<PAGE>

===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ______________

                                   FORM 10-Q

    [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                             EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED September 30, 2001



                       Commission File Number: 000-31851


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


<TABLE>
<S>                                       <C>
             California                               95-4522566
             ----------                               ----------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
 Incorporation or organization)

</TABLE>

           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.

                               Yes [ X ] No [   ]

     As of November 12, 2001, the number of shares of the Registrant's common
stock, $0.0001 par value per share, issued and outstanding, were: 40,509,247
shares of Class A Common Stock and 28,000,000 shares of Class B Common Stock

===============================================================================
<PAGE>

                        MULTILINK TECHNOLOGY CORPORATION

                                   FORM 10-Q

                                     INDEX
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>     <C>                                                                 <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited):

         Condensed Consolidated Balance Sheets as of September 30, 2001
         and December 31, 2000............................................     1

         Condensed Consolidated Statements of Operations for the three
         and nine months ended September 30, 2001 and 2000................     2

         Condensed Consolidated Statements of Shareholders' Equity
         for the nine months ended September 30, 2001.....................     3

         Condensed Consolidated Statements of Cash Flows for the
         nine months ended September 30, 2001 and 2000....................     4

         Notes to Unaudited Financial Statements..........................     5

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations........................................    10

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.......    28

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings................................................    30

Item 2.  Changes in Securities and Use of Proceeds........................    30

Item 3.  Defaults Upon Senior Securities..................................    30

Item 4.  Submission of Matters to a Vote of Security Holders..............    30

Item 5.  Other Information................................................    30

Item 6.  Exhibits and Reports on Form 8-K.................................    31
</TABLE>

<PAGE>

                         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)
<TABLE>
<CAPTION>
                                                                            September 30, December 31,
                                                                                2001         2000
                                                                            ------------  ------------
<S>                                                                         <C>           <C>
ASSETS
Current assets:
   Cash and cash equivalents...............................................   $  62,448    $  29,159
   Short term investments..................................................      33,491           --
   Accounts receivable, net................................................      15,453       13,771
   Inventories.............................................................      15,816       17,264
   Prepaid expenses and other current assets...............................       9,946        6,537
                                                                              ---------    ---------
       Total current assets................................................     137,154       66,731
                                                                              ---------    ---------
Property and equipment, net................................................      26,823       17,765
Deferred income taxes......................................................      16,852        2,573
Other assets...............................................................       4,657        3,197
                                                                              ---------    ---------
   Total assets............................................................   $ 185,486    $  90,266
                                                                              =========    =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable........................................................   $   8,278    $  10,987
   Accrued expenses........................................................      17,760       11,288
   Accrued warranty costs..................................................       1,338          785
   Software and equipment financing--current portion.......................       1,843          685
   Lease obligations--current portion......................................         559          636
   Income taxes payable....................................................          --          702
                                                                              ---------    ---------
       Total current liabilities...........................................      29,778       25,083
                                                                              ---------    ---------
Lease obligations--net of current portion..................................         226          773
Software and equipment financing--net of current portion...................       2,298          245
                                                                              ---------    ---------

Commitments and contingencies
Redeemable convertible preferred stock:
   Series A: $.0001 par value; 1,712 shares issued and outstanding as of
       December 31, 2000; no shares outstanding as of September 30, 2001...          --       15,073
   Series B: $.0001 par value; 1,000 shares issued and outstanding as of
       December 31, 2000; no shares outstanding as of September 30, 2001...          --       40,000
Shareholders' equity:
   Common stock, $.0001 par value:
       Class A.............................................................           4           --
       Class B.............................................................           3            3
   Additional paid-in-capital..............................................     183,583       34,162
   Deferred stock compensation.............................................     (13,790)     (12,601)
   Accumulated deficit.....................................................     (16,417)     (12,487)
   Accumulated other comprehensive income (loss)...........................         (81)          15
   Treasury stock, at cost.................................................        (118)          --
                                                                              ---------    ---------
       Total shareholders' equity..........................................     153,184        9,092
                                                                              ---------    ---------
       Total liabilities and shareholders' equity..........................   $ 185,486    $  90,266
                                                                              =========    =========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                      -1-
<PAGE>

               MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

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


<TABLE>
<CAPTION>
                                                       Three Months Ended       Nine Months Ended
                                                          September 30,           September 30,
                                                      --------------------    --------------------
                                                        2001         2000       2001        2000
                                                      --------     -------    --------    --------
<S>                                                   <C>          <C>        <C>         <C>
Total revenues....................................... $ 37,603     $18,680    $103,774    $ 47,347
                                                      --------     -------    --------    --------
Cost of revenues
  Product............................................   13,267       6,897      37,337      17,756
  Inventory write down...............................       --          --       4,895          --
  Deferred stock compensation........................      646         315       1,568         475
                                                      --------     -------    --------    --------
Total cost of revenues...............................   13,913       7,212      43,800      18,231
                                                      --------     -------    --------    --------
Gross profit.........................................   23,690      11,468      59,974      29,116
                                                      --------     -------    --------    --------
Operating expenses:
  Research and development, excluding deferred
    stock compensation...............................   14,386       6,682      40,181      15,617
  Research and development--warrant issuance.........       --          --          --       6,375
  Sales and marketing, excluding deferred stock
    compensation.....................................    5,051       1,893      13,085       4,407
  General and administrative, excluding deferred
    stock compensation...............................    2,892       2,199       9,148       4,308
  Deferred stock compensation........................    2,334       1,861       7,218       3,940
                                                      --------     -------    --------    --------
   Total operating expenses..........................   24,663      12,635      69,632      34,647
                                                      --------     -------    --------    --------
Operating loss.......................................     (973)     (1,167)     (9,658)     (5,531)
Other income and expenses
  Interest expense...................................     (137)        (37)       (322)       (231)
  Other income (including $176 and $383 of equity
   losses in affiliate during the three and nine
   months ended September 30, 2001, respectively)....      658         745       1,002       1,066
                                                      --------     -------    --------    --------
Loss before provision (benefit) for income taxes.....     (452)       (459)     (8,978)     (4,696)
Provision (benefit) for income taxes.................   (1,827)        400      (5,048)        847
                                                      --------     -------    --------    --------
Net income (loss)....................................    1,375        (859)     (3,930)     (5,543)
Accretion of redeemable convertible preferred stock
 to redemption value.................................       --          24          24          71

Dividend related to warrant issuance.................       --          --          --       6,375
                                                      --------     -------    --------    --------
Net income (loss) attributable to common shareholder. $  1,375     $  (883)   $ (3,954)   $(11,989)
                                                      ========     =======    ========    ========

Net income (loss) per share:
  Basic.............................................. $   0.02     $ (0.03)   $  (0.09)   $  (0.40)
                                                      ========     =======    ========    ========
  Diluted............................................ $   0.01     $ (0.03)   $  (0.09)   $  (0.40)
                                                      ========     =======    ========    ========

Weighted average shares of common stock:
  Basic..............................................   67,433      30,000      43,727      30,000
                                                      ========     =======    ========    ========
  Diluted............................................   92,275      30,000      43,727      30,000
                                                      ========     =======    ========    ========

The composition of the amortization of deferred
  stock compensation is as follows:
Research and development............................. $  1,141     $   944    $  3,668    $ 1, 739
Sales and marketing..................................      578          80       1,429         168
General and administrative...........................      615         837       2,121       2,033
                                                      --------     -------    --------    --------
  Total.............................................. $  2,334     $ 1,861    $  7,218    $  3,940
                                                      ========     =======    ========    ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                      -2-
<PAGE>

               MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (in thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>

                                                             Class A         Class B      Additional     Deferred
                                                          --------------  --------------  -----------  -------------
                                                           Common Stock    Common Stock     Paid-in     Stock Based   Accumulated
                                                          --------------  --------------  -----------  -------------  ------------
                                                          Shares  Amount  Shares  Amount    Capital    Compensation     Deficit
                                                          ------  ------  ------  ------  -----------  -------------  ------------
<S>                                                       <C>     <C>     <C>     <C>     <C>          <C>            <C>
BALANCE, JANUARY 1, 2001................................   2,049          28,000      $3    $ 34,162       $(12,601)     $(12,487)
 Stock option plan transactions including related
  income tax benefit....................................     200                                 815
 Issuance of Class A common stock.......................   9,200       1                      74,516
 Conversion of Series A and B redeemable convertible
  preferred stock to Class A common stock...............  27,116       3                      55,094
 Warrant exercise including related income tax benefit..   1,848                               9,045
 Deferred stock compensation............................                                       9,975         (9,975)
 Amortization of deferred stock compensation............                                                      8,786
 Accretion of redeemable convertible preferred stock....                                         (24)
 Purchase of treasury stock, at cost....................

 Comprehensive Income:
  Net loss..............................................                                                                  (3,930)
  Other comprehensive income--
   Foreign currency translation adjustment..............
   Unrealized gain on marketable securities.............
   Cash flow hedges reclassification adjustments........

 Comprehensive loss.....................................  ------  ------  ------  ------    --------       --------     --------
BALANCE, SEPTEMBER 30, 2001.............................  40,413      $4  28,000      $3    $183,583       $(13,790)    $(16,417)
                                                          ======  ======  ======  ======    ========       ========     ========
</TABLE>
<TABLE>
<CAPTION>
                                                           Accumulated
                                                          -------------
                                                              Other
                                                          -------------
                                                          Comprehensive
                                                          -------------
                                                          Income (Loss)  Treasury Stock     Total
                                                          -------------  ---------------  ---------
<S>                                                       <C>            <C>              <C>
BALANCE, JANUARY 1, 2001................................         $  15                    $  9,092
 Stock option plan transactions including related
  income tax benefit....................................                                       815
 Issuance of Class A common stock.......................                                    74,517
 Conversion of Series A and B redeemable convertible
  preferred stock to Class A common stock...............                                    55,097
 Warrant exercise including related income tax benefit..                                     9,045
 Deferred stock compensation............................                                        --
 Amortization of deferred stock compensation............                                     8,786
 Accretion of redeemable convertible preferred stock....                                       (24)
 Purchase of treasury stock, at cost....................                           (118)      (118)

 Comprehensive Income:
  Net loss..............................................                                    (3,930)
  Other comprehensive income--
   Foreign currency translation adjustment..............          (157)                       (157)
   Unrealized gain on marketable securities.............            86                          86
   Cash flow hedges reclassification adjustments........           (25)                        (25)

 Comprehensive loss.....................................                                    (4,026)
                                                          ------------   --------------   --------
BALANCE, SEPTEMBER 30, 2001.............................         $ (81)           $(118)  $153,184
                                                          ============   ==============   ========
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                      -3-
<PAGE>

               MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                                        Nine Months Ended
                                                                                          September  30,
                                                                                ----------------------------------
                                                                                      2001              2000
                                                                                ----------------  ----------------
<S>                                                                             <C>               <C>
Cash flows from operating activities:
  Net loss ...................................................................         $ (3,930)          $(5,543)
  Adjustments to reconcile net loss to net cash provided by (used in)
   operating activities:
    Warrant issuances  .......................................................               --             6,456
    Depreciation and amortization.............................................            6,632             1,674
    Deferred stock compensation  .............................................            8,786             4,415
    Interest expense on line of credit from shareholder.......................               --                61
    Deferred income taxes ....................................................           (2,907)           (1,706)
    Equity losses in affiliate  ..............................................              383                --
    Changes in working capital items, net  ...................................           (3,226)             (308)
    Other  ...................................................................             (157)               33
                                                                                       --------           -------
     Net cash provided by operating activities................................            5,581             5,082
                                                                                       --------           -------
Cash flows from investing activities:
  Purchases of property and equipment ........................................          (14,212)           (6,146)
  Purchases of non-marketable securities .....................................           (2,003)             (833)
  Purchases of marketable securities .........................................          (33,388)               --
                                                                                       --------           -------
  Net cash used in investing activities ......................................          (49,603)           (6,979)
                                                                                       --------           -------
Cash flows from financing activities:
  Issuance of common stock, net ..............................................           77,004                --
  Proceeds from stock option exercises .......................................              571                --
  Payments on lease obligations and software and equipment financing .........           (2,440)             (398)
  Proceeds from software and equipment financings ............................            2,257                --
  Treasury stock purchase ....................................................             (118)               --
  Issuance of preferred stock, net ...........................................               --            37,550
                                                                                       --------           -------
    Net cash provided by financing activities ................................           77,274            37,152
                                                                                       --------           -------
Effect of exchange rate changes on cash ......................................               37               (13)
                                                                                       --------           -------
Net increase in cash and cash equivalents ....................................           33,289            35,242
Cash and cash equivalents, beginning of period ...............................           29,159             8,997
                                                                                       --------           -------
Cash and cash equivalents, end of period  ....................................         $ 62,448           $44,239
                                                                                       ========           =======
Supplemental disclosures of cash flow information--Cash paid during the
 period for:
  Income taxes ...............................................................         $  2,450           $   945
                                                                                       --------           -------
  Interest ...................................................................         $    322           $   170
                                                                                       --------           -------
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                      -4-
<PAGE>

               MULTILINK TECHNOLOGY CORPORATION AND SUBSIDIARIES
        NOTES 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 nine months ended September 30, 2001 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 Registration Statement on Form S-1, including applicable amendments
thereto, which was declared effective by the Securities and Exchange Commission
on June 20, 2001.

     Derivative Financial Instruments - During January 2001, the Company began
utilizing 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 mark and 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 nine
months ended September 30, 2001, hedge ineffectiveness associated with
instruments designated as cash flow hedges was not significant. For the three
and nine months ended September 30, 2001, net losses of $0.1 million and $0.2
million, respectively, were reclassified into earnings as an adjustment to
research and development expense. These net losses were offset by gains and
losses on the transactions being hedged. At September 30, 2001 less than $0.1
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 September 30, 2001, the Company's liability of less than
$0.1 million relating to these forward contracts is included in accrued expenses
in the accompanying condensed consolidated balance sheet.

                                      -5-
<PAGE>

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


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:

<TABLE>
<CAPTION>
(Amounts in thousands)                                  Three Months        Nine Months Ended
                                                     Ended September 30,      September 30,
                                                     -------------------    -----------------
                                                      2001         2000      2001       2000
                                                     ------       ------    ------     ------
<S>                                                  <C>          <C>       <C>        <C>
Weighted average shares outstanding, basic.........  67,433       30,000    43,727     30,000
Dilutive shares issuable in connection with stock
 plans.............................................  21,404       24,259    19,650     22,449
Dilutive shares issuable in connection with
 warrants granted..................................   3,438          908     3,268        731
Conversion of preferred stock to common stock......      --       27,116    17,174     23,262
                                                     ------       ------    ------     ------
Weighted average shares outstanding, diluted.......  92,275       82,283*   83,819*    76,442*
                                                     ======       ======    ======     ======
</TABLE>

* 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.

3.   INVENTORIES

     Inventories consisted of the following:

<TABLE>
<CAPTION>
     (Amounts in thousands)                  September 30,      December 31,
                                                  2001              2000
                                             -------------      ------------
<S>                                          <C>                <C>
Finished goods...........................       $ 3,501           $ 2,736
Work-in-progress.........................         2,617             5,993
Raw materials............................         9,698             8,535
                                                -------           -------
  Total..................................       $15,816           $17,264
                                                =======           =======
</TABLE>

     During the nine months ended September 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.

                                      -6-
<PAGE>

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


4.   SEGMENT INFORMATION AND CONCENTRATION OF REVENUES

     Revenues to geographic locations are as follows:

<TABLE>
<CAPTION>
     (Amounts in Thousands)                Three Months Ended     Nine Months Ended
                                              September 30,          September 30,
                                           ------------------    -------------------
                                             2001       2000        2001       2000
                                           -------    -------    --------    -------
<S>                                        <C>        <C>        <C>         <C>
     North America.......................  $32,680    $13,111    $ 74,618    $34,655
     Europe..............................    4,799      5,564      28,987     12,586
     Asia................................      124          5         169        106
                                           -------    -------    --------    -------
                                           $37,603    $18,680    $103,774    $47,347
                                           =======    =======    ========    =======
</TABLE>

     Revenues to certain geographic locations within Europe are as follows:

<TABLE>
<S>                                        <C>        <C>        <C>         <C>
     Italy...............................        *    $ 1,358           *    $ 6,403
                                           =======    =======    ========    =======
     France..............................        *    $ 2,765    $ 12,725    $ 5,345
                                           =======    =======    ========    =======
</TABLE>

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

<TABLE>
<CAPTION>
                                   Three Months         Nine Months Ended
                                Ended September 30,       September 30,
                                -------------------    ------------------
                                  2001       2000        2001      2000
                                --------   --------    --------  --------
<S>                             <C>        <C>         <C>       <C>
     Alcatel..................      *         39%         29%       25%
     TyCom....................     53%         *          33%        *
     Lucent...................      *         27%          *        41%
     Cisco....................      *          *           *        14%
     Ciena....................     10%         *           *         *
</TABLE>

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

5.   COMMITMENTS AND CONTINGENCIES

     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.

     As disclosed in prior filings, in May and June, 2001, an
employee/shareholder sent correspondence to the Company claiming, among other
things, that the Company's Chief Executive Officer and Executive Vice President
breached a promise relating to his compensation and misused their power to
reward themselves while engaging in a scheme to oust him from the Company.  The
employee/shareholder alleged that his claims form the basis for a claim of
breach of fiduciary duty by those officers.  The correspondence proposed
settlement payments by the Company of up to $1.0 million in cash and the
transfer of one million shares of common stock. The Company received no
correspondence regarding this matter during the third quarter of 2001.

     While the Company believes the allegations set forth in the
employee/shareholder's correspondence to it are without merit, it cannot predict
the ultimate outcome of any litigation, should it be initiated.

6.   SHAREHOLDERS' EQUITY

     During the three months ended September 30, 2001, 2.5 million Class A
common stock warrants issued in connection with the Company's May 2000
semiconductor development agreement were cashlessly exercised.  The Company
issued net 1.8 million Class A common shares in connection with this
exercise and recorded a $9.0 million deferred tax asset that was
recorded as an increase to additional paid-in capital.

                                      -7-
<PAGE>

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


     On June 26, 2001, the Company completed an initial public offering of 9.2
million shares (including exercise of the underwriters' over-allotment option)
of its Class A common stock.  Since the public offering was a "qualified public
offering" as defined in the Series A and B redeemable convertible preferred
stock agreements, the 2.7 million outstanding shares of the Series A and B
preferred stock were converted into 27.1 million shares of Class A common stock.
The 500,000 Series B convertible preferred stock warrants outstanding prior to
the public offering converted automatically into warrants to purchase 5 million
shares of the Company's Class A common stock, 2.5 million of which were
exercised as described above.

7.   RELATED PARTY TRANSACTIONS

     In July 2001, the Company entered into an investment agreement with the
shareholders of Innovative Processing AG ("IPAG"), an optical components company
located in Germany, pursuant to which the Company purchased 26,230 shares, or
approximately 18%, of IPAG's ordinary shares for an aggregate purchase price of
$0.3 million.  AGITE! S.p.A., an investment fund ("AGITE!"), also purchased
24,770 shares of IPAG's ordinary shares at the same price per share as the
Company.

     In September 2001, the Company entered into a development and license
agreement with IPAG, pursuant to which IPAG will design, develop and prototype
certain optical components, and the Company will reimburse IPAG a maximum of
$770,000 of its development expenses and consign up to approximately $500,000 of
equipment to IPAG, which IPAG will later have the option to purchase at its
then-depreciated value.  The agreement also provides that the Company will enter
into a supply agreement with IPAG upon IPAG's successful completion and delivery
of the component prototypes.  During the three months ended September 30, 2001,
the Company paid $0.1 million to IPAG under this agreement.

     The Company's Executive Vice President and Co-Chairman, Dr. Jens Albers, is
a member of the Board of Supervisors of IPAG, and, in connection with his
service on the board, Dr. Albers owns 2,500 of IPAG's ordinary shares. In
addition, Dr. Albers owns a 12.5% interest in AGITE! and acts as a managing
partner of AGITE!.

8.   SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS

     During the three and nine months ended September 30, 2001, the Company
financed the acquisition of equipment or software in the amounts of $0.1 million
and $1.9 million, respectively.

9.   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June and August 2001, the Financial Accounting Standards Board, or FASB,
issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting
for Asset Retirement Obligations" and No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," respectively.  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.  Statement No. 144 establishes a single
accounting model for the accounting of a discontinued segment of a business as
well as addresses significant implementation issues related to Statement 121.
The Company does not expect that the adoption of these standards will have a
material impact on its financial position, results of operations or cash flows.

     In June 2001, the FASB, issued SFAS No. 141, "Business Combinations", and
No. 142, "Goodwill and Other Intangible Assets". Statement No. 141 requires all
business combinations initiated after June 30, 2001, to be accounted for using
the purchase method of accounting.  With the adoption of Statement 142, goodwill
is not longer subject to amortization over its estimated useful life.  Rather,
goodwill will be 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 not,
however, subject to the new impairment rules; the impairment guidance in
existing rules for equity method investments continues to apply.  The Company
does not expect that the adoption of these standards will have a material impact
on its financial position or results of operations.  The Company currently does
not have any business combinations in progress.  As of September 30, 2001, the
Company had $0.8 million of unamortized goodwill recorded resulting from one of
its equity investments.

                                      -8-
<PAGE>

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


Less than $0.1 million of goodwill amortization will occur through the remainder
of 2001, and effective January 1, 2002, the Company will discontinue amortizing
this goodwill whose annual amortization expense is less than $0.2 million.

                                      -9-
<PAGE>

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 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. During the three months ended September 30, 2001,
Tycom with 53% and Ciena with 10% accounted for more than 10% of our revenues
and four other customers each accounted for greater than 5% of our revenues.
Our top three customers for the nine months ended September 30, 2001 were TyCom,
Alcatel and Marconi, representing 33%, 29% and 9% of our revenues, respectively.
A number of telecommunication service providers have recently announced plans to
curtail the level of their capital expenditures on their infrastructure build-
out, which could significantly reduce the demand for our products by
communications equipment manufacturers, including these principal customers. We
expect that in future periods our customer base will become less concentrated
both generally and within our top three customers.

     We have focused our initial sales and marketing efforts on North American
and European communications equipment manufacturers. During the three and nine
months ended September 30, 2001, we derived 87% and 72%, respectively, of our
total revenues from communications equipment manufacturers in North America
compared with 70% and 73%, respectively, during the comparable periods in 2000.
We currently sell through our direct sales force in North America, Europe,
United Kingdom and Italy and through selected independent sales representatives
in North America, Germany, United Kingdom, Italy, France, Israel, China, Korea
and Japan. We have started to build an infrastructure to support an internal
international sales force by opening sales offices in Canada, Italy, and United
Kingdom.  International revenues are denominated in 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 recent slowdown
in the build-out of the communications infrastructure has caused our revenues to
grow less rapidly than they otherwise would have, and we recently announced that
we expect our revenues to decline in the fourth quarter of 2001, compared to the
third quarter of 2001.  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 revenue will
be affected by such fees.

     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. We outsource
substantially all of the fabrication and assembly, and a portion of the testing,
of our products.

                                      -10-
<PAGE>

Accordingly, a significant portion of our cost of revenues consists of payments
to our third-party manufacturers. As revenues increase, we believe favorable
trends should occur in manufacturing costs due to our ability to absorb overhead
costs over higher volumes.

     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 intend to increase our research and development
expenses in future periods in absolute dollar amounts.

     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 increase in future periods in
absolute dollar amounts as we hire additional sales and marketing personnel,
initiate additional marketing programs, establish sales offices in additional
domestic and international locations and expand 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 do not expect general and administrative
expenses to increase in absolute dollars.

     Deferred Stock Compensation.  In connection with the granting of stock
options 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 four years.  Based on
our balance of deferred stock compensation as of September 30, 2001, we estimate
our amortization of deferred stock compensation for each of the periods below to
be as follows:

<TABLE>
<CAPTION>
             Year Ending December 31,                     Amount
             ------------------------                ----------------
                                                      (in thousands)
<S>                                                  <C>
   2001 (subsequent to September 30, 2001).........          $ 2,376
   2002............................................            6,824
   2003............................................            3,353
   2004............................................            1,180
   2005............................................               57
                                                             -------
      Total........................................          $13,790
                                                             =======
</TABLE>

     Approximately $2.1 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.

RESULTS OF OPERATIONS

     Revenues.   Revenues increased to $37.6 million for the three months ended
September 30, 2001, compared with $18.7 million for the three months ended
September 30, 2000. Revenues increased to $103.8 million for the nine months
ended September 30, 2001, compared with $47.3 million for the nine months ended
September 30,

                                      -11-
<PAGE>

2000. The increase was due to higher unit volume shipments of integrated
circuits, modules and higher-level assemblies to existing and new customers and
the introduction of new products.

     Gross Profit.   Cost of revenues, including $0.6 million of deferred stock
compensation, increased to $13.9 million for the three months ended September
30, 2001, compared with $7.2 million for the three months ended September 30,
2000. Gross profit as a percentage of revenues, or gross margin, increased to
63% for the three months ended September 30, 2001 compared with 61% for the
three months ended September 30, 2000. Our higher sales volume, fabless strategy
and the leverage of our infrastructure all contributed to the gross margin
improvement.  Excluding the impact of deferred stock compensation, gross margins
would have been 65% and 63% for the three months ended September 30, 2001 and
2000, respectively.  During the three months ended September 30, 2001 compared
to the comparable period in 2000, stock based compensation expense associated
with cost of revenues increased $0.3 million due to stock option grants to
manufacturing employees coupled with increased manufacturing headcount.

     Cost of revenues, including $1.6 million of deferred stock compensation,
increased to $43.8 million for the nine months ended September 30, 2001,
compared with $18.2 million for the nine months ended September 30, 2000. Gross
profit as a percentage of revenues, or gross margin, decreased to 58% for the
nine months ended September 30, 2001 compared with 61% for the nine months ended
September 30, 2000. The decrease in gross margins was due predominantly to $4.9
million of inventory charges to reduce inventories to their net realizable
value. Included in the $4.9 million 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. This has resulted in cancellation of
orders by certain customers, the most significant of which was by Alcatel's
submarine networks division, which has moved to a new design system more rapidly
than expected, and certain other customers indicating that they will be
utilizing SiGe products instead of GaAs products in the future. Also included in
this inventory charge is $0.6 million that relates to consigned 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. We performed procedures to
ensure that the entire charge is associated with the first quarter of 2001
including conducting a physical count of the consigned inventory during the
fourth quarter of 2000. We identified this inventory shortage as our suppliers'
utilized consigned raw materials for the production of our products. As the
consigned raw material inventory balance was reduced, we realized that a
discrepancy existed between our perpetual records and the actual physical
quantity on hand at our suppliers' locations. We will no longer consign
inventory to these suppliers as we are allowing these suppliers to purchase
their own raw materials to manufacture our finished good products. This will
improve cash flows by maintaining lower raw material inventory levels.

     Excluding the $4.9 million inventory charge and deferred stock
compensation, gross margin would have increased to 64% for the nine months ended
September 30, 2001 compared with 63% for the nine months ended September 30,
2000. This increase was due primarily to the introduction of new module and
higher-level assembly products with higher gross margins. During the nine months
ended September 30, 2001 compared to the comparable period in 2000, stock based
compensation expense associated with cost of revenues increased $1.1 million due
to stock option grants to manufacturing employees coupled with increased
manufacturing headcount.

     Research and Development.   Research and development expenses, excluding
deferred stock compensation, increased to $14.4 million for the three months
ended September 30, 2001 compared with $6.7 million for the three months ended
September 30, 2000. As a percentage of revenues, research and development
expenses increased to 38% for the three months ended September 30, 2001 compared
with 36% for the comparable period in 2000. During the nine month period ended
September 30, 2001 compared with the comparable period in 2000, research and
development expenses, excluding deferred stock compensation, increased to $40.2
million compared with $15.6 million, respectively and, as a percentage of
revenues, increased to 39% compared with 33%, respectively. The increase in both
dollars and as a percent of revenues was due primarily to the addition of
engineering personnel in the United States and three new research and
development centers located within Europe and Israel as we continue the
development of new products to support revenue growth, costs associated with a
joint development agreement that we entered into during May 2000 and
depreciation and amortization on research and development equipment and software
purchased during late 2000 and early 2001. For the three and nine months ended
September 30, 2001, stock based compensation expense associated with research
and development increased $0.2 million and $1.9 million, respectively, due to
stock option grants to engineering personnel coupled with increased headcount.

                                     -12-
<PAGE>



     Sales and Marketing.   Sales and marketing expenses, excluding deferred
stock compensation, increased to $5.1 million for the three months ended
September 30, 2001, compared with $1.9 million for the three months ended
September 30, 2000. As a percentage of revenues, sales and marketing expenses
increased to 13% for the three months ended September 30, 2001 compared with 10%
for the three months ended September 30, 2000. During the nine month period
ended September 30, 2001 compared with the comparable period in 2000, sales and
marketing expenses, excluding deferred stock compensation, increased to $13.1
million compared with $4.4 million, respectively and, as a percentage of
revenues, increased to 13% compared with 9%, respectively. The increase in both
dollars and as a percent of revenues was due primarily to the addition of sales
and marketing and application engineering personnel as we have begun to expand
our internal domestic and international sales force. For the three and nine
months ended September 30, 2001, stock based compensation expense associated
with sales and marketing increased $0.5 million and $1.3 million, respectively,
due to stock option grants to sales and marketing personnel coupled with
increased headcount.

     General and Administrative.   General and administrative expenses,
excluding deferred stock compensation, increased to $2.9 million for the three
months ended September 30, 2001, compared with $2.2 million for the three months
ended September 30, 2000. As a percentage of revenues, general and
administrative were 8% for the three months ended September 30, 2001, compared
with 12% for the three months ended September 30, 2000. During the nine month
period ended September 30, 2001 compared with the comparable period in 2000,
general and administrative expenses, excluding deferred stock compensation,
increased to $9.1 million compared with $4.3 million, respectively and, as a
percentage of revenues, remained flat at 9%. The increase in dollars was due
primarily to the addition of personnel in the latter half of 2000 and the
associated payroll and related costs within the areas of senior management,
finance and human resources.  There was no material change in stock-based
compensation expense associated with general and administrative expenses during
the three and nine months ended September 30, 2001 compared with the comparable
periods in 2000.

     Deferred Stock Compensation.   Operating expenses included amortization of
deferred stock compensation of $2.3 and $7.2 million for the three and nine
months ended September 30, 2001, respectively, compared with $1.9 million and
$3.9 million for the three and nine months ended September 30, 2000,
respectively, due to a greater number of option grants to new and existing
employees.

     Other Income and Expenses, Net.   Other income decreased to $0.5 million
for the three months ended September 30, 2001, compared with other income of
$0.7 for the three months ended September 30, 2000. The decrease was due
primarily to a decrease in interest income as a result of lower investment
interest rates, higher interest expense resulting from software and equipment
financings during 2001 and $0.2 million of losses from our investment accounted
for under the equity method of accounting.  Other income decreased to $0.7
million for the nine months ended September 30, 2001, compared with $0.8 million
during the nine months ended September 30, 2000 as a result of higher interest
expense resulting from software and equipment financings during 2001 and $0.4
million of losses from our investment accounted for under the equity method of
accounting.

     Net Income (Loss).  Net income was $1.4 million for the three months ended
September 30, 2001, compared with a net loss of $0.9 million for the comparable
period of 2000.  The net income for the three months ended September 30, 2001 is
due to a $1.8 million income tax benefit as compared with the $0.4 million of
income tax expense during the comparable period of 2000.  The tax benefit was
predominantly created as a result of our determination that the valuation
allowance against our deferred tax assets was no longer necessary.  Based upon
our assessment, we reversed the remaining valuation allowance, as we believe
that we will be able to realize the benefits of our deferred tax assets.

     Net loss was $3.9 million and $5.5 million for the nine months ended
September 30, 2001 and 2000, respectively.  The net loss was predominantly due
to the inventory charges discussed above.  During the three and nine months
ended September 30, 2001, net loss is reduced by an income tax benefit as
compared to an income tax expense during the comparable periods of the prior
year.  During the three and nine months ended September 30, 2000, we did not
believe that is was more likely than not that we would be able to realize our
deferred tax assets.  Accordingly, no benefit was taken for these assets.
During the fourth quarter of 2000, we determined that it was more likely than
not that we would be able to realize the benefits of our deferred tax assets.
Based upon our assessment, we reversed the valuation allowance for most of these
tax assets.  We continue to believe that we will be

                                      -13-
<PAGE>

able to realize the benefits of our deferred tax assets and have recorded a tax
benefit during the three and nine months ended September 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     On June 21, 2001, we concluded our initial public offering of 9.2 million
shares (including the underwriters' over-allotment) at $9.00 per share.  After
deducting underwriters' discount but before other offering costs such as legal,
printing and accounting, we received net proceeds of $77.0 million.  As of
September 30, 2001, we had cash and cash equivalents and short-term investments
of $95.9 million.

     Cash provided by operating activities was $5.6 million and $5.1 million
during the nine months ended September 30, 2001 and 2000, respectively.  Net
loss of $3.9 million includes non-cash charges of $6.6 million for depreciation
and amortization, $8.8 million for amortization of deferred stock compensation
and $0.4 million of equity losses in our equity investment offset by deferred
tax benefits of $2.9 million.  The improvement in cash provided by operating
activities is due to improved accounts receivable collections that reduced our
days sales outstanding to 37 days from 40 days during the comparable period in
2000 and improved inventory management due to better materials management and by
implementing a turn-key approach with several of our key suppliers.

     Cash used in investing activities increased to $49.6 million for the nine
months ended September 30, 2001 from $7.0 million for the nine months ended
September 30, 2000.  The increase was due to the purchase of  $33.4 million of
short-term investments, $14.2 million of property and equipment as we continue
to invest in research and development, to an additional $1.7 million purchase in
one of our existing non-marketable investments and a $0.3 million investment in
a new non-marketable investment.

     Cash provided by financing activities was $77.3 million for the nine months
ended September 30, 2001 compared with $37.2 million for the nine months ended
September 30, 2000. The increase in cash provided by financing activities is
predominantly due to the completion of our initial public offering that provided
us with net proceeds of $77.0 million.  Also during the nine months ended
September 30, 2001, we received proceeds from stock option exercises of $0.6
million offset by an increase in debt payments and the purchase of treasury
stock.  During 2001, we secured financing through vendor financings for some of
our equipment and software needs.

     Cash and cash equivalents and short-term investments increased to $95.9
million at September 30, 2001 from $29.2 million on December 31, 2000 due to the
proceeds from our initial public offering and cash provided by operations offset
by the use of cash in investing activities discussed above.

     We believe that our current cash position and anticipated funds from
operations will satisfy our projected working capital and capital expenditure
requirements through the end of 2002.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June and August 2001, the Financial Accounting Standards Board, or FASB,
issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting
for Asset Retirement Obligations" and No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," respectively.  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.  Statement No. 144 establishes a single
accounting model for the accounting of a discontinued segment of a business as
well as addresses significant implementation issues related to Statement 121. We
do not expect that the adoption of these standards will have a material impact
on our financial position, results of operations or cash flows.

     In June 2001, the FASB, issued SFAS No. 141, "Business Combinations", and
No. 142, "Goodwill and Other Intangible Assets".  Statement No. 141 requires all
business combinations initiated after June 30, 2001, to be accounted for using
the purchase method of accounting.  With the adoption of Statement 142, goodwill
is no longer subject to amortization over its estimated useful life.  Rather,
goodwill will be 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 not,
however, subject to the new impairment rules; the impairment guidance in
existing rules for equity method investments continues to apply. We do not
expect that the adoption of these standards will have a material impact on our
financial position, results of operations or cash flows. We currently do not
have any business combinations in progress. As of September 30, 2001, we had
$0.8 million of unamortized goodwill recorded resulting from one of our equity
investments. Less than $0.1 million of goodwill amortization will occur through
the remainder of 2001, and effective January 1, 2002, we will discontinue
amortizing this goodwill whose annual amortization expense is less than $0.2
million.


                                      -14-
<PAGE>


FORWARD-LOOKING INFORMATION

     This report on Form 10-Q contains forward-looking statements within the
meaning of the federal securities laws that relate to future events or our
future financial performance. These statements involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by the forward-looking statements. These risks
and other factors include those listed below. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue" or the negative of these terms or other comparable
terminology. In addition, these forward-looking statements include, but are not
limited to, statements regarding the following:

     .  anticipated development and release of new products;

     .  anticipated sources of future revenues;

     .  the expansion of our foundry or other manufacturing relationships;

     .  potential future acquisitions;

     .  anticipated expenditures for research and development, sales and
        marketing and general and administrative expenses; and

     .  the adequacy of our capital resources to fund our operations.

These statements are only predictions. In evaluating these statements, you
should specifically consider various factors, including the risks outlined
below. Although we believe that the expectations reflected in the forward-
looking statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

                                      -15-
<PAGE>

Risk Factors

Our quarterly revenues and operating results have fluctuated in the past and may
continue to fluctuate because of a number of factors, any one of which could
adversely affect our stock price.

     Our quarterly revenues and operating results have fluctuated in the past
and may continue to fluctuate significantly from quarter to quarter in the
future.  It is possible that in future periods our revenues and operating
results could fall below the expectations of securities analysts or investors,
which could cause the market price of our Class A common stock to decline.  Some
of the factors that affect our quarterly revenues and operating results, but
which are difficult to control or predict are:

     .  the reduction, rescheduling or cancellation of orders by any of our
        customers or prospective customers;

     .  fluctuations in manufacturing yields and inventory levels;

     .  the availability of external foundry capacity, purchased parts and raw
        materials;

     .  our ability to introduce new products and technologies on a timely
        basis;

     .  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;

     .  costs associated with acquisitions and the integration of acquired
        operations;

     .  general communications and semiconductor industry conditions; and

     .  general economic conditions.

A few customers account for a majority of our sales, and the loss of one or more
key customers could significantly reduce our 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 71% of our revenues for the nine months ended September 30, 2001,
73% of our revenues in 2000 and 74% of our revenues in 1999.  Our top three
customers for the nine months ended September 30, 2001 were TyCom, Alcatel and
Marconi, representing approximately 33%, 29% and 9% 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.  Our
top three customers in 1999 were Lucent, Alcatel and TyCom, representing
approximately 36%, 20% and 18% 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.

                                      -16-
<PAGE>

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

     We incurred net losses of $0.8 million in 1997 and $1.5 million in 1998.
We had net income of $24,540 in 1999.  We had net losses of $3.7 million in 2000
and $3.9 million for the nine months ended September 30, 2001.  We expect to
continue to incur amortization of deferred stock compensation and to increase
our expenses for research and development in the next few years.  Consequently,
our ability to achieve and maintain profitability would be materially affected
if we fail to significantly increase our revenues.

Slow growth 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.  A number of network service providers have
recently announced plans to curtail the level of their capital expenditures on
their infrastructure build-out, which could significantly reduce the demand for
our products by communications equipment manufacturers.  This recent slowdown
has caused our revenues and backlog to grow less rapidly than they otherwise
would have, and we recently announced that we expect our revenues to decline in
the fourth quarter of 2001, compared to the third quarter of 2001.  In addition,
network service providers typically purchase network equipment pursuant to
multi-year purchasing programs that may increase or decrease annually as the
providers adjust their capital equipment budgets and purchasing priorities.
Network service providers' curtailment or termination of purchasing programs or
decreases in capital budgets, including with respect to undersea cable
transmission systems which constitute a significant portion of our sales, could
materially and adversely affect our revenue and business prospects.  This is
particularly true if significant and unanticipated by us and our communications
equipment manufacturer customers.  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, which could harm our business and financial condition.

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. 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.

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.

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 have 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.

                                      -17-
<PAGE>

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

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.  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.
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.  Our anticipated growth is expected to place increased demands on our
resources and likely will require the addition of new management personnel.

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 Co-Chairman of the Board, and Dr. Jens Albers, our Executive Vice
President and Co-Chairman of the Board.  Neither Dr. Nottenburg nor Dr. Albers
has an employment or non-competition agreement with us.  The loss of either of
these key individuals would be detrimental to our ongoing operations and
prospects.

Several of our key personnel are relatively new and must be integrated into our
organization.  Our failure to integrate these individuals could adversely affect
our business.

     Several of our key personnel have joined us within the past year, including
Ron Krisanda, our Senior Vice President of Operations, who joined us in November
2000 and Craig S. Lewis, our Senior Vice President of Sales, who joined us in
January 2001.  Therefore, there has been relatively little opportunity to
evaluate the effectiveness of our executive management team as a combined unit.
Our future performance will depend in part on our ability to successfully
integrate our newly hired executive officers and key personnel into our
management team, and our ability to develop an effective working relationship
among management.

Failure to effectively manage our anticipated growth and expansion could place a
significant strain on our limited personnel and other resources and could
adversely affect our business and operating results.

     We have grown rapidly in the last year and may grow in future periods.  Our
current organizational structure and systems are not adequate for our expected
growth plans.  To manage expanded operations effectively, we must continue to
improve our operational, financial and management systems and successfully hire,
train, motivate and manage our employees.  In addition, the expansion of our
manufacturing requirements and our ability to outsource our manufacturing needs
in the future will require significant additional management, technical and
administrative resources.  We cannot be certain that we will be able to
effectively manage our growth.

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

                                      -18-
<PAGE>

components into their system design, which are known as design-wins.
Suppliers who fail to achieve design-wins 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.

We compete in highly competitive markets, against competitors with longer
operating histories, greater name recognition, greater resources or larger
market capitalizations.  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;

                                      -19-
<PAGE>

     .  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, Conexant,
Broadcom, Giga (acquired by Intel), Infineon, JDS Uniphase, Maxim, Nortel
(microelectronics division), NTT Electronics, Philips, PMC-Sierra and Vitesse.
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
capitalizations 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.

     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 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.

We may not be able to effectively compete with IBM for sales of products that we
jointly develop.

     We have a joint development agreement with International Business Machines,
or IBM, pursuant to which we jointly develop integrated circuits.  Under this
agreement, both parties can sell our jointly developed products to third
parties.  Because IBM is a larger company, with a longer operating history and
substantially greater resources, it may be able to attract more customers, and
we may not have the opportunity to sell the jointly developed products to those
customers.

                                      -20-
<PAGE>

We may need to make acquisitions in order to remain competitive in our market.
Our business or the value of your investment could be adversely affected as a
result of any potential acquisitions.

     To compete effectively, we may find it necessary to acquire additional
businesses, products or technologies.  If we identify an appropriate acquisition
candidate, we may not be able to negotiate the terms of the acquisition
successfully, finance the acquisition or effectively integrate the acquired
business, products, technologies or personnel into our existing business and
operations.  Further, completing a potential acquisition and integrating an
acquired business will cause significant diversions of management's time and
resources.  If we consummate one or more significant acquisitions in which the
consideration consists of stock or other securities, the value of your
investment in our company could be significantly diluted.  If we were to proceed
with one or more significant acquisitions in which the consideration included
cash, we could be required to use a substantial portion of our available cash,
including proceeds from our initial public offering in June 2001.  In addition,
we may be required to amortize significant amounts of intangible assets in
connection with future acquisitions, which could significantly reduce our
operating and net income.

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

     International sales accounted for approximately 28% of our revenues for the
nine months ended September 30, 2001, 27% of our revenues in 2000 and 16% of our
revenues in 1999.  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

                                      -21-
<PAGE>

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 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 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.

                                      -22-
<PAGE>

     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.

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 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 ourselves.  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; and

     .  competing customer demands.

                                      -23-
<PAGE>

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.

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.

We operate in the highly cyclical semiconductor industry, and any downturns in
the industry could materially and adversely affect our business and operating
results.

     The semiconductor industry has experienced significant downturns, often in
connection with, or in anticipation of, maturing product cycles (of both
semiconductor companies' and their customers' products) and declines in general
economic conditions.  These downturns have been characterized by diminished
product demand, production overcapacity, high inventory levels and accelerated
erosion of average selling prices.  Any future downturns could have a material
adverse effect on the growth of our business and revenues.  From time to time,
the semiconductor industry also has experienced periods of increased demand and
production capacity constraints.  We

                                      -24-
<PAGE>

may experience substantial changes in future operating results due to general
semiconductor industry conditions, general economic conditions and other
factors.

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.

Our failure to protect our intellectual property adequately could adversely
affect our business.

     Our intellectual property is critical to our ability to successfully design
products for the optical networking systems market.  We currently have one U.S.
patent issued and six 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.

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.

                                      -25-
<PAGE>

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.

Technology company stock prices are especially volatile, and this volatility may
depress our stock price or lead to class action litigation.

     The stock market, and specifically the stock prices of technology
companies, have been very volatile.  The market price of our shares of Class A
common stock may fluctuate significantly in response to a number of factors,
beyond our control, including:

     .  changes in financial estimates by securities analysts;

     .  announcements by us, our customers or our competitors;

     .  changes in market valuations of similar companies;

     .  changes in accounting rules and regulations; and

     .  future sales of our common stock by our existing shareholders.

     As a result of this market volatility, you may be unable to resell your
shares at or above the purchase price.

     Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities.  Litigation
brought against us could result in substantial costs to us in defending against
a lawsuit and management's attention could be diverted from our business.

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.

     If our shareholders sell substantial amounts of our common stock in the
public markets following the expiration of the lock-up agreements in effect as
of our initial public offering in June 2001, it could materially adversely
affect the market price of our stock.  After these agreements expire,
approximately 55 million shares, as well as additional shares issuable upon
exercise of options, will become 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.

                                      -26-
<PAGE>

Because existing shareholders own a large percentage of our voting shares, your
voting power may be limited.

     We currently have 28,000,000 shares of Class B common stock outstanding,
each of which entitles the holder to ten votes.  Only Class A common stock will
be resold pursuant to this registration statement, with each share entitling the
holder to one vote.  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 or
control shares representing 55.6% of the voting power of our outstanding capital
stock.  Dr. Richard Nottenburg, as a result of his stock ownership and a voting
trust agreement with Dr. Jens Albers, alone controls approximately 47.9% 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 91.5% 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 your interests.

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.

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.
We anticipate incurring significant expenses in connection with increased
research and development activities, and we may engage in acquisitions.  The
hiring of additional personnel to support these functions, including the
expansion of our sales and marketing organizations, will also require a
significant commitment of resources.  In addition, if the market for our
products develops at a slower pace than anticipated, or if we fail to continue
to expand our market share, we may continue to utilize significant amounts of
capital.  If cash from available sources is insufficient, or if cash 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.

                                      -27-
<PAGE>

Item 3. Qualitative and Quantitative Disclosures About Market Risk

Foreign Currency Risk

     We develop and market our products in North America and Europe. 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.

     Historically, we were exposed to fluctuations in the mark, lita and the
Israeli shekel.  During the nine months ended September 30, 2001, we opened
sales offices in Canada, Italy and the United Kingdom and accordingly, and are
now exposed to fluctuations in the Canadian dollar, Euro and British pound. The
expenses of our foreign sales offices are not material.  During the three months
ended September 30, 2001, total expenses denominated in these currencies were
$4.8 million or 13% of total expenses. Expenses denominated in the mark and
shekel represented approximately $2.8 million and $1.7 million, respectively, of
foreign expenses.  During the nine months ended September 30, 2001, total
expenses denominated in these currencies were $12.4 million or 11% of total
expenses. Expenses denominated in the mark and shekel represented approximately
$6.9 million and $5.0 million, respectively, of foreign expenses. We expect that
our foreign expenses will increase as we expand our research and development and
sales efforts in foreign countries.

     During 2000, we did not engage in currency hedging activities. During 2001,
we entered into foreign forward contracts for 9.4 million Euros with a notional
amount of $8.8 million. The contracts mature throughout March 2002 and were
entered into to hedge a portion of Euro and mark 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 software and equipment financings have a fixed interest rate and
are not subject to interest rate fluctuations.  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 September 30, 2001, our investment portfolio included fixed and floating
rate securities of $33.5 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.

                                      -28-
<PAGE>

     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.   One of these investments is accounted for under the equity
basis of accounting while the remaining investments are accounted for at cost.
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.

                                      -29-
<PAGE>

                          Part II.  OTHER INFORMATION

Item 1.  Legal Proceedings

     As disclosed in prior filings, in May and June, 2001 an employee, Matthias
Bussmann, sent correspondence to us claiming, among other things, that our Chief
Executive Officer and our Executive Vice President breached a promise relating
to Dr. Bussmann's compensation and misused their power to reward themselves
while engaging in a scheme to oust Dr. Bussmann from the Company.  Dr. Bussmann
alleged that his claims form the basis for a claim of breach of fiduciary duty
by those officers.  The correspondence proposed settlement payments by us of up
to $1.0 million in cash and the transfer of one million shares of common stock.
We received no correspondence regarding this matter during the third quarter of
2001.

     While we believe the allegations set forth in Dr. Bussmann's letters to us
are without merit, we cannot predict the ultimate outcome of any litigation,
should it be initiated.

Item 2.  Changes in Securities and Use of Proceeds

(a)  None

(b)  None

(c)  None

(d)  We filed a registration statement on Form S-1 (File No. 333-47376)
     registering a total of 9.2 million shares of our Class A common stock for
     an aggregate offering price of $82.8 million.  The registration statement
     was declared effective by the Securities and Exchange Commission on June
     20, 2001. The offering commenced on June 21, 2001 and closed on June 26,
     2001.  All of the common stock registered on the registration statement was
     sold in the offering.  All of the common stock was sold by us; no shares of
     common stock were sold on behalf of any of our shareholders.  The managing
     underwriters for the offering were Credit Suisse First Boston Corporation,
     Salomon Smith Barney Inc. and Thomas Weisel Partners LLC.  We estimate that
     our fees and expenses in connection with the offering were $2.4 million.
     Underwriting discounts and commissions were $5.8 million.  We received net
     proceeds, after deducting estimated fees and expenses and underwriting
     discounts and commissions, of $74.6 million. We have not used any of the
     proceeds from this offering other than to pay offering related expenses.

Item 3. Defaults Upon Senior Securities

None

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

None

Item 5. Other Information

     Deadline For Receipt Of Shareholder Proposals

     Proposals of shareholders of the Company intended to be presented by such
shareholders at next year's Annual Meeting of Shareholders must be received by
the Company no later than January 31, 2002 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.  In addition,
the proxy solicited by the Board of Directors for next year's Annual Meeting of
Shareholders will confer discretionary authority to vote on any shareholder
proposal presented at that meeting, unless the Company receives notice of such
proposal on or before April 15, 2002.

                                      -30-
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

     We filed the following current reports on Form 8-K during the three months
ended September 30, 2001:

     1)  On July 24, 2001, we filed a Current Report on Form 8-K to announce the
issuance of our press release that addressed second quarter 2001 results.

     2)  On August 17, 2001, we filed a Current Report on Form 8-K to announce
that our executive officers have adopted trading plans under Securities and
Exchange Commission Rule 10b5-1.

                                      -31-
<PAGE>

                                   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: November 13, 2001              /s/ Eric M. Pillmore
                                     -------------------------------------
                                     Eric M. Pillmore
                                     Chief Financial Officer
                                     (Principal Financial and Accounting
                                     Officer and Duly Authorized Officer)

                                      -32-