounts as we reduce certain personnel and external sale representative costs offset by additional marketing programs, the establishment of sales offices in additional domestic and international
locations and the expansion of our customer service and support organizations.

General and Administrative.General and
administrative expenses consist primarily of salaries and related expenses for executive, finance, accounting, facilities, information services, human resources, recruiting, professional fees and other corporate expenses. We expect that general and
administrative expenses will decrease in the third quarter of 2002 in absolute dollar amounts as we continue to execute various cost reduction programs that were initiated in 2001 with the purpose of maximizing the leverage within general and
administrative functions.

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Deferred Stock Compensation.In connection with the granting of stock options and restricted stock to
our employees, officers and directors, we recorded deferred stock compensation. Deferred stock compensation represents the difference between the grant price and the fair value of the common stock underlying options granted during these periods.
Deferred stock compensation is presented as a reduction of shareholders equity. We are amortizing our deferred stock compensation using the graded vesting method, in accordance with FASB Interpretation No. 28, over the vesting period of each
respective option, generally three to four years.  Based on our balance of deferred stock compensation as of June 30, 2002, we estimate our amortization of deferred stock compensation for each of the periods below to be as follows:

| | Year Ending December 31,           |  | Amount         |        | 
| | ---------------------------------- |  | -------------- | ------ | 
| |                                    |  |                |        | 
| |                                    |  | (in thousands) |        | 
| |                                    |  |                |        | 
| | 2002 (subsequent to June 30, 2002) |  | $              | 5,893  | 
| | 2003                               |  |                | 4,404  | 
| | 2004                               |  |                | 1,436  | 
| | 2005                               |  |                | 123    | 
| |                                    |  |                |        | 
| | Total                              |  | $              | 11,856 | 
| |                                    |  |                |        | 

Approximately $1.2 million of the remaining amortization of deferred stock compensation will be charged to cost of revenues.

Net Income (Loss).  In addition to the items discussed above, net income (loss) also includes interest expense, other income, income or loss
associated with our equity investments and a provision or benefit for income taxes. Interest expense relates to interest associated with capital leases and equipment and software financings. Other income represents investment earnings on our cash
and cash equivalents and short-term investments and any income or loss associated with our equity investments.

RESULTS OF OPERATIONS

Revenues.   Revenues decreased $30.1 million to $5.0 million for the three months ended June 30, 2002, compared with $35.1 million for the three
months ended June 30, 2001.  Revenues decreased $51.1 million to $15.1 million for the six months ended June 30, 2002, compared with $66.2 million for the six months ended June 30, 2001.  The decrease was due to reduced component purchases
by communications equipment manufacturers.

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Gross Profit.

For the three months ended June 30, 2002 and 2001

Cost of revenues, including $0.3 million of deferred stock compensation, decreased to $8.8 million for the three months ended June 30, 2002, compared with $13.2
million in the comparable period of 2001. Gross profit as a percentage of revenues, or gross margin, decreased to a negative 77% for the three months ended June 30, 2002 compared with 62% for the comparable three months of 2001.  The negative
gross margin during the three months ended June 30, 2002 is the result of certain significant charges, offset by certain credits, recorded against cost of revenues.  The significant items that effected gross margin during the three months ended
June 30, 2002 and 2001 were as follows:

|                                         |  | Three Months Ended June 30, 2002 |        | Three Months Ended June 30, 2001 | 
|---------------------------------------- |  | -------------------------------- | ------ | -------------------------------- | 
|                                         |  | In $ (000s omitted)             |        | Effect on gross margin           | 
|                                         |  |                                  |       
|Total cost of revenues                   |  | $                                | 8,774  |                                  | 
|Inventory write down and related charges |  |                                  | (5,307 | )                                | 
|Fixed asset impairment charge            |  |                                  | (1,051 | )                                | 
|Deferred stock compensation              |  |                                  | (324   | )                                | 
|Accrual adjustments                      |  |                                  | 1,038  |                                  | 
|Sale of written-off inventory            |  |                                  | 215    |                                  | 
|                                         |  |                                  |        |                                  | 
|Adjusted cost of revenues                |  | $                                | 3,345  |                                  | 
|                                         |  |                                  |        |                                  | 

Excluding the impact of the above items, gross margins would have been 33% and
64% for the three months ended June 30, 2002 and 2001, respectively.  This decrease in gross margin is due to the decrease in sales volume as a result of reduced spending by communications equipment manufacturers.

Inclusive of the above items, the decrease in gross margins was due predominantly to $5.3 million of inventory charges to reduce inventories to their net realizable
value and to write off an advance made to a supplier. Included in the $5.3 million is a $4.8 million inventory write-down.  The inventory was written down to its net realizable value based upon our determination that excess quantities existed
of certain modules and raw materials.  The excess quantities of the modules are the result of forecasted demand not developing as expected and the introduction of two new modules.  The new modules have enhanced performance and cost less to
produce thereby rendering the older modules obsolete.  Accordingly, after allowing for forecasted demand and warranty issues, we wrote down this product to its net realizable value.  Certain raw materials were also written down based upon
the reduction in forecasted demand for the finished goods that these raw materials were used to manufacture.   The remaining raw materials in excess of required demand have no alternative uses and therefore will be disposed.  
Also included in this inventory charge is $0.5 million that relates to an advance to a supplier.  During 2000, we made advances to a finished goods supplier.  We had an agreement with the supplier that we would reduce the advance by
applying a credit to the purchases we made from the supplier.   Our agreement stated that if we did not make sufficient purchases to utilize all of the advances, we would not require the supplier to repay the remaining balance.  Based
upon our review of forecasted demand for the products that this supplier manufactures, we believe that it is unlikely that we will utilize the remaining advances.

In conjunction with the lower forecasted demand discussed above, we performed an impairment analysis of our manufacturing assets.  Based upon review of future
undiscounted cash flows which indicated an impairment, we recorded a $1.1 million impairment charge to write down these assets, which are all equipment, to their fair value.  Fair value was predominantly determined based upon quoted used
equipment prices by independent third parties.

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The above charges were offset by the reversal of $1.0 million of certain accruals and the sale of inventory, with a
cost of $0.2 million that was previously written down to its net realizable value during the first quarter of 2001.  The $1.0 million of accrual reversals pertains to accruals that existed at December 31, 2001 and March 31, 2002.  During
the three months ended June 30, 2002, when final information to determine the adequacy of these accruals was obtained, the accruals were adjusted accordingly.  The sale of previously written down inventory relates to inventory that was written
down during the first quarter of 2001 based upon information from the sole customer of the product that they were moving from GaAs to SiGe technology.  The customers transition from GaAs to SiGe has been delayed resulting in immaterial
purchases of this inventory by the customer.  We do not expect any material orders for this product during the remainder of 2002 however, we will continue to disclose the effect of such sales on gross margin.

During the three months ended June 30, 2002 compared to the comparable period in 2001, stock based compensation expense associated with cost of revenues did not
fluctuate significantly.

For the six months ended June 30, 2002 and 2001

Cost of revenues, including $0.9 million of deferred stock compensation, decreased to $14.8 million for the six months ended June 30, 2002, compared with $29.9
million in the comparable period of 2001. Gross profit as a percentage of revenues, or gross margin, decreased to 2% for the six months ended June 30, 2002 compared with 55% for the comparable six months of 2001.  As discussed above, the
significant reduction in gross margin during the six months ended June 30, 2002 is the result of the significant charges, offset by certain credits, recorded against cost of revenues during the three months ended June 30, 2002.  The significant
items that effected gross margin during the six months ended June 30, 2002 and 2001 were as follows:

|                                         |  | Six Months EndedJune 30, 2002 |        | Six Months Ended June 30, 2001 | 
|---------------------------------------- |  | ----------------------------- | ------ | ------------------------------ | 
|                                         |  | In $ (000s omitted)          |        | Effect on gross margin         | 
|                                         |  |                               |       
|Total cost of revenues                   |  | $                             | 14,783 |                                | 
|Inventory write down and related charges |  |                               | (5,307 | )                              | 
|Fixed asset impairment charge            |  |                               | (1,051 | )                              | 
|Deferred stock compensation              |  |                               | (888   | )                              | 
|Accrual adjustments                      |  |                               | 1,038  |                                | 
|Sale of written-off inventory            |  |                               | 735    |                                | 
|                                         |  |                               |        |                                | 
|Adjusted cost of revenues                |  | $                             | 9,310  |                                | 
|                                         |  |                               |        |                                | 

Excluding the impact of the above items, gross margins would have been 38% and
64% for the six months ended June 30, 2002 and 2001, respectively.  As noted above, the decrease in gross margin is due to the decrease in sales volume as a result of reduced spending by communications equipment manufacturers.   For
the six months ended June 30, 2002, gross margin is increased due to the sale of inventory, with a cost of $0.7 million that was previously written down to its net realizable value during the first quarter of 2001.  The sale of previously
written down inventory relates to inventory that was written down during the first quarter of 2001 based upon information from the sole customer of the product that they were moving from GaAs to SiGe technology.  The customers transition
from GaAs to SiGe has been delayed resulting in immaterial purchases of this inventory by the customer.  We do not expect any material orders for this product during the remainder of 2002 however, we will continue to disclose the effect of such
sales on gross margin.  The other items effecting cost of revenues are discussed above.

Included in the $4.9 million inventory
charge during the six months ended June 30, 2001 is a $4.3 million inventory write-down required as a result of a migration by certain of our customers from GaAs-based products to comparable SiGe-based products.  Also included in this inventory
charge is $0.6 million that relates to consigned

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inventories located at our finished goods suppliers. The charge is the result of inventory shrink and lower than expected production yields during the three months ended March
31, 2001 at these finished goods suppliers.

During the six months ended June 30, 2002 compared to the comparable period in 2001, stock
based compensation expense associated with cost of revenues did not fluctuate significantly.

Research and Development.Research and development expenses, excluding deferred stock compensation, decreased to $11.9 million for the three months ended June 30, 2002 compared with $13.3 million for the three months ended June 30, 2001. As a percentage of revenues,
research and development expenses increased to 241% for the three months ended June 30, 2002 compared with 38% for the same period in 2001.  During the six month period ended June 30, 2002 compared with the comparable period in 2001, research
and development expenses, excluding deferred stock compensation, decreased to $24.7 million compared with $25.8 million, respectively and, as a percentage of revenues, increased to 164% compared with 39%, respectively.  The increase as a
percent of revenues was due to the reduction in revenues discussed above.  The decrease in dollars is the result of our focused spending on projects that we believe will be accretive to revenues in the near term and our company wide expense
reduction programs.  The decrease in absolute dollars is also due to the reversal of an accrual of $0.8 million during the three months ended June 30, 2002.  During the three months ended June 30, 2002, additional data was obtained which
provided us with enough information to adjust the accrual downward.  Despite the reduction in communications equipment manufacturers spending, we will continue to strategically invest in research and development and seek to build relationships
with an expanding global customer base of communications equipment manufacturers.   For the three and six months ended June 30, 2002, stock based compensation expense associated with research and development increased $0.4 million due to
restricted stock grants to engineering personnel.

Sales and Marketing.   Sales and marketing expenses, excluding
deferred stock compensation, decreased to $3.7 million for the three months ended June 30, 2002, compared with $4.5 million for same period of 2001. As a percentage of revenues, sales and marketing expenses increased to 75% during the three months
ended June 30, 2002 compared with 13% during the comparable period of 2001. During the six month period ended June 30, 2002 compared with the comparable period in 2001, sales and marketing expenses, excluding deferred stock compensation, decreased
to $7.7 million compared with $8.0 million, respectively and, as a percentage of revenues, increased to 51% compared with 12%, respectively. The decrease in absolute dollars was due primarily to our concentrated effort to reduce expenses coupled
with an accrual reversal of $0.5 million. The increase as a percentage of revenues is due primarily to the reduced revenues discussed above.  For the three and six months ended June 30, 2002, there was no material change in stock based
compensation expense associated with sales and marketing as compared with the comparable period in 2001.

General and
Administrative.   General and administrative expenses, excluding deferred stock compensation, decreased to $2.1 million for the three months ended June 30, 2002, compared with $3.3 million for the comparable period in 2000. As a
percentage of revenues, general and administrative were 42% for the three months ended June 30, 2002, compared with 9% for the three months ended June 30, 2001. During the six month period ended June 30, 2002 compared with the comparable period in
2001, general and administrative expenses, excluding deferred stock compensation, decreased to $4.5 million compared with $6.3 million, respectively and, as a percentage of revenues, increased to 30% compared with 10%, respectively.  The
decrease in absolute dollars was due primarily to our focused efforts to leverage our general and administrative expenses by eliminating unnecessary spending and avoiding future costs before they occur.  The decrease in stock-based compensation
expense associated with general and administrative expenses during the three and six months ended June 30, 2002 compared with the comparable periods in 2001 is due predominantly to the reduction in the rate of amortization of deferred stock based
compensation as a result of being further into vesting periods.  As the vesting period progresses, the amount of deferred stock based compensation amortized into expense decreases.

Deferred Stock Compensation.Operating expenses included amortization of deferred stock compensation of $2.5 million and $4.7 million for the three
and six months ended June 30, 2002, respectively, compared with $2.3 million and $4.9 million for comparable periods in 2001.   There is no material change, however; deferred stock compensation associated with stock options decreased
offset by deferred stock compensation associated with restricted stock grants since the fourth quarter of 2001.  The decrease in the deferred stock compensation associated with stock options is due to a greater proportion of deferred stock
compensation expense being recognized earlier in the vesting period coupled with the cancellation of options due to employee terminations.  Under the graded vesting

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method of amortization, a greater proportion of deferred stock compensation is recorded in the earlier years of the vesting period.  Since the most significant portion of
deferred stock based compensation was recorded on option grants in 2000 and early 2001, much of the deferred stock based compensation associated with these grants has already been amortized as expense.  Since our initial public offering in June
2001, we have not issued any stock options with an exercise price below fair value that would require the recognition of any deferred stock compensation.  However, during the latter part of 2001 and during the first and second quarters of 2002,
we issued restricted stock to certain of our employees.  The deferred stock compensation associated with these restricted stock grants is being amortized over the vesting period, which generally ranges from six months to three years.  The
deferred stock compensation associated with the restricted stock grants will increase deferred stock compensation expense in future quarters.

In June 2002 and as amended in July 2002, we initiated a voluntary stock option exchange program to our employees, officers and board members located in the United
States and Europe. The program commenced on June 24, 2002, and as amended, participants will be able to tender for cancellation stock options to purchase our Class A common stock that have an exercise price equal to or greater than $1.35 per share
for replacement options to purchase Class A common stock to be granted on a date which is at least six months plus one day from the date of cancellation of the tendered options.   The cancellation date is currently expected to be August
30, 2002.  The exercise price of the replacement options will be equal to 100 percent of the market price of our Class A common stock on the grant date of the replacement options. The terms and conditions of the replacement options, including
the vesting schedules, will be substantially the same as the terms and conditions of the options cancelled.  During the third quarter ending September 30, 2002, the deferred stock compensation associated with the stock options that are tendered
in connection with this offer will be accelerated into the statement of operations.

Other Income and Expenses, Net.  Other
income increased to $95,000 for the three months ended June 30, 2002, compared with other income of $44,000 for the three months ended June 30, 2001. Other income increased to $0.5 million for the six months ended June 30, 2002, compared with $0.2
million during the comparable six months of 2001.  The increase is due to higher interest income as a result of having a higher average cash balance during the three and six months ended June 30, 2002 from the proceeds of our June 2001 initial
public offering offset by an increase of $0.2 million, during the three months ended June 30, 2002, and $0.1 million, during the six months ended June 30, 2002, of losses from our investment accounted for under the equity method of accounting and
higher interest expense resulting from software and equipment financings during 2001 and the first quarter of 2002.

Net Income
(Loss).  Net loss was $44.0 million and $54.5 million for the three and six months ended June 30, 2002, respectively, compared with $0.9 million and $5.3 million for the three and six months ended June 30, 2001, respectively.  The
increase in net loss is predominantly due to the items discussed above including the reduction in revenue and the corresponding decrease in gross profit, the inventory write downs and related charges and the fixed asset impairment charge.  In
addition to the items discussed above, the net loss is also increased by our recognition of a valuation allowance against all of our deferred tax assets.  During the three months ended June 30, 2002, we concluded that significant uncertainty
existed surrounding the recoverability of our deferred tax assets. On a quarterly basis, we assesses the recoverability of our deferred tax assets by reviewing a number of factors, including operating trends, the scheduled reversal of deferred tax
liabilities and future projections of taxable income, to determine whether a valuation allowance is required to reduce such deferred tax assets to an amount that is more likely than not to be realized.  We considered the following factors that
occurred during the three months ended June 30, 2002 in assessing the recoverability of our deferred tax assets: (i) further announced reductions in 2002 capital spending by the major telecommunication service providers and industry analysts
forecasting a further reduction in capital spending in 2003, (ii) significant workforce reductions within the telecommunications and related industries, (iii) continued poor visibility of customer orders, (iv) a depressed capital market which makes
obtaining new capital difficult and (v) a lower than expected demand for 10 gigabit products.

Based on the projections for future taxable
income over the periods in which the deferred tax assets are realizable, we believe that significant uncertainty exists surrounding the recoverability of the deferred tax assets.  Accordingly, during the three months ended June 30, 2002, we
recorded a valuation allowance equal to our deferred tax assets.  As a result of recording the valuation allowance, $20.8 million was charged to income tax expense and $12.2 million was charged against additional paid-in capital.  The
$12.2 million charge against additional paid-in capital represents deferred tax assets that were recorded as a result of employee stock option and warrant exercises.

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LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2002, we
had cash and cash equivalents and short-term investments of  $79.7 million.

Cash used in operating activities was $7.6 million
during the six months ended June 30, 2002 compared with $3.1 million during the six months ended June 30, 2001.  Net loss of $54.5 million includes non-cash charges of $6.4 million for depreciation and amortization, $5.6 million for
amortization of deferred stock compensation, $1.1 million of asset impairment charges, $5.3 million of inventory write down and related charges and deferred tax expense of $14.4 million.  The increase in cash used in operating activities is due
to the significant reduction in revenues discussed above.

Cash provided by investing activities increased to $2.8 million for the six
months ended June 30, 2002 from $11.7 million of cash used in investing activities for the six months ended June 30, 2001.  The increase is due to the net sale of $8.9 million of marketable securities during the six months ended June 30, 2002
coupled with a decrease in fixed asset purchases.  The proceeds from the sale of marketable securities were used predominantly for operating purposes and to pay certain financing obligations that were due.

Cash provided by financing activities was $0.9 million for the six months ended June 30, 2002 compared with $76.0 million for the six months ended June 30, 2001. The
decrease in cash provided by financing activities is predominantly due to the proceeds from our initial public offering in June 2001.  During 2002, our debt payments increased due to software and equipment financings that were entered into
during the latter part of 2001 and during the first quarter of 2002.  In addition, we made a $0.5 million loan to our Co-chairman and Executive Vice President.  The loan was made to assist the officer with the purchase of a new home upon
his transfer from our European headquarters in Germany to our California facility.  During August 2002, we announced that this officer will depart from the Company on December 31, 2002 and accordingly, such loan is due on or before January 30,
2003. During the six months ended June 30, 2002, we secured financing of $8.4 million through vendor financings and negotiated extended payment terms (generally payable within 12 months from purchase date) for another $2.6 million for some of our
equipment and software needs.

During April 2002, we entered into an unsecured $6.0 million credit facility with Comerica
Bank-California.  All amounts drawn down under this facility must be used for the purchase of capital assets.  The amount drawn down under the facility from May 2002 through October 2002 will be converted into a 30-month term loan
(referred to as Tranche A).  The amount drawn down under the facility from November 2002 through April 2003 will also be converted into a 30-month term loan (referred to as Tranche B).  The Tranche A and B term loans will have a fixed
interest rate determined at 150 basis points above the three year Treasury Note at the time such amounts are converted into their respective term loan.  During each six-month draw down period, only monthly interest payments are due. 
During this period, interest is calculated at the London Interbank Offered Rate (LIBOR) plus 150 basis points.  The agreement requires that the Company maintain i) a liabilities to tangible net worth ratio of .50 to 1, ii) a minimum
cash balance of $50 million and iii) at least $12 million invested at Comerica Bank-California. During the six months ended June 30, 2002, $3.0 million was drawn down under Tranche A described above, of which $0.8 million, plus interest, is due
within the next 12 months.

Cash and cash equivalents and short-term investments decreased to $79.7 million at June 30, 2002 from $92.7
million on December 31, 2001 due predominantly to the use of cash in operating activities coupled with fixed asset purchases discussed above.

Cash and cash equivalents and short-term investments are expected to decrease throughout the remainder of 2002.  We expect that our net cash usage will range
from $16 to $18 million during the third quarter of 2002 and $13 to $15 million during the fourth quarter of 2002.  This cash usage excludes approximately $6 to $8 million of cash usage that is expected to occur during the third quarter of 2002
relating to our recently announced corporate realignment plan.  Given the short maturity of our short-term investments and their high liquidity, a material change in interest rates will not materially affect our liquidity.  We believe that
our current cash position, availability under our new credit facility and the availability of vendor financings will satisfy our projected working capital and capital expenditure requirements through at least the next 12 months.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001,
the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations.  Statement No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset.  We do not expect that the adoption of this standard will have a material impact on our financial position, results of operations or cash flows.

In July 2002, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards (SFAS) No. 146, Accounting for
Costs Associated with Exit or Disposal Activities.  This statement requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred.  This differs from prior guidance,
which required the liability to be recognized when a commitment plan was put into place.   Statement No. 146 also establishes that fair value is the objective for initial measurement of the liability.  This statement is effective for
exit or disposal activities that are initiated after December 31, 2002.  We do not expect that the adoption of this standard will have a material impact on our financial position, results of operations or cash flows.

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FORWARD-LOOKING INFORMATION

This Report contains
forward-looking statements which include, but are not limited to, statements concerning projected revenues, expenses, gross profit and income, market acceptance of our products, the competitive nature of and anticipated changes in our markets, our
ability to achieve further product integration, the status of evolving technologies and their growth potential, the timing of new product introductions, the adoption of future industry standards, our production capacity, our ability to migrate to
smaller process geometries, new technologies, and the need for additional capital. These forward-looking statements are based on our current expectations, estimates and projections about our industry, managements beliefs, and certain
assumptions made by us. Words such as anticipates, expects, intends, plans, believes, seeks, estimates, may, will and variations of these
words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions,
are forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from
those expressed in any forward-looking statements as a result of various factors, some of which are listed herein. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

As used in this Form 10Q, company, we, us, our, Multilink and Multilink Technology refer
to Multilink Technology Corporation and its subsidiary companies.

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RISK FACTORS

Our quarterly revenues and operating results have declined substantially and are expected to continue
to decline because of a number of factors, any one of which could adversely affect our stock price.

Our revenues declined
substantially in the first and second quarters of 2002, and we anticipate an additional, decline in the third quarter of 2002.  Due to general economic conditions and slowdowns in purchases of optical networking equipment, it has become
increasingly difficult for us to predict the purchasing activities of our customers and we expect that our operating results will fluctuate substantially in the future.  In particular, we expect our revenues to be significantly lower and loss
per share to be greater for fiscal 2002 than in fiscal 2001.  Future fluctuations in operating results may be caused by a number of factors, many of which are outside our control.  Factors that could affect our future operating results
include the following:

| |  |  | the reduction, rescheduling or cancellation of orders by any of our customers or prospective customers;
| | - |  | -------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                        
| |  |  | the loss of major customers;                                                                           
| |   |  |                                                                                                        
| |  |  | our ability to introduce new products and technologies on a timely basis;                              
| |   |  |                                                                                                        
| |  |  | the success and market acceptance of our recently announced corporate realignment plan;                
| |   |  |                                                                                                        
| |  |  | the announcement or introduction of new products and technologies by our competitors;                  
| |   |  |                                                                                                        
| |  |  | competitive pressures on selling prices;                                                               
| |   |  |                                                                                                        
| |  |  | the amounts and timing of costs associated with warranties and product returns;                        
| |   |  |                                                                                                        
| |  |  | the amounts and timing of investments in research and development;                                     
| |   |  |                                                                                                        
| |  |  | market acceptance of our products and of our customers products;                                      
| |   |  |                                                                                                        
| |  |  | the ability of our customers to obtain components from their other suppliers;                          
| |   |  |                                                                                                        
| |  |  | fluctuations in manufacturing yields and inventory levels;                                             
| |   |  |                                                                                                        
| |  |  | the availability of external foundry capacity, purchased parts and raw materials;                      
| |   |  |                                                                                                        
| |  |  | costs associated with acquisitions and the integration of acquired operations;                         
| |   |  |                                                                                                        
| |  |  | general communications and semiconductor industry conditions; and                                      
| |   |  |                                                                                                        
| |  |  | general economic conditions.                                                                           

In the first and
second quarters of  2002, we continued to identify areas of cost reduction in an effort to bring our expenses in line with our reduced revenue expectations.  However, for at least the next several quarters, we do not expect that these
measures, implemented in the fourth quarter of 2001, will be sufficient to offset lower revenues, and as such, we expect to continue to incur increased net losses.  During August 2002, we announced a significant corporate realignment plan that
includes workforce reductions, the consolidation of facilities through closure of certain locations, a reduction in the level of activity at other locations and potential asset impairment charges.  We expect to record a charge during the third
quarter of 2002 in the range of $13.0 million to $15.0 million as a result of this plan.  In the past, we have recorded significant new product and process development costs because our policy is to expense these costs at the time that they are
incurred.  We may incur these types of expenses in the future.  These additional expenses will have a material and adverse effect on our results in future periods.  The occurrence of any of the above-mentioned factors could have a
material adverse effect on our business and on our financial results.

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The market price for our Class A common stock has been volatile and future volatility could cause the value of an investment in our company to decline.

Our stock price has experienced significant volatility recently.  In particular, our stock price declined significantly in the context of
announcements made by us and other semiconductor suppliers of reduced revenue expectations and of a general slowdown in the technology sector, particularly the optical networking equipment sector.  Given these general economic conditions and
the reduced demands for our products that we have experienced recently, we expect that our stock price will continue to be volatile.  In addition, the value of our company could decline due to the impact of any of the following factors, among
others, upon the market price of our Class A common stock:

| |  |  | additional changes in financial analysts estimates of our revenues and earnings (losses);               
| | - |  | ---------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                          
| |  |  | our failure to meet financial analysts performance expectations; and                                    
| |   |  |                                                                                                          
| |  |  | changes in market valuations of other companies in the semiconductor or fiber optic equipment industries.

In addition, many of the risks described elsewhere in this section could materially and adversely affect our stock price, as discussed in those risk factors. 
The stock markets have recently experienced substantial price and volume volatility.  Fluctuations such as these have affected and are likely to continue to affect the market price of our common stock.

In the past, securities class action litigation has often been instituted against companies following periods of volatility and decline in the market price of such companies securities.  If instituted against us,
regardless of the outcome, such litigation could result in substantial costs and diversion of our managements attention and resources and have a material adverse effect on our business, financial condition and results of operations.  We
could be required to pay substantial damages, including punitive damages, if we were to lose such a lawsuit.

Our Class A common stock could be delisted from the Nasdaq National
Market

In July, 2002, we were notified by Nasdaq that, based upon its review of price data for our Class A common stock, the closing
bid price for the Class A common stock was less than $1.00 per share during the relevant review period of thirty consecutive trading days, which is a requirement for continued inclusion of the Class A common stock on the Nasdaq National
Market.  If we are unable to demonstrate compliance with this requirement for ten consecutive trading days during the 90 calendar days ending September 30, 2002, the Class A common stock may be delisted.  If a delisting were to occur, our
Class A common stock may trade on the Nasdaq SmallCap Market, on the OTC Bulletin Board, or in the pink sheets maintained by the National Quotation Bureau, possibly adversely affecting its liquidity.  In addition, some institutional
investors have internal policies preventing the purchase of stocks trading on the Nasdaq SmallCap Market, the OTC Bulletin Board, or the pink sheets, which could also negatively affect the marketability of the Class A common stock. 
Accordingly, if our Class A common stock were no longer to trade on the Nasdaq National Market, its market price could be adversely impacted.

Our proposed reverse stock split may adversely
affect the market price of our stock

On July 18, 2002, our board of directors authorized an amendment to our articles of
incorporation to effect a reverse stock split for the purpose of increasing the market price of our Class A common stock above the Nasdaq minimum of $1.00.  Under the proposed amendment, each outstanding 5, 6, 7, 8, 9 or 10 shares of our Class
A common stock and Class B common stock would be converted into one share of Class A common stock or Class B common stock, as applicable.  The proposed reverse stock split is subject to shareholder approval, and the board of directors has the
authority to determine which, if any, of the conversion ratios within this range will be used.    The effect of the reverse stock split upon the market prices for our Class A common stock cannot be accurately predicted.  In
particular, there is no assurance that prices for shares of the Class A common stock after the reverse stock split will be proportionately higher than the prices for shares of the Class A common stock immediately prior to the reverse stock
split.  Furthermore, there can be no assurance that the market price of the Class A Common Stock immediately after the proposed reverse stock split will be maintained for any period of time.  Even if an increased share price can be
maintained, the reverse stock split may not achieve the desired results which have been

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outlined above.  Moreover, because some investors may view the reverse stock split negatively, there can be no assurance that the reverse stock split will not adversely
impact the market price of our Class A common stock or, alternatively, that the market price following the reverse stock split will either exceed or remain in excess of the current market price.

A long lasting downturn in the communications equipment industry could negatively impact our revenues, profitability and cash flows.

We derive substantially all of our revenues from communications equipment manufacturers. The communications equipment industry, which is highly cyclical, is
experiencing a significant downturn. This downturn has had a negative effect on the demand for our products. We cannot predict how long this downturn will last. A prolonged downturn will adversely affect our profitability and cash flows and will
result in net losses and reduced cash balances for us.  In addition, our need to continue investment in research and development during this downturn and to maintain extensive ongoing customer service and support capability constrains our
ability to reduce expenses.  We may not be able to generate sufficient cash to maintain our current spending levels if this downturn continues for an extended period of time.

A few
customers account for a majority of our sales, and the loss of one or more key customers could significantly reduce our cash flows, revenues and any profits.

Historically, a relatively small number of customers has accounted for a majority of our revenues.  Our three largest customers accounted for approximately 65%
of our revenues for the six months ended June 30, 2002, 71% of our revenues in 2001, and 73% of our revenues in 2000.  Our top three customers for the six months ended June 30, 2002 were TyCom, Alcatel and Lucent, representing approximately
30%, 22% and 13% of our revenues, respectively.  Our top three customers for the year ended December 31, 2001 were TyCom, Alcatel and Marconi, representing approximately 34%, 29% and 8% of our revenues, respectively.  Our top three
customers in 2000 were Lucent, Alcatel and Cisco, representing approximately 34%, 28% and 11% of our revenues, respectively.  We anticipate that relatively few customers will continue to account for a significant portion of our revenues. 
A reduction, delay or cancellation of orders from one or more significant customers or the loss of one or more key customers in any period could significantly reduce our revenues and any profits.

We have incurred net losses in the past and expect to incur net losses in the future.

We had net losses of
$3.7 million in 2000, $12.4 million in 2001 and $54.5 million for the six months ended June 2002.  Additionally, although we intend to engage in a previously announced corporate realignment, our ability to achieve and maintain profitability
could still be materially affected if we fail to significantly increase our revenues.  We anticipate incurring net losses for the foreseeable future.

Our corporate realignment plan may not
be successful

On August 8, 2002, we announced a corporate realignment plan that will be initiated during the third quarter of 2002
and that we expect will be substantially completed by December 31, 2002.  The plan includes workforce reductions, the consolidation of facilities through closure of certain locations, a reduction in the level of activity at other locations and
expected asset impairment charges.  We have estimated the total third quarter charge to be in the range of $13.0 million to $15.0 million.  Although we are making every effort to reduce our expenses, we still expect to incur significant
net losses in the foreseeable future due predominantly to our decrease in revenues.

Realignment plans require significant managerial
resources to execute and we may fail to achieve our targeted goals.  In establishing the realignment plan, we may have incorrectly anticipated the demand for our products, we may be forced to restructure further or may incur further operating
charges due to poor business conditions and some of our product development initiatives may be delayed due to the reduction in our development resources and personnel.

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Declining activity in the buildout of the communications infrastructure and uncertainties in network service providers purchasing programs, as well as
consolidation in the network service provider industry, may adversely affect our future business and operating results.

Our business
prospects depend substantially on the continued buildout of the communications infrastructure.  Almost all telecommunication service providers have curtailed the level of their capital expenditures on their infrastructure buildout,
which has significantly reduced the demand for our products by communications equipment manufacturers.  This slowdown has caused our revenues and backlog to decline substantially.  Our revenues declined in the first and second quarters of
2002, compared to the comparable periods in 2001 and the fourth quarter of 2001, and we recently announced that we expect our revenues to decline further in the third quarter of 2002, compared with the second quarter of 2002.  In addition,
network service providers typically purchase network equipment pursuant to multiyear purchasing programs that may increase or decrease on a monthly basis as the providers adjust their capital equipment budgets and purchasing priorities. 
Network service providers further curtailment or termination of purchasing programs or decreases in capital budgets could materially and adversely affect our revenue and business prospects.  This is particularly true if significant and
unanticipated by our communications equipment manufacturer customers and us.  Additionally, consolidation among network service providers may cause delays in the purchase of our products and a reexamination of strategic and purchasing decisions
by these network service providers and our current and potential communications equipment manufacturer customers, including delaying the expansion of 10 Gb/s systems and the migration to 40 Gb/s systems, which could harm our business and financial
condition.

We may not immediately benefit from a recovery in the communications equipment industry.

Our industry is currently experiencing a significant downturn due to a corresponding downturn in the communications equipment industry.  We expect to be
positively affected when the communications equipment industry begins to recover.  However, some of our customers may have significant inventory on hand and a recovery in the communications equipment industry may not immediately benefit
us.  Our customers will first utilize their current inventory levels before placing orders with us.  If our customers or potential customers are maintaining a substantial amount of inventory, it may take a significant period of time before
we benefit from an improvement in the communications equipment industry.  We attempt to estimate inventory levels at our customers but we cannot ensure that such estimates are materially accurate.

Our industry is subject to consolidation.

There has been a trend toward consolidation among companies in our
industry for several years. We expect this trend toward industry consolidation to continue as communications integrated circuit companies attempt to strengthen or hold their positions in evolving markets. Consolidation may result in stronger
competitors, which in turn could have a material adverse effect on our business, operating results, and financial condition.  There has also been consolidation among communication equipment manufacturers, which could reduce the quantity of
systems into which we could sell, which in turn could have a material adverse effect on our business.

We sell substantially all of our products based on individual purchase orders, and we cannot
predict the size or timing of our orders.  Our failure to effectively plan production levels and inventory could materially harm our business and operating results.

We sell substantially all of our products based on individual purchase orders, rather than longterm contracts.  As a result, our customers generally can
cancel or reschedule orders on short notice and are not obligated to purchase a specified quantity of any product.  For example, we had significant order cancellations during 2001.  We cannot assure you that our existing customers will
continue to place orders with us, that orders by existing customers will be repeated at current or historical levels or that we will be able to obtain orders from new customers.  We cannot predict the size, timing or terms of incoming purchase
orders; therefore, decreases in the number or size of orders or the development of customer orders with new terms may adversely affect our business and operating results.

Because we do not have substantial non-cancelable backlog, we typically plan our production and inventory levels based on internal forecasts of customer demand that
are highly unpredictable and can fluctuate

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substantially.  In anticipation of long lead times to obtain certain inventory and materials, we order materials in advance of anticipated customer sales.  This
advance ordering might result in excess inventory levels or unanticipated inventory writedowns if our customers cancel orders or change the specifications for their orders.  If we are unable to plan inventory and production levels
effectively, our business and operating results could be materially harmed.

We compete in highly competitive markets, against competitors with longer operating histories, greater name
recognition, greater resources or larger market capitalization.  Our failure to compete effectively would harm our business.

The
markets in which we compete are highly competitive.  Our ability to compete successfully in our markets depends on a number of factors, including:

| |  |  | product timetomarket;                                                                                 
| | - |  | --------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                         
| |  |  | product performance;                                                                                    
| |   |  |                                                                                                         
| |  |  | product price;                                                                                          
| |   |  |                                                                                                         
| |  |  | product quality; product reliability;                                                                   
| |   |  |                                                                                                         
| |  |  | success in designing and subcontracting the manufacture of new products that implement new technologies;
| |   |  |                                                                                                         
| |  |  | market acceptance of our competitors products;                                                         
| |   |  |                                                                                                         
| |  |  | efficiency of production;                                                                               
| |   |  |                                                                                                         
| |  |  | expansion of production of our products for particular systems manufacturers; and                       
| |   |  |                                                                                                         
| |  |  | customer support and reputation.                                                                        

We compete
primarily against Agere, Applied Micro Circuits, Broadcom, Giga (acquired by Intel), Infineon, JDS Uniphase, Maxim, Mindspeed (a Conexant company), NEL, Nortel (microelectronics division), NTT Electronics, Philips, PMCSierra, Vitesse and
various startups.  Many of our competitors operate their own fabrication facilities and have longer operating histories and a greater presence in key markets, greater name recognition, access to larger customer bases and significantly
greater financial, sales and marketing, distribution, technical and other resources.  As a result, our competitors may be able to adapt more quickly to new or emerging technologies, changes in customer requirements or devote greater resources
to the promotion and sale of their products.  In addition, our competitors may develop technologies that more effectively address the transmission of digital information through existing analog infrastructures at a lower cost, thereby rendering
our products obsolete.  Our competitors that have large market capitalization or cash reserves are also better positioned than we are to acquire other companies, thereby obtaining new technologies or products.  Any of these acquisitions
could give our competitors a strategic advantage that could adversely affect our business, financial condition and results of operations.  Additionally, these competitors resources place them in a stronger position to weather a continued
downturn in our industry.

Current and potential competitors have established or may establish financial or strategic relationships among
themselves or with existing or potential customers, resellers or other third parties.  Accordingly, it is possible that new competitors or alliances forged by competitors could emerge and rapidly acquire significant market share.

We may need additional capital, which may not be available, and our ability to grow may be limited as a result.

We may be required, or could elect, to seek additional funding at any time.  Although we have initiated cost reduction programs during the fourth quarter of 2001
and have announced a third quarter of 2002 corporate realignment plan to further reduce expenses, we may still need additional capital. The market for our products has developed at a slower pace than anticipated, and we have failed to continue to
expand our market share; accordingly, we have continued to utilize significant amounts of capital.  If cash from available sources is insufficient, or if cash

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is used for acquisitions or other unanticipated uses, we may need additional capital sooner than anticipated.  In the event we are required, or elect, to raise additional
funds, we may not be able to do so on favorable terms, if at all.

We must incur substantial research and development expenses.  If we do not have sufficient resources to invest in research
and development, our business could be seriously harmed.

In order to remain competitive, we must continue to make substantial
investments in research and development to develop new and enhanced products.  We cannot assure you that we will have sufficient resources to invest in the development of new and enhanced technologies and competitive products.  Our failure
to continue to make sufficient investments in research and development programs could significantly reduce our revenue growth and harm our business.  Additionally, our products have a short life cycle; therefore, we have limited time to
capitalize upon our research and development investments and generate revenues.  We cannot assure you that our research and development investments will result in revenues in excess of our expenses, if at all, or will result in any commercially
accepted products.

We incur research and development expenses in advance of obtaining access to the required technology, and as a result, these investments may not result in the production of
any marketable products.

We often incur substantial research and development expenses for the development of products incorporating emerging process technologies.  We make these
substantial investments in the product design stage and prior to gaining access to these process technologies.  Failure to gain access to these process technologies could prevent our products development and commercialization and
materially harm our business.

Our future success depends on the continued service of our engineering, technical and key management personnel and our ability to identify, hire and retain
additional engineering, technical and key management personnel, and our failure to hire and retain such personnel would be harmful to our ongoing operations and business prospects.

There is intense competition for qualified personnel in our industry, particularly for engineers and senior level management.  We may not be able to continue to
attract and retain engineers or other qualified personnel necessary for the development of our products and business or to replace engineers or other qualified personnel who may leave us in the future.  Loss of the services of, or failure to
recruit, engineers or other technical and key management personnel could be significantly detrimental to our product and process development programs and adversely affect our business and operating results.

Our future success depends in part on the continued service of our key executives, and the loss of any of these key executives could adversely affect our business and operating results.

Our success depends in part upon the continued service of our executive officers, particularly Dr. Richard N. Nottenburg, our President, Chief Executive Officer
and Chairman of the Board.  Dr. Nottenburg does not have an employment or noncompetition agreement with us.  The loss of Dr. Nottenburg would be detrimental to our ongoing operations and prospects.  In August, 2002, Eric
Pillmore, our Vice President of Finance and Chief Financial Officer, resigned to pursue other opportunities, and Dr. Jens Albers, our Executive Vice President and Co-chairman of the Board, retired from his full-time duties as an officer and
director, and announced that he will leave our company on December 31, 2002.  While we have replaced Mr. Pillmore and reassigned Dr. Albers responsibilities to other members of management, our future success will depend in part on how
effectively we can carry out our business plan in their absence.

We will lose significant customer sales and may not be successful if customers and prospective customers do not qualify our
products to be designed into their systems.

Because our products must function as part of a larger system or network, our customers
often undertake extensive qualification processes prior to placing large product orders.  Once communications equipment manufacturers decide to use a particular suppliers products or components, they incorporate those products or
components into their system design, which are known as design-wins.  Suppliers who fail to achieve design-wins

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are unlikely to make sales to those customers for particular projects until at least the adoption of future redesigned systems.  Even then, many companies may be reluctant
to incorporate entirely new products into their new system designs, as this could involve significant additional redesign efforts.  If we fail to achieve designwins we will lose the opportunity for significant sales to those customers for
a lengthy period of time.  Although a designwin increases the likelihood that our products will be incorporated into the systems of our customers or prospective customers, it does not obligate that customer or prospective customer to
purchase specified quantities of our products.

Our products are incorporated into sophisticated systems, and defects may be discovered only after full deployment, which could seriously harm our
business.

Our products are complex and are designed to be deployed in large quantities across sophisticated networks.  Because
of the nature of our products, they can only be fully tested when completely deployed in large networks with high amounts of traffic.  Our customers may discover errors or defects in our products, or our products may not operate as expected,
after they have been fully deployed.  If our products have defects or do not operate as expected, we could experience:

| |  |  | loss of, or delay in, revenues and loss of market share;                       
| | - |  | -------------------------------------------------------------------------------
| |   |  |                                                                                
| |  |  | loss of existing customers;                                                    
| |   |  |                                                                                
| |  |  | failure to attract new customers or achieve market acceptance for our products;
| |   |  |                                                                                
| |  |  | diversion of development resources;                                            
| |   |  |                                                                                
| |  |  | increased service and warranty costs;                                          
| |   |  |                                                                                
| |  |  | legal actions by our customers;                                                
| |   |  |                                                                                
| |  |  | increased insurance costs; and                                                 
| |   |  |                                                                                
| |  |  | damage to our reputation and customer relationships.                           

The occurrence of any of these problems could seriously harm our business and result in decreased revenues and increased operating expenses.  Defects,
integration issues or other performance problems in our products could result in financial or other damages to our customers or could negatively affect market acceptance for our products.

Our
failure to protect our intellectual property adequately could adversely affect our business, and patents obtained by our competitors may preclude us from certain product development.

Our intellectual property is critical to our ability to successfully design products for the optical networking systems market.  We currently have 1 U.S. patent
issued and 11 U.S. patent applications pending.  We cannot assure you that our pending patent applications or any future applications will be approved.  Further, we cannot assure you that any issued patents will provide us with competitive
advantages or will not be challenged by third parties, or that if challenged, will be found to be valid or enforceable.  Additionally, we cannot assure you that the patents of others will not have an adverse effect on our ability to do
business.  Furthermore, others may independently develop similar products or processes, duplicate our products or processes or design around any patents that may be issued to us.

We rely on the combination of maskwork protection under the Semiconductor Chip Protection Act of 1984, trademarks, copyrights, trade secrets, employee and
thirdparty nondisclosure agreements and licensing arrangements to protect our intellectual property.  Despite these efforts, we cannot be certain that others will not independently develop substantially equivalent intellectual property or
otherwise gain access to our intellectual property, or disclose such intellectual property, or that we can meaningfully protect our intellectual property.

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We could be harmed by litigation involving patents and proprietary rights.

The semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property rights.  We may be accused of infringing
upon the intellectual property rights of third parties.  Additionally, we have indemnification obligations to our customers with respect to intellectual property infringement claims by third parties.  Such intellectual property
infringement claims by third parties or indemnification claims by our customers could harm our business.

Any litigation relating to the
intellectual property rights of third parties, whether or not determined in our favor or settled by us, could be costly and could divert the efforts and attention of our management and technical personnel.  In the event of any adverse ruling in
any litigation, we could be required to:

| |  |  | pay substantial damages;                                                                                                 
| | - |  | -------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                          
| |  |  | cease the manufacturing, use and sale of certain products;                                                               
| |   |  |                                                                                                                          
| |  |  | discontinue the use of certain process technologies; and                                                                 
| |   |  |                                                                                                                          
| |  |  | obtain a license from the thirdparty claiming infringement, which might not be available on reasonable terms, if at all.

Our success is dependent upon our ability to develop new products and reduce costs in a timely manner.

Our operating results will depend largely on our ability to continue to introduce new and enhanced products on a timely basis. Successful product development and
introduction depends on numerous factors, including, among others:

| |  |  | our ability to anticipate customer and market requirements and changes in technology and industry standards;  
| | - |  | --------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                               
| |  |  | our ability to accurately define new products;                                                                
| |   |  |                                                                                                               
| |  |  | our ability to timely complete development of new products and bring our products to market on a timely basis;
| |   |  |                                                                                                               
| |  |  | our ability to differentiate our products from offerings of our competitors;                                  
| |   |  |                                                                                                               
| |  |  | our ability to understand overall system and network architecture; and                                        
| |   |  |                                                                                                               
| |  |  | overall market acceptance of our products.                                                                    

Furthermore, we are required to continually evaluate expenditures for planned product development and to choose among alternative technologies based on our
expectations of future market growth. We cannot assure you that we will be able to develop and introduce new or enhanced products in a timely and cost-effective manner, that our products will satisfy customer requirements or achieve market
acceptance, or that we will be able to anticipate new industry standards and technological changes. We also cannot assure you that we will be able to respond successfully to new product announcements and introductions by competitors.

In addition, prices of established products may decline, sometimes significantly, over time. We believe that in order to remain competitive we must
continue to reduce the cost of producing and delivering existing products at the same time that we develop and introduce new or enhanced products. We cannot assure you that we will be able to continue to reduce the cost of our products to remain
competitive.

Our future success depends in part on strategic relationships with certain of our customers. If we cannot maintain these relationships or if these customers develop their own
solutions or adopt a competitors solutions instead of buying our products, our operating results would be adversely affected.

In the past, we have relied on our strategic relationships with certain customers who are technology leaders in our target markets. We intend to pursue and continue
to form these strategic relationships in the future but we

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cannot assure you that we will be able to do so. These relationships often require us to develop new products that typically involve significant technological challenges. Our
partners frequently place considerable pressure on us to meet their tight development schedules. Accordingly, we may have to devote a substantial amount of our limited resources to our strategic relationships, which could detract from or delay our
completion of other important development projects. Delays in development could impair our relationships with our strategic partners and negatively impact sales of the products under development. Moreover, it is possible that our customers may
develop their own solutions or adopt a competitors solution for products that they currently buy from us. If that happens, our business, financial condition and results of operations could be materially and adversely affected.

Our operating results are subject to fluctuations because of sales to foreign customers.

International sales accounted for approximately 17% of our revenues for the six months ended June 30, 2002, 24% of our revenues for the year ended December 31,
2001, and 27% of our revenues in 2000.  International sales may continue to account for a significant portion of our revenues, and as a result, we will be subject to certain risks associated with international sales, including:

| |  |  | changes in regulatory requirements;                                                    
| | - |  | ---------------------------------------------------------------------------------------
| |   |  |                                                                                        
| |  |  | increases in tariffs and other trade barriers;                                         
| |   |  |                                                                                        
| |  |  | timing and availability of export licenses;                                            
| |   |  |                                                                                        
| |  |  | political and economic instability;                                                    
| |   |  |                                                                                        
| |  |  | difficulties in accounts receivable collections;                                       
| |   |  |                                                                                        
| |  |  | difficulties in staffing and managing foreign subsidiary and branch operations;        
| |   |  |                                                                                        
| |  |  | difficulties in managing distributors;                                                 
| |   |  |                                                                                        
| |  |  | difficulties in obtaining governmental approvals for communications and other products;
| |   |  |                                                                                        
| |  |  | foreign currency exchange fluctuations;                                                
| |   |  |                                                                                        
| |  |  | the burden of complying with a wide variety of complex foreign laws and treaties; and  
| |   |  |                                                                                        
| |  |  | potentially adverse tax consequences.                                                  

We are
subject to the risks associated with the imposition of legislation and regulations relating to the import or export of high technology products.  We cannot predict whether quotas, duties, taxes or other charges or restrictions upon the
importation or exportation of our products will be implemented by the United States or other countries.  Some of our customer purchase orders and agreements are governed by foreign laws, which may differ significantly from U.S. laws. 
Therefore, we may be limited in our ability to enforce our rights under these agreements and to collect damages, if awarded.

Because
sales of our products are denominated in U.S. dollars, increases in the value of the U.S. dollar could increase the price of our products so that they become more expensive to customers in the local currency of a particular country, leading to a
reduction in sales and profitability in that country.  Future international activity may result in increased foreign currency denominated sales.  Gains and losses on the conversion to U.S. dollars of accounts receivable, accounts payable
and other monetary assets and liabilities arising from international operations may contribute to fluctuations in our results of operations.

If we become subject to unfair hiring claims we could
incur substantial costs in defending ourselves, or our managements attention could be diverted away from our operations.

Companies in our industry often hire individuals formerly employed by their competitors.  In such cases, these competitors frequently claim that the hiring
company has engaged in unfair hiring practices.  We have received claims of this kind in the past from our competitors, and we cannot assure you that we will not receive claims of this kind in the future or that those claims will not result in
material litigation.  We could incur substantial costs in defending ourselves or our employees against such claims, regardless of the merits of the claims.  In

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addition, defending ourselves from such claims could divert the attention of our management away from our operations.

Our
dependence on thirdparty manufacturing and supply relationships could negatively impact the production of our products and significantly harm our business.

We do not own or operate manufacturing facilities necessary for the production of most of our products.  We rely on several outside foundries and other outsource
partners for the manufacture and assembly of most of our products, and we expect this to continue for the foreseeable future.  Finding alternative sources for these products will result in substantial delays in production and additional
costs.

Our dependence upon third parties that manufacture, assemble, package or supply components for our products may result
in:

| |  |  | lack of assured semiconductor wafer supply and reduced control over delivery schedules and quality;
| | - |  | ---------------------------------------------------------------------------------------------------
| |   |  |                                                                                                    
| |  |  | the unavailability of, or delays in obtaining access to, key process technologies;                 
| |   |  |                                                                                                    
| |  |  | limited control over manufacturing yields and quality assurance;                                   
| |   |  |                                                                                                    
| |  |  | inadequate capacity during periods of excess demand;                                               
| |   |  |                                                                                                    
| |  |  | inadequate allocation of production capacity to meet our needs;                                    
| |   |  |                                                                                                    
| |  |  | increased costs of materials or manufacturing services;                                            
| |   |  |                                                                                                    
| |  |  | difficulties selecting and integrating new subcontractors;                                         
| |   |  |                                                                                                    
| |  |  | limited warranties on wafers or products supplied to us;                                           
| |   |  |                                                                                                    
| |  |  | inability to take advantage of price reductions; and                                               
| |   |  |                                                                                                    
| |  |  | misappropriation of our intellectual property.                                                     

Any one of these factors could adversely affect our
business.

While we believe we have good relations with our outside foundries and suppliers, we cannot be certain that we will be able to
maintain these favorable relations.  Additionally, because there is a limited number of foundries and suppliers that can produce our products, establishing relationships and increasing production with new outside foundries takes a considerable
amount of time.  Thus, there is no readily available alternative source of supply for our production needs.  A manufacturing disruption, such as a raw material shortage, experienced by any of our outside foundries and suppliers could
impact the production of some of our products for a substantial period of time.  Our outside foundries and suppliers inability to increase their production capacity or to continue to allocate capacity to manufacture our components
could also limit our ability to grow our business.

In addition, our internal manufacturing operations, though limited, are complex and
subject to disruption due to causes beyond our control. The fabrication of integrated circuits is an extremely complex and precise process consisting of hundreds of separate steps. It requires production in a highly controlled, clean environment.
Minute impurities, errors in any step of the fabrication process, defects in the masks used to print circuits on a wafer or a number of other factors can cause a substantial percentage of wafers to be rejected or numerous die on each wafer not to
function.

We may face production delays if the subcontractors we use to manufacture our wafers or products discontinue the manufacturing processes needed to meet our demands or fail to advance
the process technologies needed to manufacture our products.

Our wafer and product requirements represent a small portion of the
total production of the thirdparty foundries that manufacture our products.  As a result, we are subject to the risk that our external foundries may not continue to devote resources to the continued development and improvement of the
process technologies on which

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the manufacturing of our products are based.  This could increase our costs and harm our ability to deliver our products on time.

Our operating results substantially depend on manufacturing output and yields, which may not meet expectations.

Manufacturing semiconductors requires manufacturing tools that are unique to each product produced.  If one of these unique manufacturing tools of our outside
foundries were damaged or destroyed, then the ability of these foundries to manufacture the related product would be impaired and our business would suffer.  In addition, our manufacturing yields decline whenever a substantial percentage of
wafers must be rejected or significant portions of each wafer are nonfunctional.  Such declines can be caused by many factors, including minute levels of contaminants in the manufacturing environment, design imperfections, defects in masks used
to print circuits on a wafer and difficulties in the fabrication process.  Many of these problems are difficult to diagnose, are time consuming and expensive to remedy and can result in shipment delays.

Difficulties associated with adapting our technology and product design to the proprietary process technology and design rules of our outside foundries can lead to
reduced yields.  Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested.  As a result,
yield problems may not be identified until well into the production process, and resolution of yield problems may require cooperation between our manufacturers and us.  In some cases this risk could be compounded by the offshore location of
some of our manufacturers, increasing the effort and time required to identify, communicate and resolve manufacturing yield problems.  Manufacturing defects that we do not discover during the manufacturing or testing process may lead to costly
product recalls.  Difficulties in diagnosing and solving the complicated problems of assembling these types of semiconductors could also reduce our yields.

If we are unable to commit to
deliver sufficient quantities of our products to satisfy our customers needs, it may be difficult for us to attract new orders and customers or we may lose current orders and customers.

Our customers typically require that we commit to provide specified quantities of products over a given period of time.  We may be unable to deliver
sufficient quantities of our products for any of the following reasons:

| |  |  | our reliance on thirdparty manufacturers;                  
| | - |  | ------------------------------------------------------------
| |   |  |                                                             
| |  |  | our limited infrastructure, including personnel and systems;
| |   |  |                                                             
| |  |  | the limited availability of raw materials;                  
| |   |  |                                                             
| |  |  | competing customer demands; and                             
| |   |  |                                                             
| |  |  | transportation.                                             

If we are unable to commit to deliver sufficient quantities of our products to satisfy a
customers anticipated needs, we may lose the order and the opportunity for significant sales to that customer and may be unable to attract new orders and customers.

Our business depends on
the continued availability of raw materials and advanced process technologies at reasonable prices.  If adequate amounts of raw materials or advanced process technologies are unavailable, our operating results would be adversely
affected.

Highly specialized raw materials and advanced process technologies are needed for the production of our products.  In
some cases, there are only two or three suppliers of such materials and technologies in the world.  We depend on the continued availability of these materials and technologies at reasonable prices.  We may not be able to fulfill customer
purchase requests if there is a substantial increase in the price for these materials or if our outside suppliers cannot provide adequate quantities of raw materials for the production of our products.  This may result in decreased revenues and
adversely affect our operating results.

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The markets we serve are subject to rapid technological change, and if we are unable to develop and introduce new products, our revenues could stop growing or could
decline.

The markets we serve frequently undergo transitions in which products rapidly incorporate new features and performance
standards on an industrywide basis.  Products for communications applications, as well as for highspeed computing applications, are based on continually evolving industry standards.  A significant portion of our revenues in
recent periods has been, and is expected to continue to be, derived from sales of products based on existing transmission standards.  However, our ability to compete in the future will depend on our ability to identify and ensure compliance
with evolving industry standards.

The emergence of new industry standards could render our products incompatible with products developed
by major communications equipment manufacturers.  If our products are unable to support the new features, the enhanced integration of functions or the performance levels required by communications equipment manufacturers in these markets, we
would likely lose business from an existing or potential customer.  Moreover, we would not have the opportunity to compete for new business until the next product transition occurs.  As a result, we could be required to invest significant
time and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards.  If our products are not in compliance with prevailing industry standards for a significant period of time, we could miss
opportunities to achieve crucial designwins.

Moreover, to improve the costeffectiveness and performance of our products, we
may be required to transition one or more of our products to process technologies with smaller components, other materials or higher speeds.  We may not be able to improve our process technologies and develop or otherwise gain access to new
process technologies in a timely or costeffective manner.  We could record expenses or charges associated with such a transition. For example, we wrote off $4.3 million of our inventory in the first quarter of 2001, which resulted from a
transition from certain GaAs products to SiGe products and an order cancellation, reducing our gross profit.

These risks may lead to
increased costs or delay product delivery, which would harm our profitability and customer relationships.  Consequently, our revenues could be significantly reduced for a substantial period if we fail to develop products with required features
or performance standards, if we experience a delay as short as a few months in bringing a new product to market, or if our customers fail to achieve market acceptance of their products.

Necessary licenses of thirdparty technology may not be available to us or may be prohibitively expensive, which could adversely affect our ability to produce and sell our products.

From time to time we may be required to license technology from third parties to develop new products or product enhancements.  We cannot assure you that
thirdparty licenses will be available to us on commercially reasonable terms, if at all.  Our inability to obtain any thirdparty license required to develop new products and product enhancements could require us to obtain substitute
technology of lower quality or performance standards or at greater cost, if at all, any of which could seriously harm our ability to sell our products.

The communications industry is subject to
U.S. and foreign government regulations that could harm our business.  Our failure to timely comply with regulatory requirements, or obtain and maintain regulatory approvals, could materially harm our business.

The Federal Communications Commission, or FCC, has jurisdiction over the entire communications industry in the United States and, as a result, our products and our
customers products are subject to FCC rules and regulations.  Current and future FCC rules and regulations affecting communications services, our products or our customers businesses or products could negatively affect our
business.  In addition, international regulatory standards could impair our ability to develop products in the future.  Delays caused by our compliance with regulatory requirements could result in postponements or cancellations of product
orders, which would harm our business, results of operations and financial condition.  Further, we cannot be certain that we will be successful in obtaining or maintaining any regulatory approvals that may, in the future, be required to operate
our business.

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Our business is subject to environmental regulations.

We
are subject to various governmental regulations related to toxic, volatile and other hazardous chemicals used in our manufacturing process.  If we fail to comply with these regulations, this failure could result in the imposition of fines or in
the suspension or cessation of our operations.  Additionally, we may be restricted in our ability to expand operations at our present locations, or we may be required to incur significant expenses to comply with these regulations.

If a significant number of shares become available for sale and are sold in a short period of time, the market price of our stock could decline.

The lock-up agreements in effect as of our initial public offering in June 2001 expired in December 2001.  If our shareholders now sell substantial amounts of
our common stock in the public markets, the market price of our stock could be materially adversely affected.  Following the expiration of these agreements, approximately 55 million shares, as well as additional shares issuable upon exercise of
options, became immediately eligible for sale in the public market, subject to certain exceptions.

In addition, under certain
investors rights agreements, some of our current shareholders have demand and/or piggyback registration rights in connection with future offerings of our common stock.  Demand rights enable shareholders
to demand that their shares be registered and may require us to file a registration statement under the Securities Act at our expense.  Piggyback rights require us to notify the shareholders of our stock if we propose to register
any of our securities under the Securities Act, and grant such shareholders the right to include their shares in the registration statement.  Registration of these additional shares would make them generally available to be sold in the public
market.

Certain of our directors, executive officers and their affiliates can control the outcome of matters that require the approval of our shareholders, and accordingly we will not be able to
engage in certain transactions without their approval.

We currently have approximately 49,800,000 shares of Class A common stock
outstanding, with each share entitling the holder to one vote.  We currently have 26,000,000 shares of Class B common stock outstanding, each of which entitles the holder to ten votes.  All of the Class B common stock is held by
officers, directors or other persons or entities owning 5% or more of the outstanding shares of our common stock.

Our executive officers,
directors and their affiliates beneficially own approximately 50% of our outstanding common stock and over 50% of the total voting control held by our shareholders.  In particular, Dr. Richard Nottenburg, as a result of his stock ownership
and a voting trust agreement with Dr. Jens Albers, alone controls approximately 50% of the outstanding voting power of our capital stock.  In addition, persons and entities owning more than 5% of our outstanding shares of common stock, in
the aggregate, control over 90% of the outstanding voting power of our capital stock.  As a result, our directors and 5% shareholders acting together have the ability to control all matters submitted to our shareholders for approval, including
the election and removal of directors and the approval of any merger, consolidation or sale of all or substantially all of our assets.  These shareholders may make decisions that are adverse to the interests of our other
shareholders.

Our board of directors may issue, without shareholder approval, shares of preferred stock that have rights and preferences superior to those of our shares of common stock and that
may prevent or delay a change of control.

Our articles of incorporation provide that our board of directors may issue new shares of
preferred stock without shareholder approval.  Some of the rights and preferences of these shares of preferred stock would be superior to the rights and preferences of shares of our common stock.  Accordingly, the issuance of new shares of
preferred stock may adversely affect the rights of the holders of shares of our common stock.  In addition, the issuance of new shares of preferred stock may prevent or delay a change of control of our company.

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Item 3. 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We develop and market our products in North America, Europe and Asia. As a result, our financial results could be affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. As our sales are currently made or denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets. Although we recognize
our revenues in U.S. dollars, we incur expenses in currencies other than U.S. dollars.

We are exposed to fluctuations in the Euro, lita
and the Israeli shekel.  During 2001, we opened sales offices in Canada, Italy and the United Kingdom and are now exposed to fluctuations in the Canadian dollar and British pound. The expenses of our foreign sales offices are not
material.  During the six months ended June 30, 2002, total expenses denominated in these currencies were $8.2 million or  15% of total expenses before a benefit for income taxes.  For the six months ended June 30, 2002, expenses
denominated in the Euro represented approximately $4.7 million of foreign expenses and expenses denominated in the shekel were approximately $3.1 million for the same time period. We expect that our foreign expenses will decrease as we begin
executing our corporate realignment plan that was announced on August 8, 2002.

During 2002, we entered into foreign forward contracts for
4.5 million Euros with a notional amount of $3.9 million. The contracts mature through December 2002 and were entered into to hedge a portion of Euro denominated expenses. Although we have not experienced significant foreign exchange rate
losses to date, we may in the future, especially to the extent that we do not engage in hedging.  We do not enter into derivative financial instruments for trading or speculative purposes.

The economic impact of currency exchange rate movements on our operating results is complex because such changes are often linked to variability in real growth,
inflation, interest rates, governmental actions and other factors. These changes, if material, may cause us to adjust our financing and operating strategies. Consequently, isolating the effect of changes in currency does not incorporate these other
important economic factors.

Interest Rate Risk

Software and
Equipment Financings

All of our vendor software and equipment financings have a fixed interest rate and are not subject to interest
rate fluctuations.  The Tranche A and B term loans of our credit facility have a fixed interest rate determined at 150 basis points above the three year Treasury Note at the time such amounts are converted into their respective term loan. 
During each six-month draw down period under the credit facility, only monthly interest payments are due.  During this period, interest is calculated at the London Interbank Offered Rate (LIBOR) plus 150 basis points.   An
immediate 100 basis point fluctuation in these rates would not have a material impact on our financial condition, results of operations or cash flows.

Short-term Investments

At June 30, 2002,
our investment portfolio included fixed and floating rate securities of $33.9 million.  The maximum maturity of these investments is 12 months with an overall dollar-weighted maturity of the portfolio of less than six months.  Fixed rate
securities are subject to interest rate risk and will decline in value if interest rates increase whereas floating rate securities may produce less income than expected if interest rates decrease.  Accordingly, our future investment income may
not meet expectations as a result of interest rate fluctuations or a loss of principal may occur if we were to sell securities that have declined in market value as a result of interest rate fluctuations.  As a result of the relatively short
average maturity of the portfolio, an immediate 100 basis point increase in interest rates would not have a material impact on our financial condition, results of operations or cash flows.

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We do not attempt to reduce our exposure to interest rate risk through the use of derivative financial instruments
due to the short-term nature of our portfolio.

Other Investments

Our other investments include several strategic investments in privately held companies.  These investments have an inherent level of risk associated with them,
as they are comprised of investments in start-up or development stage companies.  We consider these investments long-term strategic investments.  The market for these technologies or products that they have under development is typically
in the early stages, and may never materialize.  Accordingly, we could lose our entire investment in these companies.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 
Actual results could differ from those estimates.  We believe the most critical accounting policies that are significantly affected by these estimates include allowance for doubtful accounts receivable, inventory reserves, valuation allowance
for deferred tax assets, warranty accruals, related party transactions and equity-based compensation.

Allowance for doubtful accounts
receivable.  Accounts receivable are reduced by a valuation allowance to estimate the amount that will actually be collected from our customers.  Many of our customers have been adversely affected by reduced carrier spending and have
been paying us slower than in the past and are attempting to negotiate longer payment terms.  Our customers are aggressively managing their cash flows while other customers have virtually no cash flows and have filed for bankruptcy
protection.  If the financial condition of our customers were to materially deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required.

Inventory reserves.  Inventories are stated at the lower of cost or market with cost being determined on the firstin, first-out method. 
Reserves for slow moving and obsolete inventories are provided based on historical experience and current product demand.  If our estimate of future demand is not correct or if our customers place significant order cancellations, actual
inventory reserves could materially differ from our estimate. We may also receive orders for inventory that has been fully or partially reserved.  To the extent that the sale of reserved inventory has a material impact on our financial results,
we will appropriately disclose such effects.  Our inventory carrying costs are not material; thus we may not physically dispose of reserved inventory immediately.

Valuation allowance for deferred tax assets.  We record a valuation allowance to reduce our deferred tax assets to an amount that is more likely than not
to be realized.  During the three months ended June 30, 2002, we concluded that significant uncertainty existed surrounding the recoverability of our deferred tax assets.  On a quarterly basis, we assesses the recoverability of our
deferred tax assets by reviewing a number of factors, including operating trends, the scheduled reversal of deferred tax liabilities and future projections of taxable income, to determine whether a valuation allowance is required to reduce such
deferred tax assets to an amount that is more likely than not to be realized. Based on the projections for future taxable income over the periods in which the deferred tax assets are realizable, we believe that significant uncertainty exists
surrounding the recoverability of the deferred tax assets.  Accordingly, during the three months ended June 30, 2002, we recorded a valuation allowance equal to our deferred tax assets.

Warranty accruals.  Our warranty costs are predominantly driven by product failure rates.  Should actual failure rates differ from our estimates and
vary significantly from historical trends, revisions in the estimated warranty liability would be required. We have also recently introduced many new products with no historical failure data.  A material failure in a new product would
materially affect the required warranty accrual.

Related party transactions.  We enter into transactions with some of our
equity holders for various products used in both the manufacturing and research and development functions. We enter into these transactions, as these parties are predominant, well-established suppliers in our industry for these products.

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Equity-based compensation.  As part of our compensation and retention structure, we grant employees,
officers and directors stock options and restricted stock.  Prior to our initial public offering during June 2001, most of our stock options were issued at an exercise price lower than our estimated fair market value.  The difference
between the exercise price and the estimated fair market value of the options is recorded as a separate component of shareholders equity as deferred stock compensation and amortized into expense over the vesting period of the options.
 Subsequent to our initial public offering, we did not issue any options with an exercise price lower than the fair market value of our stock on the option grant date.  When we issue restricted stock, we also record deferred stock
compensation for the difference between the exercise price, which is zero, and the fair market value of our stock on the grant date of the restricted stock.  This amount is also amortized into expense over the vesting period of the restricted
stock.  We account for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and complies with the
disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Under APB Opinion No. 25, compensation expense is based on the difference, if any, on the date of
grant, between the fair value of the Companys stock and the exercise price.  We account for stock options issued to non-employees in accordance with the provisions of SFAS No. 123, and Emerging Issues Task Force Consensus on Issue No.
96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.  We are amortizing deferred stock compensation using the graded vesting method, in
accordance with Financial Accounting Standards Board Interpretation No. 28, over the vesting period of each respective option or restricted stock award, which ranges from six months to four years.

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PART II. 
OTHER INFORMATION

|Item 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Legal Proceedings                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                          
|In May 2002, a complaint was filed in Los Angeles Superior Court against us, our Chief Executive Officer and our former Executive Vice President arising out of an alleged oral joint venture agreement
between the plaintiff, us and the named officers in connection with the development of our subsidiary in Israel. The action claims that we and the named officers breached an oral agreement to deliver to the plaintiff a warrant to purchase at least
100,000 shares of our common stock at a price of $1.30 per share, and seeks damages in excess of $1.0 million. Although we have denied the allegations in the complaint and believe that they are without merit, we cannot predict the outcome of the
litigation.
|Item 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Changes in Securities and Use of Proceeds
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                          
|(a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | None                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                          
|(b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | None                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                          
|(c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | None                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                          
|(d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | None                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                          
|Item 3.
Defaults Upon Senior Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Item 4.
Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|We held our Annual Meeting of Shareholders on May 30, 2002 for the purposes of electing our directors and to ratify the appointment of Deloitte & Touche LLP as our
independent auditors for the 2002 fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|All nominees for directors were elected and the appointment of auditors was ratified.  The voting on each matter is set forth below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Election of Directors

|Nominee                   |  | For         |  | Withheld   | 
|------------------------- |  | ----------- |  | ---------- | 
|                          |  |             |  |            | 
|Dr. Richard N. Nottenburg |  | 255,063,485 |  | 55,004,599 | 
|                          |  |             |  |            | 
|Dr. Jens Albers           |  | 255,063,485 |  | 55,004,599 | 
|                          |  |             |  |            | 
|Dr. Stephen R. Forrest    |  | 255,113,884 |  | 54,954,200 | 
|                          |  |             |  |            | 
|G. Bradford Jones         |  | 255,218,884 |  | 54,849,200 | 
|                          |  |             |  |            | 
|James M. Schneider        |  | 310,018,884 |  | 49,200     | 
|                          |  |             |  |            | 
|John Walecka              |  | 255,218,884 |  | 54,849,200 | 
|                          |  |             |  |            | 
|Edward J. Zander          |  | 310,018,884 |  | 49,200     | 

Proposal to ratify the appointment of Deloitte & Touche LLP as our independent auditors
for the 2002 fiscal year:

|For         |  | Against |  | Abstain    | 
|----------- |  | ------- |  | ---------- | 
|            |  |         |  |            | 
|252,912,085 |  | 135,837 |  | 57,020,162 | 

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|Item 5.
Other Information               
|----------------------------------------
|                                        
|None                                    
|                                        
|Item 6.
Exhibits and Reports on Form 8-K
|                                        
|                                        
|                                        
|                                        
|first quarter 2002 results.             

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                      |  | MULTILINK TECHNOLOGY CORPORATION                                        
|--------------------- |  | ------------------------------------------------------------------------
|                      | 
|Date: August 14, 2002 |  | /s/ John U. Soenksen                                                    
|                      | 
|                      |  | John U. Soenksen                                                        
|                      |  | Chief Financial Officer                                                 
|                      |  | (Principal Financial and Accounting Officer and Duly Authorized Officer)

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