Quarterly Report


Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 3, 2010
or
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 000-31581
OPLINK COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
     
Delaware   No. 77-0411346
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
46335 Landing Parkway, Fremont, CA 94538
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (510) 933-7200
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 þ       No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No þ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o       No o
The number of shares of the registrant’s common stock outstanding as of January 29, 2010 was 20,895,883.
 
 

 


 

OPLINK COMMUNICATIONS, INC.
FORM 10-Q
TABLE OF CONTENTS
         
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  EX-31.1
  EX-31.2
  EX-32.1
  EX-32.2
NOTE: The registrant’s fiscal year ends on the Sunday closest to June 30 and each of its fiscal quarters ends on the Sunday closest to the calendar quarter end. For ease of presentation, throughout this report the registrant refers to its fiscal years as ending on June 30 and to its fiscal quarters as ending on the calendar quarter end. For example, the registrant’s most recently completed fiscal year ended on Sunday, June 28, 2009 and its most recently completed fiscal quarter ended on Sunday, January 3, 2010, but throughout this report those periods will be referred to as having ended on June 30, 2009 and December 31, 2009, respectively.

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PART I. FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    December 31,     June 30,  
    2009     2009 (1)  
    (In thousands, except share  
    and per share data)  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 57,815     $ 49,702  
Short-term investments
    120,992       115,774  
Accounts receivable, net
    25,374       29,023  
Inventories
    10,308       10,031  
Prepaid expenses and other current assets
    3,982       2,648  
 
           
Total current assets
    218,471       207,178  
 
               
Long-term investments
    10,000       3,180  
Property, plant and equipment, net
    28,060       30,318  
Intangible assets, net
    6,957       8,848  
Other assets
    418       423  
 
           
 
               
Total assets
  $ 263,906     $ 249,947  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 9,623     $ 7,580  
Accrued liabilities
    10,453       10,044  
Income taxes payable
    115       644  
Accrued transitional costs for contract manufacturing
    160       160  
 
           
Total current liabilities
    20,351       18,428  
 
               
Income taxes payable, non-current
    3,270       2,816  
Other non-current liabilities
    633       676  
 
           
Total liabilities
    24,254       21,920  
 
           
 
               
Commitments and contingencies (Note 14)
               
 
               
Stockholders’ equity:
               
Common stock, $0.001 par value, 34,000,000 shares authorized; 20,892,139 and 20,497,592 shares issued and outstanding as of December 31, 2009 and June 30, 2009, respectively
    21       20  
Additional paid-in capital
    459,743       453,083  
Accumulated other comprehensive income
    8,264       8,246  
Accumulated deficit
    (228,376 )     (233,322 )
 
           
Total stockholders’ equity
    239,652       228,027  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 263,906     $ 249,947  
 
           
 
(1)   The condensed consolidated balance sheet at June 30, 2009 has been derived from the audited consolidated financial statements at that date.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
    (in thousands, except per share data)  
Revenues
  $ 32,743     $ 37,611     $ 66,308     $ 80,563  
 
                       
Cost of revenues:
                               
Cost of revenues
    21,643       28,939       45,277       65,584  
Stock compensation expense
    88       126       187       244  
 
                       
Total cost of revenues
    21,731       29,065       45,464       65,828  
 
                       
 
               
Gross profit
    11,012       8,546       20,844       14,735  
 
                       
 
                               
Operating expenses:
                               
Research and development:
                               
Research and development
    2,268       2,785       4,493       6,067  
Stock compensation expense
    245       252       514       475  
 
                       
Total research and development
    2,513       3,037       5,007       6,542  
 
                       
 
                               
Sales and marketing:
                               
Sales and marketing
    1,923       1,945       4,009       4,202  
Stock compensation expense
    361       267       689       582  
 
                       
Total sales and marketing
    2,284       2,212       4,698       4,784  
 
                       
 
                               
General and administrative:
                               
General and administrative
    1,810       2,702       3,531       5,368  
Stock compensation expense
    914       723       1,864       1,634  
 
                       
Total general and administrative
    2,724       3,425       5,395       7,002  
 
                       
 
               
Impairment charges and other costs
          10,829             10,829  
Amortization of intangible assets
    403       412       807       824  
 
                       
 
               
Total operating expenses
    7,924       19,915       15,907       29,981  
 
                       
Income (loss) from operations
    3,088       (11,369 )     4,937       (15,246 )
 
               
Interest and other income, net
    193       1,300       467       2,340  
Gain (loss) on sale or disposal of assets
    214       (492 )     338       (611 )
 
                       
Income (loss) before income taxes (provision) benefit
    3,495       (10,561 )     5,742       (13,517 )
 
               
Income taxes (provision) benefit
    (358 )     15       (796 )     (441 )
 
                       
Net income (loss)
  $ 3,137     $ (10,546 )   $ 4,946     $ (13,958 )
 
                       
 
                               
Net income (loss) per share:
                               
Basic
  $ 0.15     $ (0.51 )   $ 0.24     $ (0.67 )
 
                       
Diluted
  $ 0.14     $ (0.51 )   $ 0.23     $ (0.67 )
 
                       
 
                               
Shares used in per share calculation:
                               
Basic
    20,797       20,686       20,686       20,721  
 
                       
Diluted
    21,694       20,686       21,452       20,721  
 
                       
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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OPLINK COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    December 31,  
    2009     2008  
    (In thousands)  
Cash flows from operating activities:
               
Net income (loss)
  $ 4,946     $ (13,958 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
               
Depreciation of property and equipment
    3,341       3,817  
Amortization of intangible assets
    1,891       1,908  
Impairment charges and other costs
          10,829  
Stock compensation expense
    3,254       2,935  
Provision for doubtful accounts
          323  
Inventory charges
          4,065  
Amortization of premium (discount) on investments
    131       (229 )
(Gain) loss on sale or disposal of assets
    (338 )     611  
Other
    (18 )     (563 )
Change in assets and liabilities:
               
Accounts receivable
    3,654       6,040  
Inventories
    (286 )     2,708  
Prepaid expenses and other current assets
    (1,333 )     (1,715 )
Other assets
    14       (7 )
Accounts payable
    2,037       (7,334 )
Accrued liabilities and other liabilities
    317       (1,691 )
 
           
Net cash provided by operating activities
    17,610       7,739  
 
           
 
               
Cash flows from investing activities:
               
Purchases of available-for-sale investments
    (106,834 )     (39,828 )
Sales and maturities of available-for-sale investments
    99,762       47,602  
Purchases of held-to-maturity investments
    (10,000 )      
Maturities of held-to-maturity investments
    5,000        
Proceeds from sales of property and equipment
    278       475  
Purchases of property and equipment
    (1,129 )     (1,834 )
 
           
Net cash (used in) provided by investing activities
    (12,923 )     6,415  
 
           
 
               
Cash flows from financing activities:
               
Proceeds from issuance of common stock
    3,406       846  
Repurchase of common stock
          (2,293 )
 
           
Net cash provided by (used in) financing activities
    3,406       (1,447 )
 
           
 
Effect of exchange rate changes on cash and cash equivalents
    20       (410 )
 
Net increase in cash and cash equivalents
    8,113       12,297  
 
Cash and cash equivalents, beginning of period
    49,702       72,001  
 
           
 
Cash and cash equivalents, end of period
  $ 57,815     $ 84,298  
 
           
 
               
Supplemental disclosures of cash flow information:
               
Cash paid during the period for income taxes
  $ 895,000     $ 497,000  
 
           
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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OPLINK COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business. Oplink Communications, Inc. (“Oplink” or the “Company”) was incorporated in California in September 1995 and was later reincorporated in Delaware in September 2000. The Company is headquartered in Fremont, California and has manufacturing, design and research and development facilities in Zhuhai, Shanghai and Wuhan, China, in Taiwan and in Calabasas, California.
     Oplink began selling its products in 1996. The Company’s product portfolio includes solutions for next-generation, all-optical dense and coarse wavelength division multiplexing (“DWDM” and “CWDM,” respectively), optical amplification, switching and routing, monitoring and conditioning, and line transmission applications. Oplink’s addressable markets include long-haul networks, metropolitan area networks (“MANs”), local area networks (“LANs”) and fiber-to-the-home (“FTTH”) networks. The Company’s customers include telecommunications, data communications and cable TV equipment manufacturers located around the globe.
     Oplink offers its customers design, integration and optical manufacturing solutions (“OMS”) for the production and packaging of highly-integrated optical subsystems and turnkey solutions, based upon a customer’s specific product design and specifications. Oplink also offers solutions with lower levels of component integration for customers that place more value on flexibility than would be provided with turnkey solutions.
2. Basis of Presentation . The unaudited condensed consolidated financial statements included herein have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company at December 31, 2009, the results of its operations for the three and six month periods ended December 31, 2009 and 2008 and its cash flows for the six month periods ended December 31, 2009 and 2008. The results of operations for the periods presented are not necessarily indicative of those that may be expected for the full year. The condensed consolidated financial statements presented herein have been prepared by management, without audit by independent auditors who do not express an opinion thereon, and should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2009 included in the Company’s Annual Report on Form 10-K.
     The Company operates and reports using a fiscal year, which ends on the Sunday closest to June 30. Interim fiscal quarters end on the Sundays closest to each calendar quarter end. For presentation purposes, the Company presents each fiscal year as if it ended on June 30. The Company presents each of the fiscal quarters as if it ended on the last day of each calendar quarter. January 3, 2010 represents the Sunday closest to the period ended December 31, 2009. The quarter ended December 31, 2009 is a 14-week fiscal period. The quarter ending March 31, 2010 will consist of 12 weeks. Fiscal 2010 and fiscal 2009 are 52-week fiscal years.
     The consolidated financial statements include the accounts of the Company and its wholly and majority- owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. With the exception of the Company’s Optical Communication Products, Inc. (“OCP”) subsidiaries, the Company presents the financial information of its consolidated foreign operating subsidiaries in its consolidated financial statements utilizing accounts as of a date one month earlier than the accounts of its parent company, U.S. subsidiary and its non-operating non-U.S. subsidiaries to ensure timely reporting of consolidated results.
     The Company conducts its business within one business segment and has no organizational structure dictated by product, service lines, geography or customer type.

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     Certain items previously reported in prior periods’ consolidated financial statements have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported total assets, stockholders’ equity, or net income (loss).
     In June 2009, the Financial Accounting Standards Board (“FASB”) established the Accounting Standards Codification (“Codification” or “ASC”) as the official single source of authoritative U.S. generally accepted accounting principles (“GAAP”). In the first quarter of fiscal 2010, the Company adopted the Codification and all future references to authoritative accounting literature will be referenced in accordance with the ASC. Since the Codification is not intended to change GAAP, the adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.
     The Company has reviewed and evaluated events subsequent to the end of the second quarter of fiscal 2010, December 31, 2009 through February 11, 2010, the date that the consolidated financial statements were issued. Refer to Note 17 for disclosure on subsequent events.
3. Risks and Uncertainties. There are a number of risks and uncertainties facing the Company that could have a material adverse effect on the Company’s financial condition, operating results or cash flows. These risks and uncertainties include, but are not limited to, a further and sustained downturn in the telecommunications industry or the overall economy in the United States and other parts of the world, possible further reductions in customer orders, intense competition in the Company’s target markets and potential pricing pressure that may arise from changing supply or demand conditions in the industry. In addition, the Company obtains most of its critical materials from a single or limited number of suppliers and generally does not have long-term supply contracts with them. The Company could experience discontinuation of key components, price increases and late deliveries from its suppliers. Also, substantially all of the Company’s manufacturing operations are located in China and are subject to laws and regulations of China. These and other risks and uncertainties facing the Company are described from time to time in the Company’s periodic reports filed with the SEC.
4. Net Income (Loss) Per Share . Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and common equivalent shares outstanding during the period, if dilutive. Potentially dilutive common equivalent shares are composed of the incremental common shares issuable upon the exercise of stock options, the vesting of restricted stock units (“RSUs”) and purchases under the employee stock purchase plan. The following is a reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations and the antidilutive common stock equivalents excluded from the computations for the periods presented (in thousands, except per share data):
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Numerator:
                               
Net income (loss)
  $ 3,137     $ (10,546 )   $ 4,946     $ (13,958 )
 
                       
 
                               
Denominator:
                               
Weighted average shares outstanding — basic
    20,797       20,686       20,686       20,721  
Effect of dilutive potential common shares
    897             766        
 
                       
Weighted average shares outstanding — diluted
    21,694       20,686       21,452       20,721  
 
                       
 
                               
Net income (loss) per share — basic
  $ 0.15     $ (0.51 )   $ 0.24     $ (0.67 )
 
                       
Net income (loss) per share — diluted
  $ 0.14     $ (0.51 )   $ 0.23     $ (0.67 )
 
                       
 
                               
Antidilutive stock options and restricted stock units not included in income per share calculation
    1,637       4,120       2,042       4,120  
 
                       

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5. Comprehensive Income (Loss) . Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The components of comprehensive income (loss) consist of foreign currency translation adjustments, foreign currency transaction gains and losses from intercompany transactions and balances for which settlement is not planned or anticipated in the foreseeable future, and changes in unrealized gains and losses on investments. The balance of accumulated other comprehensive income is as follows (in thousands):
                 
    December 31,     June 30,  
    2009     2009  
Accumulated other comprehensive income:
               
Cumulative translation adjustment
  $ 8,264     $ 8,329  
Unrealized loss on investments, net
          (83 )
 
           
 
  $ 8,264     $ 8,246  
 
           
     The reconciliation of net income (loss) to comprehensive income (loss) for the three and six months ended December 31, 2009 and 2008 is as follows (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Net income (loss)
  $ 3,137     $ (10,546 )   $ 4,946     $ (13,958 )
Change in cumulative translation adjustment
    (27 )     (225 )     (65 )     276  
Change in unrealized (loss) gain on investments, net
    (63 )     (12 )     83       3  
 
                       
 
                               
Total comprehensive income (loss)
  $ 3,047     $ (10,783 )   $ 4,964     $ (13,679 )
 
                       
6. Short-Term and Long-Term Investments. The Company generally invests its excess cash in debt instruments of government, government agencies and corporations with strong credit ratings. Such investments are made in accordance with the Company’s investment policy, which establishes guidelines relative to diversification and maturities designed to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.

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     Short-term and long-term investments at December 31, 2009 and June 30, 2009 consist of the following (in thousands):
                                         
    December 31, 2009  
                    Gross     Gross        
    Carrying     Amortized     Unrealized     Unrealized     Estimated  
    Value     Cost     Gains     Losses     Fair Value  
Short-term investments:
                                       
Certificates of deposit
  $ 5,566     $ 5,566     $     $     $ 5,566  
United States government agencies
    5,002       5,000       2             5,002  
United States Treasury
    44,911       44,919       6       (14 )     44,911  
Corporate securities
    65,513       65,507       38       (10 )     65,535  
 
                             
Total short-term investments
    120,992       120,992       46       (24 )     121,014  
 
                             
 
                                       
Long-term investments:
                                       
United States government agencies
    10,000       10,000             (54 )     9,946  
 
                             
Total long-term investments
    10,000       10,000             (54 )     9,946  
 
                             
 
                                       
Total investments
  $ 130,992     $ 130,992     $ 46     $ (78 )   $ 130,960  
 
                             
                                         
    June 30, 2009  
                    Gross     Gross        
    Carrying     Amortized     Unrealized     Unrealized     Estimated  
    Value     Cost     Gains     Losses     Fair Value  
Short-term investments:
                                       
Certificates of deposit
  $ 3,140     $ 3,140     $     $     $ 3,140  
United States government agencies
    10,004       10,001       3       (2 )     10,002  
United States Treasury
    48,971       48,944       27             48,971  
Corporate securities
    53,659       53,772       13       (126 )     53,659  
 
                             
Total short-term investments
    115,774       115,857       43       (128 )     115,772  
 
                             
 
                                       
Long-term investments:
                                       
Corporate securities
    3,180       3,180                   3,180  
 
                             
Total long-term investments
    3,180       3,180                   3,180  
 
                             
 
                                       
Total investments
  $ 118,954     $ 119,037     $ 43     $ (128 )   $ 118,952  
 
                             

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     The amortized cost and fair value of available-for-sale and held-to-maturity investments at December 31, 2009 and June 30, 2009 are presented in the following tables (in thousands):
                                 
    December 31, 2009  
            Gross     Gross        
    Amortized     Unrealized     Unrealized     Estimated  
    Cost     Gains     Losses     Fair Value  
Available-for-sale investments:
                               
Certificates of deposit
  $ 5,566     $     $     $ 5,566  
United States government agencies
    5,000       2             5,002  
United States Treasury
    44,919       6       (14 )     44,911  
Corporate securities
    62,368       16       (10 )     62,374  
 
                       
Total available-for-sale investments
    117,853       24       (24 )     117,853  
 
                       
 
                               
Held-to-maturity investments:
                               
Corporate securities
    3,139       22             3,161  
United States government agencies
    10,000             (54 )     9,946  
 
                       
Total held-to-maturity investments
    13,139       22       (54 )     13,107  
 
                       
 
                               
Total investments
  $ 130,992     $ 46     $ (78 )   $ 130,960  
 
                       
                                 
    June 30, 2009  
            Gross     Gross        
    Amortized     Unrealized     Unrealized     Estimated  
    Cost     Gains     Losses     Fair Value  
Available-for-sale investments:
                               
Certificates of deposit
  $ 3,140     $     $     $ 3,140  
United States government agencies
    5,000       3             5,003  
United States Treasury
    48,944       27             48,971  
Corporate securities
    53,772       13       (126 )     53,659  
 
                       
Total available-for-sale investments
    110,856       43       (126 )     110,773  
 
                       
 
                               
Held-to-maturity investments:
                               
Corporate securities
    3,180                   3,180  
United States government agencies
    5,001             (2 )     4,999  
 
                       
Total held-to-maturity investments
    8,181             (2 )     8,179  
 
                       
 
                               
Total investments
  $ 119,037     $ 43     $ (128 )   $ 118,952  
 
                       

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     There were no realized gains (losses) on sales of available-for-sale securities for the three and six month periods ended December 31, 2009 or 2008. The unrealized losses on available-for-sale and held-to-maturity securities are primarily due to decreases in the fair value of debt securities as a result of changes in market interest rates. The Company has the intent and the ability to hold these securities for a reasonable period of time sufficient for a forecasted recovery of fair value up to (or beyond) the initial cost of the investment. The Company expects to realize the full value of these investments upon maturity. In addition, the Company does not believe that it will be required to sell these securities to meet its cash or working capital requirements or contractual or regulatory obligations. Therefore, the Company has determined that the gross unrealized losses on its securities at December 31, 2009 are temporary in nature. The following table provides a breakdown of the Company’s available-for-sale and held-to-maturity securities with unrealized losses as of December 31, 2009 (in thousands):
                 
    December 31, 2009  
    In Loss Position  
    < 12 months  
            Gross  
    Fair     Unrealized  
    Value     Losses  
Available-for-sale investments:
               
United States Treasury
  $ 24,922     $ (14 )
Corporate securities
    14,003       (10 )
 
           
Total available-for-sale investments in loss position
    38,925       (24 )
 
           
 
               
Held-to-maturity investments:
               
United States government agencies
    9,946       (54 )
 
           
Total held-to-maturity investments in loss position
    9,946       (54 )
 
           
 
               
Total investments in loss position
  $ 48,871     $ (78 )
 
           
     The amortized cost and estimated fair value of debt securities at December 31, 2009 and June 30, 2009 by contractual maturities are shown below (in thousands):
                                 
    December 31, 2009     June 30, 2009  
    Amortized     Estimated     Amortized     Estimated  
    Cost     Fair Value     Cost     Fair Value  
Available-for-sale investments:
                               
Due in one year or less
  $ 117,853     $ 117,853     $ 110,856     $ 110,773  
 
                       
Total available-for-sale investments
    117,853       117,853       110,856       110,773  
 
                       
 
                               
Held-to-maturity investments:
                               
Due in one year or less
    3,139       3,161       5,001       4,999  
Due in one year to five years
    10,000       9,946       3,180       3,180  
 
                       
Total held-to-maturity investments
    13,139       13,107       8,181       8,179  
 
                       
 
                               
Total investments
  $ 130,992     $ 130,960     $ 119,037     $ 118,952  
 
                       
7. Fair Value Accounting . Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. The Company applies the fair value hierarchy which has the following three levels of inputs to measure fair value:
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
 
    Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
 
    Level 3 inputs are unobservable inputs for the asset or liability.

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     The Company’s Level 1 financial assets generally include money market funds. The Company’s Level 2 financial assets generally include United States Treasury securities, United States government agency debt securities, certificates of deposit, commercial paper, and corporate bonds.
     The Company bases the fair value of its financial assets on pricing from third party sources of market information obtained through the Company’s investment brokers. The Company does not adjust for or apply any additional assumptions or estimates to the pricing information it receives from brokers. The Company’s investment brokers obtain pricing data from a variety of industry standard data providers (e.g., Bloomberg), and rely on comparable pricing of other securities because the Level 2 securities that the Company holds are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities. There are no changes in valuation techniques or related inputs during the three months ended December 31, 2009.
     The Company adopted the authoritative guidance on fair value measurement for financial assets and financial liabilities effective June 30, 2008 and for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) effective June 29, 2009.
      Items Measured at Fair Value on a Recurring Basis
     The following table presents the Company’s financial assets, excluding accrued interest components, which are measured at fair value on a recurring basis at December 31, 2009 and June 30, 2009, consistent with the fair value hierarchy (in thousands):
                                 
    December 31, 2009  
    Level 1     Level 2     Level 3     Total  
Financial assets:
                               
Money market funds
  $ 6,457     $     $     $ 6,457  
Certificates of deposit
          5,566             5,566  
United States government agencies
          5,002             5,002  
United States Treasury
          49,911             49,911  
Corporate securities
          83,399             83,399  
 
                       
Total financial assets
  $ 6,457     $ 143,878     $     $ 150,335  
 
                       
 
                               
Financial liabilities
  $     $     $     $  
 
                       
                                 
    June 30, 2009  
    Level 1     Level 2     Level 3     Total  
Financial assets:
                               
Money market funds
  $ 24,813     $     $     $ 24,813  
Certificates of deposit
          3,140             3,140  
United States government agencies
          5,003             5,003  
United States Treasury
          48,971             48,971  
Corporate securities
          58,658             58,658  
 
                       
Total financial assets
  $ 24,813     $ 115,772     $     $ 140,585  
 
                       
 
                               
Financial liabilities
  $     $     $     $  
 
                       
     As of December 31, 2009, the Company did not have financial liabilities that are measured at fair value or any assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

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      Items Measured at Fair Value on a Nonrecurring Basis
     Certain assets that are subject to nonrecurring fair value measurement are not included in the table above. These assets include cost method investments in private companies. The Company did not record any other-than-temporary impairment charges for these investments during the three and six months ended December 31, 2009.
8. Inventories . Inventories are stated at the lower of cost or market. Inventory cost is determined using standard costs, which approximates actual cost on a first-in, first-out basis. Inventories consist of (in thousands):
                 
    December 31,     June 30,  
    2009     2009  
Inventories:
               
Raw materials
  $ 8,595     $ 7,809  
Work-in-process
    1,713       2,222  
 
           
Total
  $ 10,308     $ 10,031  
 
           
9. Intangible Assets, Net. The following table presents details of the intangible assets acquired as a result of acquisitions as of December 31, 2009 and June 30, 2009 (in thousands):
                                 
    Estimated                    
    Useful Life     Gross     Accumulated        
December 31, 2009   (in Years)     Amount     Amortization     Net  
Technology
    4     $ 8,673     $ 4,987     $ 3,686  
Trade name
    6       1,595       607       988  
Customer relationships
    3-4       5,481       3,198       2,283  
Backlog
    1       97       97        
 
                       
Total
          $ 15,846     $ 8,889     $ 6,957  
 
                       
                                 
    Estimated                    
    Useful Life     Gross     Accumulated        
June 30, 2009   (in Years)     Amount     Amortization     Net  
Technology
    4     $ 8,673     $ 3,903     $ 4,770  
Trade name
    6       1,595       474       1,121  
Customer relationships
    3-4       5,481       2,524       2,957  
Backlog
    1       97       97        
 
                       
Total
          $ 15,846     $ 6,998     $ 8,848  
 
                       
     The following table presents details of the amortization expense of intangible assets as reported in the condensed consolidated statements of operations (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
Reported as:   2009     2008     2009     2008  
Cost of revenues
  $ 542     $ 542     $ 1,084     $ 1,084  
Operating expenses
    403       412       807       824  
 
                       
Total
  $ 945     $ 954     $ 1,891     $ 1,908  
 
                       

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     The future amortization of intangible assets is as follows (in thousands):
         
Fiscal years ending June 30,   Amount  
2010
  $ 1,891  
2011
    3,677  
2012
    1,066  
2013
    260  
2014
    63  
After 2014
     
 
     
 
  $ 6,957  
 
     
10. Accrued Liabilities. Accrued liabilities consist of (in thousands):
                 
    December 31,     June 30,  
    2009     2009  
Accrued liabilities:
               
Payroll and related expenses
  $ 3,828     $ 3,120  
Employee withholdings and related expenses
    721       586  
Accrued sales commission
    559       535  
Accrued warranty
    371       371  
Accrued professional fees
    832       1,561  
Accrued sales return
    439       595  
Advance deposits from customers
    162       123  
Other
    3,541       3,153  
 
           
 
  $ 10,453     $ 10,044  
 
           
11. Product Warranties. The Company provides reserves for the estimated cost of product warranties at the time revenue is recognized based on its historical experience of known product failure rates and expected material and labor costs to provide warranty services. The Company generally provides a one-year warranty on its products. Additionally, from time to time, specific warranty accruals may be made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary, the Company may reverse a portion of such provisions in future periods.
     Changes in the warranty liability, which is included as a component of “Accrued liabilities” on the condensed consolidated balance sheets as disclosed in Note 10, is as follows (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Balance at the beginning of the period
  $ 371     $ 346     $ 371     $ 286  
 
                               
Accruals for warranties issued during the period
    29       71       88       156  
 
                               
Accruals related to pre-existing warranties including expirations and changes in estimates
    64       (4 )     78       109  
 
                               
Cost of warranty repair
    (93 )     (67 )     (166 )     (205 )
 
                       
 
                               
Balance at the end of the period
  $ 371     $ 346     $ 371     $ 346  
 
                       

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12. Stock Compensation . Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the employee requisite service period. The Company’s stock compensation is generally accounted for as an equity instrument. The effect of recording stock compensation for the three and six months ended December 31, 2009 and 2008 was as follows (in thousands, except per share data):
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Stock-based compensation expense by type of award:
                               
Employee stock options
  $ 1,114     $ 1,182     $ 2,129     $ 2,298  
Restricted stock awards and restricted stock units
    419             817       223  
Employee stock purchase plan
    75       186       308       414  
 
                       
Total stock-based compensation
    1,608       1,368       3,254       2,935  
Tax effect on stock-based compensation
                       
 
                       
Net effect on net income (loss)
  $ 1,608     $ 1,368     $ 3,254     $ 2,935  
 
                       
 
                               
Effect on net income (loss) per share:
                               
Basic
  $ (0.08 )   $ (0.07 )   $ (0.16 )   $ (0.14 )
 
                       
Diluted
  $ (0.07 )   $ (0.07 )   $ (0.15 )   $ (0.14 )
 
                       
     Forfeitures are estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.
     During the three months ended December 31, 2009 and 2008, the Company granted 61,500 and 49,060 stock options, respectively, with an estimated total grant-date fair value of $420,000 and $199,000, respectively. In addition, the Company issued 3,080 restricted stock awards (“RSAs”) with a total grant-date fair value of $48,000 for the three months ended December 31, 2009. The Company estimated that the stock compensation expense for the awards granted in the three months ended December 31, 2009 and 2008 not expected to vest was $59,000 and $32,000, respectively.
     During the six months ended December 31, 2009 and 2008, the Company granted 87,500 and 327,040 stock options, respectively, with an estimated total grant-date fair value of $589,000 and $1.9 million, respectively. In addition, the Company granted 483,000 and 16,000 RSAs and restricted stock units (“RSUs”), with a total grant-data fair value of $6.7 million and $223,000 during the six months ended December 31, 2009 and 2008, respectively. The Company estimated that the stock compensation expense for the awards granted in the six months ended December 31, 2009 and 2008 not expected to vest was $1.2 million and $298,000, respectively.
     As of December 31, 2009, the unrecorded deferred stock compensation balance related to stock options to purchase Oplink common stock was $5.6 million which will be recognized over an estimated weighted average amortization period of 2.1 years. The unrecorded deferred stock compensation balance related to RSUs was $4.8 million which will be recognized over an estimated weighted average amortization period of 3.6 years. Approximately $8,000 of stock compensation was capitalized as inventory at December 31, 2009 and June 30, 2009.
      Valuation Assumptions

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     The Company estimates the fair value of stock options and purchase rights under the Company’s employee stock purchase plan using a Black-Scholes valuation model. The fair value of each option grant is estimated on the date of grant using the Black-Scholes valuation model and the straight-line attribution approach with the following weighted-average assumptions:
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Risk-free interest rate
    2.18 %     2.31 %     2.27 %     2.87 %
Expected term
  4.6 years     4.6 years     4.6 years     4.6 years  
Expected dividends
    0 %     0 %     0 %     0 %
Volatility
    50 %     65 %     51 %     51 %
     The estimated fair value of purchase rights under the Company’s employee stock purchase plan is determined using the Black-Scholes valuation model with the following weighted-average assumptions:
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Risk-free interest rate
    0.53 %     1.26 %     0.53 %     1.26 %
Expected term
  1.3 years     1.3 years     1.3 years     1.3 years  
Expected dividends
    0 %     0 %     0 %     0 %
Volatility
    50 %     65 %     50 %     65 %
     The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. Expected volatility is based on the historical volatility of the Company’s common stock. The risk-free interest rates are taken from the Daily Federal Yield Curve Rates as of the grant dates as published by the Federal Reserve and represent the yields on actively traded Treasury securities for terms equal to the expected term of the options or purchase rights. The expected term calculation for stock options is based on the observed historical option exercise behavior and post-vesting forfeitures of options by the Company’s employees. The expected term assumption for purchase rights is based on the average exercise date for the four purchase periods in each 24-month offering period.
     The weighted-average grant date fair value for options to purchase Oplink common stock granted under the Company’s stock option plans was $6.83 and $4.06 for the three months ended December 31, 2009 and 2008, respectively, and $6.73 and $5.52 for the six months ended December 31, 2009 and 2008, respectively.
      Equity Incentive Program
     Oplink adopted the 2000 Equity Incentive Plan (the “2000 Plan”) in July 2000. The 2000 Plan was terminated in November 2009 immediately upon the effectiveness of the Company’s new 2009 Equity Incentive Plan (the “2009 Plan”). No further awards will be granted under the 2000 Plan. However, the 2000 Plan will continue to govern awards previously granted under that plan.
     The 2009 Plan was adopted by the Company in September 2009 and became effective upon approval by the Company’s stockholders at the annual meeting held in November 2009. The 2009 Plan provides for the grant of stock awards to employees, directors and consultants. These stock awards include stock options, RSAs, RSUs, stock appreciation rights, performance units, and performance shares. The maximum aggregate number of shares of common stock that may be issued under the 2009 Plan is 2,500,000 shares, plus any shares subject to stock awards granted under 2000 Plan that expire or otherwise terminate without having been exercised in full, or that are forfeited to or repurchased by the Company (up to a maximum of 3,795,130 additional shares from expired, terminated, forfeited or repurchased awards granted under the 2000 Plan). Shares subject to “full value” awards (RSUs, RSAs, performance shares and performance units) will count against the 2009 Plan’s share reserve as 1.3 shares for every one share subject to such awards. Accordingly, if such awards are forfeited or repurchased by the Company, 1.3 times the number of shares forfeited or repurchased will return to the 2009 Plan. The maximum term of stock options and stock appreciation rights under the 2009 Plan is 7 years.

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     The following table summarizes activity under the equity incentive plans for the indicated periods:
                                         
            Options     Awards  
                    Weighted     Restricted     Weighted  
            Number of     Average     Stock     Average  
    Awards Available     Options     Exercise     Awards/Units     Grant Date  
    for Grant     Outstanding     Price     Outstanding     Fair Value  
Balance, June 30, 2009
    1,876,918       3,795,130     $ 14.0630           $  
 
Additional shares authorized
    2,500,000                          
Granted
    (570,313 )     87,500       15.1511       482,813       13.9000  
Exercised or vested
          (295,295 )     9.7818       (19,080 )     13.9000  
Cancelled or forfeited
    70,371       (70,371 )     30.7377              
Expired (1)
    (1,374,461 )                        
 
                                 
Balance, December 31, 2009
    2,502,515       3,516,964     $ 14.1209       463,733     $ 13.9000  
 
                                 
 
(1)     The Company’s 2000 Stock Option Plan terminated upon the adoption of the 2009 Plan and shares not grated at the time of termination have expired.
     The options outstanding and exercisable at December 31, 2009 were in the following exercise price ranges:
                                                                 
      Options Outstanding       Options Vested and Exercisable  
      at December 31, 2009       at December 31, 2009  
            Weighted                             Weighted              
            Average                             Average              
            Remaining     Weighted     Aggregate             Remaining     Weighted     Aggregate  
            Contractual     Average     Intrinsic             Contractual     Average     Intrinsic  
Range of Exercise   Number     Life     Exercise     Value     Number     Life     Exercise     Value  
Price   Outstanding     (in Years)     Price     (in thousands)     Outstanding     (in Years)     Price     (in thousands)  
$1.0000- $5.00
    406,904       2.8     $ 4.62     $ 4,790       406,904       2.8     $ 4.62     $ 4,790  
$5.0001 - $8.00
    389,948       3.6       5.76       4,144       350,462       3.0       5.55       3,798  
$8.0001 - $10.00
    30,416       1.9       8.76       232       30,416       1.9       8.76       232  
$10.0001 - $11.00
    443,569       7.9       10.09       2,793       194,197       7.2       10.10       1,222  
$11.0001 - $13.00
    245,090       7.4       12.16       1,037       124,237       6.5       12.39       497  
$13.0001 - $15.00
    627,036       7.4       13.70       1,689       349,118       6.7       13.68       945  
$15.0001 - $18.00
    323,008       7.1       17.12       44       198,703       6.2       17.44        
$18.0001 - $20.00
    192,072       4.0       18.87             173,731       3.8       18.83        
$20.0001 - $25.00
    753,170       6.4       20.24             673,448       6.4       20.24        
$25.0001 - $35.00
    69,894       0.6       31.41             69,812       0.6       31.41        
$42.0001 - $158.00
    35,857       0.7       73.44             35,857       0.7       73.44        
 
                                                       
 
    3,516,964       5.8     $ 14.12     $ 14,729       2,606,885       5.0     $ 14.41     $ 11,484  
 
                                                       
 
                                                               
Vested and expected to vest
    3,449,891       5.8     $ 14.15     $ 14,466                                  
 
                                                           
     As of December 31, 2009 and June 30, 2009, options to purchase 2,606,885 and 2,579,605 shares at weighted average exercise prices of $14.41 and $14.21 per share, respectively, were vested and exercisable.
     The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company’s closing stock price of $16.39 as of December 31, 2009, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options

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exercisable as of December 31, 2009 was 1,455,334. The total intrinsic value of options exercised during the three months ended December 31, 2009 and 2008 was $824,000 and $28,500, respectively. The total intrinsic value of options exercised during the six months ended December 31, 2009 and 2008 was $1.6 million and $164,500, respectively.
     The total cash received by the Company from employees as a result of employee stock option exercises during the three months ended December 31, 2009 and 2008 was $1.8 million and $2,000, respectively, and for the six months ended December 31, 2009 and 2008 was $2.9 million and $355,000, respectively.
     The aggregate intrinsic value and weighted average remaining contractual term of RSUs vested and expected to vest as of December 31, 2009 was $6.4 million and 3.7 years, respectively. The number of RSUs that are vested and expected to vest is 391,426 shares.
     The Company settles employee stock option exercises with newly issued common shares.
      Employee Stock Purchase Plan
     The Company’s 2000 Employee Stock Purchase Plan (the “ESPP”) was originally adopted by the Company in July 2000 and was amended and restated effective upon the approval of the Company’s stockholders in November 2009. The ESPP authorizes the granting of stock purchase rights to eligible employees during an offering period not more than 27 months with exercise dates approximately every six months. Shares are purchased through employee payroll deductions at purchase prices equal to 85% of the lesser of the fair market value of the Company’s common stock at either the first day of each offering period or the date of purchase. A maximum of 2,857,142 shares may be issued under the ESPP.
     The compensation cost in connection with the ESPP for the three month periods ended December 31, 2009 and 2008 was $75,000 and $186,000, respectively, and $307,000 and $414,000 for the six month periods ended December 31, 2009 and 2008, respectively. 80,172 and 71,040 shares were purchased under the ESPP during the three month periods ended December 31, 2009 and 2008, respectively.
     The total cash received by the Company from employees as a result of purchases under the ESPP during the three and six months ended December 31, 2009 was $535,000, and was $490,000 for the three and six months ended December 31, 2008.
13. Recent Accounting Pronouncements . In September 2006, the Financial Accounting Standards Board (“FASB”) issued fair value measurement guidance, which was later codified under ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). This guidance was effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. It defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This guidance applies under other accounting pronouncements that require or permit fair value measurements. The guidance indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. This guidance defines fair value based upon an exit price model. In February 2008, the FASB issued further guidance to exclude accounting for leases from fair value measurement and to delay the effective date of fair value measurement for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years and interim periods within those fiscal years, beginning after November 15, 2008, which, for the Company, was June 29, 2009. The adoption of fair value measurements which was applied to nonfinancial assets and nonfinancial liabilities did not have a significant impact on the Company’s consolidated financial position, results of operations or cash flows.
     In April 2008, the FASB issued guidance related to determining the useful lives of intangible assets later codified under ASC Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”). This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a

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recognized intangible asset under ASC 350. This guidance is intended to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure the fair value of the asset under ASC Topic 805, “Business Combinations”, and other U.S. generally accepted accounting principles. This guidance was effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008, which, for the Company, was June 29, 2009. The Company has determined that there is no material impact from adopting this guidance on its consolidated financial position, results of operations or cash flows.
     In December 2007, the FASB issued a revision of business combinations guidance, which was later codified under ASC Topic 805, “Business Combinations” (“ASC 805”). This guidance replaces the previous FASB guidance on business combinations and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree in a business combination. It also establishes principles around how goodwill acquired in a business combination or a gain from a bargain purchase should be recognized and measured, as well as provides guidelines on the disclosure requirements on the nature and financial impact of the business combination. In addition, the guidance establishes a model to account for certain pre-acquisition contingencies. This guidance was effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008, which, for the Company, was June 29, 2009. The impact from the adopting the provisions on the Company’s consolidated financial position, results of operations or cash flows will be dependent on future business combinations, if any.
     In December 2007, the FASB issued guidance related to noncontrolling interests later codified under ASC Topic 810, “Consolidation.” This guidance was effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, which, for the Company, was June 29, 2009. This guidance requires that noncontrolling interests be separately reported in the consolidated entity’s equity section and that no gain or loss shall be reported when transactions occur between the controlling interest and the noncontrolling interest. Furthermore, the acquisition of noncontrolling interest by the controlling interest is not treated as a business combination. The Company has determined that there is no material impact from adopting this guidance on its consolidated financial position, results of operations or cash flows.
     In August 2009, the FASB issued Accounting Standards Update 2009-05, “Fair Value Measurements and Disclosures – Measuring Liabilities at Fair Value”. This update provides amendments to ASC Topic 820-10, “Fair Value Measurements and Disclosures-Overall”, for the fair value measurement of liabilities. This update is effective for the first reporting period (including interim periods) beginning after issuance. The Company does not believe that the implementation will have a material impact on its consolidated financial position, results of operations or cash flows.
     In January 2010, the FASB issued Accounting Standards Update 2009-16 to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will be applied prospectively to new transfers of financial assets occurring in fiscal years beginning after November 15, 2009. The Company does not believe that the implementation will have a material impact on its consolidated financial position, results of operations or cash flows.
     In various areas, including revenue recognition, stock option and purchase accounting, accounting standards and practices continue to evolve. The Company believes that it is in compliance with all of the rules and related guidance as they currently exist. However, any changes to accounting principles generally accepted in the United States of America in these areas could impact the future accounting of its operations.

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14. Commitments and Contingencies.
      Contractual Obligations
     Contractual obligations as of December 31, 2009 have been summarized below (in thousands):
                                         
            Contractual Obligations Due by Period  
Contractual Obligations   Total     Less than 1 year     1-3 years     4-5 years     After 5 years  
Purchase obligations
  $ 12,148     $ 12,148     $     $     $  
Operating leases
    473       305       168              
Capital expenditure
    202       180       22              
Total
  $ 12,823     $ 12,633     $ 190     $     $  
      Litigation
      Finisar Corporation v. Source Photonics, Inc., et al.
     On January 5, 2010, Finisar Corporation filed a complaint in the United States District Court for the Northern District of California against Oplink and Source Photonics, Inc., MRV Communications, Inc. and Neophotonics Corporation (collectively, the “co-defendants”). In the complaint, Finisar alleges infringement of certain of its U.S. patents arising from Oplink’s and the co-defendants’ manufacture and sale of their respective optical transceiver products. Finisar seeks to recover unspecified damages, up to treble the amount of actual damages, together with attorneys’ fees, interest and costs. On January 26, 2010, Finisar and Oplink stipulated to an extension of time to February 26, 2010, for Oplink to answer the complaint.
      IPO Securities Litigation
     In November 2001, Oplink and certain of its officers and directors were named as defendants in a class action shareholder complaint filed in the United States District Court for the Southern District of New York. In the amended complaint, the plaintiffs alleged that Oplink, certain of Oplink’s officers and directors and the underwriters of Oplink’s initial public offering (“IPO”) violated Section 11 of the Securities Act of 1933 based on allegations that Oplink’s registration statement and prospectus failed to disclose material facts regarding the compensation to be received by, and the stock allocation practices of, the IPO underwriters. Similar complaints were filed by plaintiffs against hundreds of other public companies that went public in the late 1990s and early 2000s and their IPO underwriters (collectively, the “IPO Lawsuits”). During the summer of 2008, the parties engaged in a formal mediation process to discuss a global resolution of the IPO Lawsuits. Ultimately, the parties reached an agreement to settle all 309 cases against all defendants, and entered into a settlement agreement in April 2009. The settlement provides for a $586 million recovery in total, divided among the 309 cases. Oplink’s share of the settlement is $327,458, which is the amount Oplink will be required to pay if the settlement is finally approved. The court issued a final order approving the settlement in October 2009. A number of appeals have been filed with the Second Circuit Court of Appeals, challenging the fairness of the settlement. A number of shareholder plaintiffs have also filed petitions for leave to appeal the class certification portion of Judge Scheindlin’s ruling. These appeals and petitions are pending, and the Second Circuit has not yet taken any action in regard to them.
      IPO 16(b) Claim
     In October 2007, Vanessa Simmonds filed in the United States District Court for the Western District of Washington a Complaint for Recovery of Short Swing Profits Under Section 16(b) of the Securities Exchange Act of 1934 against Bank of America and JP Morgan Chase & Company as defendants, and against Oplink as a nominal defendant. The complaint did not seek recovery of damages or other relief against Oplink. The Complaint alleged that in the years 2000 and 2001 the underwriters and unnamed officers, directors and principal shareholders of Oplink acted as a “group” by coordinating their efforts to undervalue the IPO price of Oplink and to thereafter inflate the aftermarket price throughout the six month lock-up period. The Complaint further alleges that the underwriters

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profited by (a) sharing in profits of customers to whom they had made IPO allocations; (b) allocating shares of Oplink to insiders at other companies from whom the underwriters expected to receive additional work in return; and (c) by creating the opportunity (through the alleged laddering practices) for Oplink’s directors, officers and other insiders to profit through their sale of stock after the lock-up period in return for future business for the underwriter.
     The complaint against Oplink and its underwriters was one of a total of 54 nearly identical lawsuits filed by Ms. Simmonds in October 2007 against companies and underwriters that had completed IPOs in the early 2000s. All of these cases were transferred to one judge at the U.S. District Court. In March 2009, the judge dismissed the complaints, ruling that the plaintiff made an insufficient demand on the issuers and that the cases did not merit tolling the statute of limitations. The plaintiff filed notices of appeal in each of the 54 cases in April 2009, and the appeals were consolidated in June 2009 in the Ninth Circuit Court of Appeals. Each of Ms. Simmonds and the issuer and underwriter defendants has submitted their appeal briefs to the court. As of the date of this report, no date for oral arguments has been set.
      Other Litigation
     The Company is subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flow.
15. Segment Reporting. The Company has determined that it has one reportable segment: fiber optic component and subsystem product sales. This segment consists of organizations located in the United States and China, which develop, manufacture, and/or market fiber optic networking components.
     The geographic breakdown of revenues by customers’ bill-to location is as follows (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Revenues:
                               
United States
  $ 11,311     $ 14,080     $ 24,728     $ 28,327  
Canada
    745       1,448       1,555       4,299  
Europe
    4,675       5,705       9,650       12,604  
China
    8,587       8,323       16,433       17,571  
Japan
    4,544       5,862       8,205       10,413  
Asia-Pacific (excluding China and Japan)
    2,881       2,193       5,737       7,349  
 
                       
Totals
  $ 32,743     $ 37,611     $ 66,308     $ 80,563  
 
                       
     The breakdown of property, plant and equipment, net by geographical location is as follows (in thousands):
                 
    December 31,     June 30,  
    2009     2009  
United States
  $ 5,525     $ 7,492  
China
    22,526       22,811  
Asia-Pacific (excluding China)
    9       15  
 
           
 
               
Totals
  $ 28,060     $ 30,318  
 
           
     The Company’s top five customers, although not necessarily the same five customers for each period together accounted for 56% and 59% of revenues for the three months ended December 31, 2009 and 2008, respectively, and 56% and 61% of revenues for the six months ended December 31, 2009 and 2008, respectively.

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16. Income Taxes. The Company accounts for income taxes under the liability method, which recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts, and for net operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance against deferred tax assets when it is more likely than not that such assets will not be realized.
     The Company accounts for uncertain tax positions in accordance with the authoritative guidance on income taxes under which the Company may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.
     As of December 31, 2009, the Company’s total unrecognized tax benefits were $5,021,000, of which $2,840,000, if recognized, would affect the Company’s effective tax rate. The unrecognized tax benefits increased by $195,000 during the six months ended December 31, 2009. The Company had accrued interest and penalties related to unrecognized tax benefits of approximately $430,000 at December 31, 2009.
     Although the Company files U.S. federal, various state, and foreign tax returns, the Company’s only major tax jurisdictions are the United States, California, and China. The tax years 2004 to 2008 remain open in several jurisdictions.
17. Subsequent Event .
     On January 29, 2010, the Company acquired approximately 91% of the outstanding shares of Emit Technology Co., Ltd (“Emit”), a fiber optic components manufacturer based in Taiwan. The purchase price is comprised of approximately $6.3 million in cash, 80% of which was paid at closing, with the balance to be held in escrow and to be released in equal installments six (6) months and twelve (12) months after the closing date, after satisfaction of any claims that the Company may have under the purchase agreement for breaches of representations or warranties. The outstanding shares that the Company does not own will remain outstanding and will continue to be held by the Emit shareholders. The results of Emit’s operations will be included in the condensed consolidated financial statements for the quarter ending March 31, 2010.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements
     This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions, or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, prospective investors should carefully consider the information set forth below under the caption “Risk Factors” in addition to the other information set forth herein. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.
     The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes in this report, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, related financial information and audited

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consolidated financial statements contained in our Form 10-K for the fiscal year ended June 30, 2009 as filed with the Securities and Exchange Commission on September 11, 2009.
Overview
     We design, manufacture and sell optical networking components and subsystems. Our products expand optical bandwidth, amplify optical signals, monitor and protect wavelength performance, redirect light signals and provide signal transmission and reception within an optical network. Our products enable greater and higher quality bandwidth over longer distances, which reduces network congestion and transmission cost per bit. Our products also enable optical system manufacturers to provide flexible and scalable bandwidth to support the increase of data traffic on the Internet and other public and private networks.
     We offer our customers design, integration and optical manufacturing solutions (“OMS”) for the production and packaging of highly-integrated optical subsystems and turnkey solutions, based upon a customer’s specific product design and specifications. We also offer solutions with lower levels of component integration for customers that place more value on flexibility than would be provided with turnkey solutions.
Use of Estimates and Critical Accounting Policies
     The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure. On an ongoing basis, we evaluate our estimates, including those related to product returns, accounts receivable, inventories, intangible assets, warranty obligations, restructuring accruals, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. These estimates and judgments are reviewed by management on an ongoing basis and by the audit committee of our board of directors at the end of each quarter prior to the public release of our financial results. We believe the following critical accounting policies and our procedures relating to these policies, affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements.
     We have identified the policies below as critical to our business operations and understanding of our financial condition and results of operations. A critical accounting policy is one that is both material to the presentation of our financial statements and requires us to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. These policies may require us to make assumptions about matters that are highly uncertain at the time of the estimate, and different estimates that we could have used, or changes in the estimate that are reasonably likely to occur, may have a material impact on our financial condition or results of operations. Our critical accounting policies cover the following areas:
    revenue recognition and product returns;
 
    depreciation and amortization;
 
    warranty obligations;
 
    allowance for doubtful accounts;
 
    excess and obsolete inventory;
 
    impairment of investments;

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    long-lived asset valuation;
 
    impairment of goodwill and other intangible assets;
 
    fair value accounting;
 
    business combination;
 
    income taxes;
 
    stock compensation; and
 
    loss contingencies.
This is not a comprehensive list of all of our accounting policies.
     As of the date of the filing of this quarterly report, we believe there have been no material changes to our critical accounting policies and estimates during these six months ended December 31, 2009 compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009 as filed with the SEC on September 11, 2009. Additional information about these critical accounting policies may be found in the “Management’s Discussion & Analysis of Financial Condition and Results of Operations” section included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009.
Results of Operations
      Revenues :
                                                                 
    Three Months Ended                 Six Months Ended              
    December 31,         Percentage     December 31,         Percentage  
    2009     2008     Change     Change       2009   2008     Change     Change  
    (In thousands, except percentages)  
Revenues
  $ 32,743     $ 37,611     $ (4,868 )     -12.9 %   $ 66,308     $ 80,563     $ (14,255 )     -17.7 %
     The decrease in revenues for the three months ended December 31, 2009 compared to the three months ended December 31, 2008 was primarily due to decreased revenue of our line transmission products, which accounted for 88% of the decrease in revenues. The decreased revenue of our line transmission products mainly reflected the reduced unit shipments. We believe that the decrease in shipments was largely due to a general decrease in spending activities in the telecommunications industry. The slight decline of unit shipments of our other product categories, including our ROADM optical switching and routing product and our multiplexer products further contributed to the decrease in revenues. A decline in average selling prices, which is characteristic of the industry also contributed to the decrease in revenues.
     The decrease in revenues for the six months ended December 31, 2009 compared to the six months ended December 31, 2008 was primarily due to reduced revenue of our line transmission products, which accounted for 64% of the decrease in revenues. The lower revenue of our line transmission application product was mainly due to decreased unit shipments. We believe that the decrease in shipments was largely due to a general decrease in spending activities in the telecommunications industry. The reduced unit shipments of our ROADM optical switching and routing product, conditioning and monitoring products and multiplexer products further contributed to the decrease in revenues. A decline in average selling prices, which is characteristic of the industry also contributed to the decrease in revenues.

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     Historically, a relatively small number of customers have accounted for a significant portion of our revenue. Our top five customers, although not necessarily the same five customers for each period together accounted for 56% and 59% of revenues for the three months ended December 31, 2009 and 2008, respectively, and 56% and 61% of revenues for the six months ended December 31, 2009 and 2008, respectively.
     We expect our revenues to be in the range of $30 million to $34 million for the third quarter of fiscal 2010.
      Gross Profit :
                                                                 
    Three Months Ended                 Six Months Ended              
    December 31,         Percentage     December 31,           Percentage  
    2009     2008     Change     Change     2009     2008     Change     Change  
    (In thousands, except percentages)  
Gross profit
  $ 11,012     $ 8,546     $ 2,466       28.9 %   $ 20,844     $ 14,735     $ 6,109       41.5 %
Gross profit margin
    33.6 %     22.7 %                     31.4 %     18.3 %                
     The increase in gross profit for the three months ended December 31, 2009 compared to the three months ended December 31, 2008 was primarily due to lower material costs, lower provision for excess and obsolete inventory, higher utilization of previously fully reserved inventory, and lower manufacturing overhead expenses, partially offset by decreased revenues. Our gross profit for the three months ended December 31, 2009 was positively impacted by the sale of inventory that had been previously fully reserved of $1.4 million, compared to the sale of inventory that had been previously fully reserved of $750,000 in the three months ended December 31, 2008.
     Gross profit increased for the six months ended December 31, 2009 compared to the six months ended December 31, 2008 primarily reflecting a lower provision for excess and obsolete inventory, lower material costs, higher utilization of previously fully reserved inventory, and lower manufacturing overhead expenses and labor costs as a result of further integration of Optical Communication Products, Inc. (“OCP”) and other cost reduction efforts, partially offset by lower revenues. During the six months ended December 31, 2008, we recorded a provision for excess and obsolete inventory of $4.1 million which was primarily related to our line transmission products. Our gross profit for the six months ended December 2009 was positively impacted by the sale of inventory that had been previously fully reserved of $2.9 million, compared to the sale of inventory that had been previously fully reserved of $1.2 million in the six months ended December 31, 2008.
     Our gross margin increased for the three months ended December 31, 2009 compared to the three months ended December 31, 2008 primarily driven by lower material costs as a percentage of revenues, lower provision for excess and obsolete inventory, and higher utilization of previously fully reserved inventory, partially offset by higher direct labor costs and manufacturing overhead expenses as a percentage of revenues. We expect our direct labor costs and manufacturing overhead expenses to continue to rise due to anticipated increase in employee headcount and employee compensation expenses in China.
     The increase in gross margin for the six months ended December 31, 2009 compared to the six months ended December 31, 2008 reflected a lower provision for excess and obsolete inventory, higher utilization of previously fully reserved inventory, and lower material costs as a percentage of revenues, partially offset by higher labor costs and manufacturing overhead expenses as a percentage of revenues.
     We expect our gross profit margin to decrease slightly in the third quarter of fiscal 2010 compared to the second quarter of fiscal 2010.

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      Research and Development :
                                                                 
    Three Months Ended                 Six Months Ended              
    December 31,         Percentage     December 31,         Percentage  
    2009     2008     Change     Change     2009     2008     Change     Change  
                            (In thousands, except percentages)                  
Research and development
  $ 2,513     $ 3,037     $ (524 )     -17.3 %   $ 5,007     $ 6,542     $ (1,535 )     -23.5 %
     Research and development expenses for the three months ended December 31, 2009 compared to the three months ended December 31, 2008 decreased $524,000, or 17.3%. Research and development expenses for the six months ended December 31, 2009 compared to the six months ended December 31, 2008 decreased $1.5 million, or 23.5%. The decrease in research and development expenses was primarily driven by cost savings as a result of continued integration of OCP, research and development programs being transitioned from higher cost facilities in the United States to lower cost facilities in China, and other cost reduction measures.
     We believe that developing customer solutions at the prototype stage is critical to our strategic product development objectives. In order to meet the changing requirements of our customers, we will need to fund investments in several concurrent product development projects. We expect our research and development expense, excluding stock compensation expense, to be slightly higher in the third quarter of fiscal 2010 compared to the second quarter of fiscal 2010 due to increased research and development programs being undertaken at our research facilities.
      Sales and Marketing :
                                                                 
    Three Months Ended                 Six Months Ended              
    December 31,         Percentage     December 31,         Percentage  
    2009     2008     Change     Change     2009     2008     Change     Change  
                    (In thousands, except percentages)  
Sales and marketing
  $ 2,248     $ 2,212     $ 72       3.3 %   $ 4,698     $ 4,784     $ (86 )     -1.8 %
     Sales and marketing expenses for the three and six months ended December 31, 2009 compared to the three and six months ended December 31, 2008 were largely unchanged. Excluding the impact of stock compensation expense, sales and marketing expenses for the six months ended December 31, 2009 compared to the six months ended December 31, 2008 decreased $193,000. The decrease was mainly driven by cost savings resulting from the integration of OCP and other cost reduction measures.
     We expect our sales and marketing expense, excluding stock compensation expense, to decrease slightly in the third quarter of fiscal 2010 compared to the second quarter of fiscal 2010.
      General and Administrative :
                                                                 
    Three Months Ended                 Six Months Ended              
    December 31,         Percentage     December 31,                 Percentage  
    2009     2008     Change     Change     2009     2008     Change     Change  
                    (In thousands, except percentages)  
General and administrative
  $ 2,724     $ 3,425     $ (701 )     -20.5 %   $ 5,395     $ 7,002     $ (1,607 )     -23.0 %
     General and administrative expenses for the three months ended December 31, 2009 compared to the three months ended December 31, 2008 decreased $701,000, or 20.5%, mainly driven by lower salary and payroll related expenses and decreased professional fees, partially offset by higher stock compensation expense.

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     General and administrative expenses for the six months ended December 31, 2009 compared to the six months ended December 31, 2008 decreased $1.6 million, or 23.0%. The decrease mainly reflected the cost savings associated with the integration of OCP and other cost reduction measures. Reduced professional fees also contributed to the decrease in general and administrative expenses.
     We expect our general and administrative expense, excluding stock compensation expense, to decrease slightly in the third quarter of fiscal 2010 compared to the second quarter of fiscal 2010.
      Stock Compensation Expense :
                                                                 
    Three Months Ended                 Six Months Ended              
    December 31,         Percentage     December 31,         Percentage  
    2009     2008     Change     Change     2009     2008     Change     Change  
                    (In thousands, except percentages)  
Stock compensation expense
  $ 1,608     $ 1,368     $ 240       17.5 %   $ 3,254     $ 2,935     $ 319       10.9 %
     Stock compensation expense recorded in cost of revenues, research and development, sales and marketing, and general and administrative is the amortization of the fair value of share-based payments made to employees and members of our board of directors, primarily in the form of stock options, restricted stock awards and units (“RSAs” and “RSUs”) and purchases under the employee stock purchase plan (see Note 12 — Stock Compensation). The fair value of stock options and purchase rights granted to purchase our common stock under the employee stock purchase plan is estimated using a Black-Scholes valuation model and is recognized as expense over the employee requisite service period. The compensation expense incurred for RSAs and RSUs is based on the closing market price of Oplink’s common stock on the date of grant and is amortized on a straight-line basis over the requisite service period.
     The increase in stock compensation expense for the three and six months ended December 31, 2009 compared to the three and six months ended December 31, 2008 was primarily due to the amortization of RSUs which were granted in the three months ended September 30, 2009 and additional grants to new and existing employees during the three and six months ended December 31, 2009.
     We expect our stock compensation expense in the third quarter of fiscal 2010 to decrease slightly from the second quarter of fiscal 2010.
      Impairment Charges and Other Costs
     We review property, plant and equipment and identifiable intangibles assets with definite lives for impairment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that they may be impaired.
     As a result of the impairment analysis, in connection with our annual goodwill impairment testing during the three month ended December 31, 2008, we determined that the goodwill, which was acquired in connection with Oplink’s acquisition of OCP, was impaired. This resulted in an impairment charge of $10.8 million being recorded in the statement of operations for the three and six months ended December 31, 2008.
      Amortization of Intangible Assets
     Amortization of intangible and other assets was approximately $945,000 and $954,000 for the three months ended December 31, 2009 and 2008, respectively, and approximately $1.9 million for the six months ended December 31, 2009 and the six months ended December 31, 2008, representing charges incurred as a result of our acquisitions.

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Interest and Other Income, Net
                                                                 
    Three Months Ended                 Six Months Ended              
    December 31,         Percentage     December 31,         Percentage  
    2009     2008     Change     Change     2009     2008     Change     Change  
                    (In thousands, except percentages)                          
Interest and other income, net
  $ 193     $ 1,300     $ (1,107)       -85.2 %   $ 467     $ 2,340     $ (1,873)       -80.0 %
     Interest and other income for the three months ended December 31, 2008 included a release of escrow account of $466,000 which was primarily related to a previous acquisition of OCP. Excluding the impact of the release of escrow account, interest and other income for the three and six months ended December 31, 2008 was approximately $834,000 and $1.9 million, respectively.
     The decrease in interest and other income for the three and six months ended December 31, 2009 compared to the three and six months ended December 31, 2008 was primarily due to the declining average rate of return, partially offset by increased overall cash and cash equivalents, short-term and long-term investments balances. The average rate of return for the three months ended December 31, 2009 and 2008 was 0.39% and 1.8%, respectively. The average rate of return for the six months ended December 31, 2009 and 2008 was 0.44% and 2.14%, respectively.
      Gain (loss) on Sale or Disposal of Assets
     We recognized a gain on sales of assets of $214,000 and $338,000 in the three and six months ended December 31, 2009, respectively. We recorded a loss on sale of assets of $492,000 and $611,000 in the three and six months ended December 31, 2008, respectively, primarily related to disposal of equipment.
      Provision for Income Taxes
     As a multinational corporation, we are subject to taxation in the United States and in foreign jurisdictions. The taxation of our business is subject to the application of multiple and sometimes conflicting tax laws and regulations as well as multinational tax conventions. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide earnings or losses, the tax regulations and tax holidays in each geographic region, and the availability of tax credits and carryforwards. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against us that could materially impact our tax liability and/or our effective income tax rate.
     We are required to make our best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis. We recorded a tax provision of $358,000 and a tax benefit of $15,000 for the three months ended December 31, 2009 and 2008, respectively. We recorded a tax provision of $796,000 and $441,000 for the six months ended December 31, 2009 and 2008, respectively. The increase in provision for income taxes was mainly due to higher US taxable income and an increased effective tax rate.
     The effective tax rate for the three and six months ended December 31, 2009 and 2008 differ from the statutory rate. This is primarily due to taxable income being reduced as a result of carrying forward net operating losses from previous years and tax holidays in certain jurisdictions. The effective tax rate could increase in the future due to changes in the taxable income mix between various jurisdictions and the expiration of certain tax holidays.

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      Liquidity and Capital Resources
     Since our inception, we have financed our operations primarily through issuances of equity, which totaled approximately $319.4 million in aggregate net proceeds, partially offset by $47.5 million in common stock repurchases, net of proceeds from exercise of stock options, employee stock purchase plan and warrants through December 31, 2009. As of December 31, 2009, we had cash and cash equivalents, short-term and long-term investments of $188.8 million and working capital of $198.1 million.
      Six Months Ended December 31, 2009
     Our operating activities provided cash of $17.6 million in the six months ended December 31, 2009 as a result of a net income of $4.9 million for the period adjusted by $5.2 million in non-cash charges of depreciation and amortization, $3.3 million in non-cash stock-based compensation expenses and an increase of cash of $4.4 million as a result of change in assets and liabilities, partially offset by other non-cash items of $225,000.
     For the six months ended December 31, 2009, cash provided as a result of the net change in assets and liabilities was primarily the result of a decrease in accounts receivables of $3.7 million, an increase in accounts payable of $2.0 million, partially offset by an increase in prepaid expenses and other current assets of $1.3 million.
     Accounts receivable provided $3.7 million of cash driven by improved collections of receivables in the six months ended December 31, 2009 compared to the fourth quarter of fiscal 2009. Days sales outstanding (“DSO”) was 74 days and 71 days for the first and second quarters of fiscal 2010, respectively, compared to 82 days for the fourth quarter of fiscal 2009. We typically bill customers on an open account basis with net thirty to ninety day payment terms. We would generally expect the level of accounts receivable at the end of any quarter to reflect the level of sales in that quarter and to change from one period to another in a direct relationship to the change in the level of sales. Our level of accounts receivable would increase if shipments are made closer to the end of the quarter and if customers delayed their payments or if we offered extended payment terms to our customers.
     Prepaid expenses and other current assets used $1.3 million of cash during the six months ended December 31, 2009 primarily reflecting increased balance of short-term notes receivables as certain customers converted accounts receivables to short-term notes receivables.
     Accounts payable provided cash of $2.0 million in the six months ended December 31, 2009 primarily due to a change in the level of inventory purchases and as a result of the timing of payments to our vendors.
     Our investing activities used cash of $12.9 million in the six months ended December 31, 2009 as a result of purchases of investments of $116.8 million and purchases of equipment of $1.1 million, partially offset by sales and maturities of investments of $104.8 million. We anticipate that cash outlays in capital expenditures will be approximately $2.5 million over the next six months.
     Our financing activities provided $3.4 million of cash in the six months ended December 31, 2009 due to proceeds from issuance of common stock in connection with the exercise of stock options and the employee stock purchase plan.
     We believe that our current cash, cash equivalent and short-term and long-term investment balances will be sufficient to meet our operating and capital requirements for at least the next 12 months. We may use cash and cash equivalents from time to time to fund our acquisition of businesses and technologies. We may be required to raise funds through public or private financings, strategic relationships or other arrangements. We cannot assure you that such funding, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. Our failure to raise capital when needed could harm our ability to pursue our business strategy and achieve and maintain profitability.

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      Six Months Ended December 31, 2008
     Our operating activities provided cash of $7.7 million in the six month period ended December 31, 2008 as a result of a net loss of $14.0 million for the period adjusted by $5.7 million in non-cash charges of depreciation and amortization charges, $2.9 million in non-cash stock-based compensation expenses, $4.1 million in provision for excess and obsolete inventory, and $10.8 million in impairment charges of goodwill primarily related to our OCP acquisition, being partially offset by other non-cash items of $181,000 and a decrease in cash of $1.7 million as a result of a net change in assets and liabilities.
     For the six months ended December 31, 2008, cash used as a result of the net change in assets and liabilities was primarily the result of changes in accounts receivable, inventory, prepaid expenses, accounts payables, and accrued liabilities and other liabilities.
     Accounts receivable provided $6.4 million of cash primarily driven by the decreases in revenues and improved collections of receivables in the six month period ended December 31, 2008 compared to the fourth quarter of fiscal 2008. DSO was 70 days and 68 days for the first and second quarters of fiscal 2009 compared to 84 days for the fourth quarter of fiscal 2008.
     Inventories provided $2.7 million of cash during the six month period ended December 31, 2008 primarily due to a change in the level of inventory purchases as a result of anticipated lower revenues in the third quarter of fiscal 2009.
     Prepaid expenses and other current assets used $1.7 million of cash in the six months period ended December 31, 2008 as certain customers converted accounts receivable to short-term notes receivable.
     Accounts payable used cash of $7.3 million in the six month period ended December 31, 2008 primarily due to lower levels of inventory purchases driven by anticipated lower sales in the third quarter of fiscal 2009.
     Accrued liabilities and other liabilities consumed cash of $1.7 million in the six month period ended December 31, 2008 largely due to payments associated with the acquisition of OCP and a decrease in professional fees, payroll and payroll related expenses.
     Our investing activities provided cash of $6.4 million in the six month period ended December 31, 2008. The net cash provided by investing activities in the six month period ended December 31, 2008 was primarily due to sales or maturities of investments of $47.6 million, being partially offset by purchases of investments of $39.8 million and equipment purchase of $1.8 million.
     Our financing activities used cash of $1.4 million in the six month period ended December 31, 2008 due to cash usage of $2.3 million for the repurchase of our common stocks, being partially offset by $846,000 in proceeds from the issuance of our common stock in connection with the exercise of stock options and the employee stock purchase plan.
Off-Balance Sheet Arrangements
     As of December 31, 2009, we did not have any off-balance sheet financing arrangements.

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Contractual Obligations
     Our contractual obligations as of December 31, 2009 have been summarized below (in thousands):
                                         
    Contractual Obligations Due by Period  
Contractual Obligations   Total     Less than 1 year     1-3 years     4-5 years     After 5 years  
Purchase obligations
  $ 12,148     $ 12,148     $     $     $  
Operating leases
    473       305       168              
Capital expenditure
    202       180       22              
 
                             
Total
  $ 12,823     $ 12,633     $ 190     $     $  
 
                             
Recent Accounting Pronouncements
     In September 2006, the Financial Accounting Standards Board (“FASB”) issued fair value measurement guidance, which was later codified under ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). This guidance was effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. It defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This guidance applies under other accounting pronouncements that require or permit fair value measurements. The guidance indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. This guidance defines fair value based upon an exit price model. In February 2008, the FASB issued further guidance to exclude accounting for leases from fair value measurement and to delay the effective date of fair value measurement for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years and interim periods within those fiscal years, beginning after November 15, 2008, which, for Oplink, was June 29, 2009. The adoption of this fair value measurement which was applied to nonfinancial assets and nonfinancial liabilities did not have a significant impact on our consolidated financial position, results of operations or cash flows.
     In April 2008, the FASB issued guidance related to determining the useful lives of intangible assets later codified under ASC Topic 350, “Intangibles — Goodwill and Other” (“ASC 350”). This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350. This guidance is intended to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure the fair value of the asset under ASC Topic 805, “Business Combinations”, and other U.S. generally accepted accounting principles. This guidance was effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008, which, for Oplink, was June 29, 2009. We have determined that there is no material impact from adopting this guidance on our consolidated financial position, results of operations or cash flows.
     In December 2007, the FASB issued a revision of business combinations guidance, which was later codified under ASC Topic 805, “Business Combinations” (“ASC 805”). This guidance replaces the previous FASB guidance on business combinations and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree in a business combination. It also establishes principles around how goodwill acquired in a business combination or a gain from a bargain purchase should be recognized and measured, as well as provides guidelines on the disclosure requirements on the nature and financial impact of the business combination. In addition, the guidance establishes a model to account for certain pre-acquisition contingencies. This guidance was effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008, which, for Oplink, was June 29, 2009. The impact from the adopting the provisions on our consolidated financial position, results of operations or cash flows will be dependent on future business combinations, if any.
     In December 2007, the FASB issued guidance related to noncontrolling interests later codified under ASC Topic 810, “Consolidation.” This guidance was effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, which, for Oplink, was June 29, 2009. This guidance requires that noncontrolling interests be separately reported in the consolidated entity’s equity section and that no gain or loss shall

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be reported when transactions occur between the controlling interest and the noncontrolling interest. Furthermore, the acquisition of noncontrolling interest by the controlling interest is not treated as a business combination. We have determined that there is no material impact from adopting this guidance on our consolidated financial position, results of operations or cash flows.
     In August 2009, the FASB issued Accounting Standards Update 2009-05, “Fair Value Measurements and Disclosures — Measuring Liabilities at Fair Value”. This update provides amendments to ASC Topic 820-10, “Fair Value Measurements and Disclosures-Overall”, for the fair value measurement of liabilities. This update is effective for the first reporting period (including interim periods) beginning after issuance. We do not believe that the implementation will have a material impact on our consolidated financial position, results of operations or cash flows.
     In January 2010, the FASB issued Accounting Standards Update 2009-16 to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will be applied prospectively to new transfers of financial assets occurring in fiscal years beginning after November 15, 2009. We do not believe that the implementation will have a material impact on our consolidated financial position, results of operations or cash flows.
     In various areas, including revenue recognition, stock option and purchase accounting, accounting standards and practices continue to evolve. We believe that we are in compliance with all of the rules and related guidance as they currently exist. However, any changes to accounting principles generally accepted in the United States of America in these areas could impact the future accounting of our operations.
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
     We are exposed to market risk related to fluctuations in interest rates and in foreign currency exchange rates as follows:
      Interest Rate Exposure
     The primary objective of our investment activities is to preserve principal while maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in are subject to market risk. To minimize this risk, we maintain our portfolio of cash equivalents and investments in a variety of securities, including commercial paper, money market funds, government and non-government debt securities and corporate bonds.

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     As of December 31, 2009, all of our short-term investments were in high quality commercial papers, corporate bonds, and government and government agency debt securities. Our long-term investments primarily consisted of government agency debt securities with effective maturities of up to two years. We invest our excess cash in short-term and long-term investments to take advantage of higher yields generated by these investments. We do not hold any instruments for trading purposes. As of December 31, 2009, the gross unrealized losses on our debt securities are primarily due to decreases in the fair value of debt securities as a result of changes in market interest rates. We have the intent and the ability to hold these securities for a reasonable period of time sufficient for a forecasted recovery of fair value up to (or beyond) the initial cost of the investment. We expect to realize the full value of all of these investments upon maturity. In addition, we do not believe that we will be required to sell these securities to meet our cash or working capital requirements or contractual or regulatory obligations. Therefore, we have determined that the gross unrealized losses on our investments at December 31, 2009 are temporary in nature. The following table summarizes our investment securities (in thousands, except percentages) for the last two years:
                                 
    Carrying     Average Rate     Carrying     Average Rate  
    Value at     of Return at     Value at     of Return at  
    December 31,     December 31,     June 30,     June 30,  
    2009     2009     2009     2009  
            (Annualized)             (Annualized)  
Investment Securities:
                               
Cash equivalents — variable rate
  $           $ 24,813       0.3 %
Cash equivalents — fixed rate
    32,483       0.3 %     4,999       0.2 %
Short-term investments — variable rate
    9,503       0.8 %     14,362       1.2 %
Short-term investments — fixed rate
    111,489       0.6 %     101,412       1.4 %
Long-term investments — fixed rate
    10,000       1.3 %     3,180       1.5 %
Total
  $ 163,475             $ 148,766          
                                         
    Expected Fiscal Year Maturity Date  
    2010     2011     2012     Total     Fair Value  
 
                                       
Long-term investments — fixed rate
  $     $     $ 10,000     $ 10,000     $ 9,946  
Average interest rate
                    1.3 %     1.3 %        
 
                                       
      Foreign Currency Exchange Rate Exposure
     We operate in the United States, manufacture in China, and the substantial majority of our sales to date have been made in U.S. dollars. Certain expenses from our China operations are incurred in the Chinese Renminbi. As a result, currency fluctuations between the U.S. dollar and the Chinese Renminbi could cause foreign currency transaction gains or losses that we would recognize in the period incurred. A 10% fluctuation in the dollar at December 31, 2009 would have an immaterial impact on our net dollar position in outstanding trade receivables and payables.
     We expect our international revenues and expenses to continue to be denominated largely in U.S. dollars. We also believe that our China operations will likely expand in the future if our business continues to grow. As a result, we anticipate that we may experience increased exposure to the risks of fluctuating currencies and may choose to engage in currency hedging activities to reduce these risks. However, we cannot be certain that any such hedging activities will be effective, or available to us at commercially reasonable rates.
ITEM 4 — CONTROLS AND PROCEDURES.
      Evaluation of Disclosure Controls and Procedures. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the quarterly period covered by this report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
      Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting that occurred during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1- LEGAL PROCEEDINGS
     The material set forth in under the caption “Litigation” in Note 14 of the Notes to Condensed Consolidated Financial Statements appearing in Part I, Item I of this Quarterly Report on Form 10-Q is incorporated herein by reference.

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ITEM 1A—RISK FACTORS
     Other than with respect to the risk factors set forth below, there have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2009.
We expect volatility in our stock price, which could cause you to lose all or part of your investment.
     We expect the market price of our common stock to fluctuate significantly. For example, the market price of our common stock has fluctuated from a high of $22.38 in October 2006 to an intra-day low of $5.05 in November 2008. The closing sale price of our common stock on February 9, 2010 was $15.02. These fluctuations may occur in response to a number of factors, some of which are beyond our control, including:
    quarterly variations in our operating results;
 
    changes in financial estimates by securities analysts and/or our failure to meet estimates;
 
    changes in market values of comparable companies;
 
    announcements by our competitors or us of new products or of significant acquisitions, strategic partnerships or joint ventures;
 
    any loss by us of a major customer;
 
    economic fluctuations in the market for optical communications products, or in the telecommunications industry generally;
 
    the outcome of, and costs associated with, any litigation to which we are or may become a party;
 
    departures of key management or engineering personnel; and
 
    future sales of our common stock.
Our operating results may be further adversely affected by the downturn in the global economy and the global telecommunications industry.
     Challenging economic conditions worldwide have resulted in slowdowns in the global telecommunications and networking industries, as well as specific segments and markets in which we operate, resulting in:
    reduced demand for our products as a result of constraints on IT-related capital spending, decreasing our revenue;
 
    increased price competition for our products, resulting in price erosion and declining average selling prices; and
 
    higher overhead costs as a percentage of revenue, producing lower gross margins.
     Our quarterly revenue has decreased from $43.0 million for the quarter ended September 30, 2008 to $32.7 million for the quarter ended December 31, 2009. There is a risk of a further decrease in revenue. We have recently been able to produce positive cash flow from operations, but may be unable to do so if revenue decreases.

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     If global economic and market conditions, or economic conditions in the United States or other key markets for our products, remain uncertain or persist, spread, or deteriorate further, we may experience further material impacts on our business, operating results, and financial condition.
We depend upon a small number of customers for a substantial portion of our revenues, and any decrease in revenues from, or loss of, these customers without a corresponding increase in revenues from other customers would harm our operating results.
     We depend upon a small number of customers for a substantial portion of our revenues. Our dependence on orders from a relatively small number of customers makes our relationship with each customer critical to our business.
     Our top five customers, although not the same five customers for each period, together accounted for 56% and 59% of our revenues for the three months ended December 31, 2009 and 2008, respectively, and 56% and 61% of our revenues for six months ended December 31, 2009 and 2008, respectively.
     We expect that the majority of our revenues will continue to depend on sales to a relatively small number of customers. We may not be the sole source of supply to our customers, and they may choose to purchase products from other vendors. The loss of one or more of our significant customers, our inability to successfully develop relationships with additional customers or future price reductions could cause our revenue to decline significantly. Our dependence on a small number of customers may increase if the fiber optic components and subsystems industry and our other target markets continue to consolidate.
If our inventory levels prove to be too low for us to be able to respond quickly to an increase in demand for our products, we may lose sales opportunities.
     In recent months, we have been closely managing our inventory levels in an effort to maximize the efficiency of our operations and to match inventory levels to anticipated demand. As of December 31, 2009, our inventory balance was $10.3 million, a 53% reduction from our inventory balance of $21.8 million one year prior, at December 31, 2008. Due to our lower inventory levels, we may not be able to react quickly to a sharp increase in demand for our products, which could result in lost sales opportunities with current or potential customers, which could result in lost sales opportunities with current or potential customers.
If we do not successfully increase our manufacturing capacity, we may face capacity constraints that could harm our business.
     We are currently seeking to expand our manufacturing capacity at our primary manufacturing facility in Zhuhai, China. To successfully increase our manufacturing capacity, we will need to hire, train and manage substantial numbers of additional production personnel. The labor market in China, particularly in the manufacturing-heavy Southeast region of China where our facilities are located, has become more challenging for employers, and many companies are facing a shortage of qualified workers and/or higher costs due to increased wages. If we cannot successfully expand our capacity on a timely basis, our revenue growth will be constrained and our ability to acquire and retain customers may be harmed, which could adversely affect our operating results.
We may be involved in intellectual property disputes in the future, which could divert management’s attention, cause us to incur significant costs and prevent us from selling or using the challenged technology.
     Participants in the communications and fiber optic components and subsystems markets in which we sell our products have experienced frequent litigation regarding patent and other intellectual property rights. Numerous patents in these industries are held by others, including our competitors. In addition, from time to time, we have become aware of the possibility or have been notified that we may be infringing certain patents or other intellectual property rights of others. Regardless of their merit, responding to such claims can be time consuming, divert

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management’s attention and resources and may cause us to incur significant expenses. In addition, intellectual property claims against us could invalidate our proprietary rights and force us to do one or more of the following:
    obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all;
 
    stop selling, incorporating or using our products that use the challenged intellectual property;
 
    pay substantial monetary damages; or
 
    redesign the products that use the technology.
     Any of these actions could result in a substantial reduction in our revenue and could result in losses over an extended period of time.
     In January 2010, Finisar Corporation filed a complaint in the United States District Court for the Northern District of California against us and three other companies in our industry. In the complaint, Finisar alleges infringement of certain of its U.S. patents arising from the manufacture and sale of our and the other defendants’ optical transceiver products. Finisar seeks to recover unspecified damages, up to treble the amount of actual damages, together with attorneys’ fees, interest and costs. We believe that we have meritorious defenses to the infringement allegations and intend to defend this lawsuit vigorously. However, there can be no assurance that we will be successful in our defense and, even if we are successful, we may incur substantial legal fees and other costs in defending the lawsuit.
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
     None.
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES
    None.
ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     Oplink’s annual meeting of stockholders was held on November 4, 2009. The following actions were taken by Oplink’s stockholders at the annual meeting:
  1.   Tim Christoffersen and Jesse Jack were elected to serve as Class III directors for three-year terms that expire at the 2012 annual meeting of stockholders;
 
  2.   The appointment of Burr, Pilger & Mayer LLP as Oplink’s independent registered public accounting firm for the 2010 fiscal year was ratified;
 
  3.   A new 2009 Equity Incentive Plan was approved; and
 
  4.   An amendment and restatement of the Company’s 2000 Employee Stock Purchase Plan to extend the term of the plan and make certain other changes was approved.
The results of the voting were as follows:
                 
            Authority  
    For     Withheld  
1. Election to the Board of Directors of two Class III Directors:
               
Tim Christoffersen
    17,011,929       379,160  
Jesse Jack
    17,011,293       379,796  

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    For     Against     Abstain  
2. Ratification of the appointment of Burr, Pilger & Mayer LLP as Oplink’s independent registered public accounting firm for the fiscal year ending June 30, 2010
    17,355,392       29,905       5,792  
                         
    For     Against     Abstain  
3. Approval of 2009 Equity Incentive Plan
    11,483,724       3,386,705       15,425  
                         
    For     Against     Abstain  
4. Approval of Amendment and Restatement of 2000 Employee Stock Purchase Plan
    13,854,535       1,014,843       16,476  
ITEM 5 — OTHER INFORMATION
     None.
ITEM 6 — EXHIBITS
Exhibit Index
     
Exhibit No.   Description
3.1(1)
  Amended and Restated Certificate of Incorporation of the Registrant.
 
   
3.2(2)
  Bylaws of the Registrant.
 
   
3.3(3)
  Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant.
 
   
3.4(4)
  Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant.
 
   
3.5(5)
  Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant.
 
   
3.6(6)
  Amendment to Bylaws of the Registrant.
 
   
31.1
  Certification of Chief Executive Officer Required under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
 
   
31.2
  Certification of Chief Financial Officer Required under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
 
   
32.1 **
  Certification of Chief Executive Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350).
 
   
32.2 **
  Certification of Chief Financial Officer Required under Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.
 
(1)   Previously filed as Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1/A, No. 333-41506, filed on August 29, 2000 and incorporated herein by reference.
 
(2)   Previously filed as Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1/A, No. 333-41506, filed on August 1, 2000 and incorporated herein by reference.
 
(3)   Previously filed as Exhibit 4.1 to the Registrant’s Report on Form 8-K filed on March 22, 2002 and

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    incorporated herein by reference.
 
(4)   Previously filed as Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2005 and incorporated herein by reference.
 
(5)   Previously filed as Exhibit 3.5 to the Registrant’s Quarterly Report on Form 10-Q filed on February 9, 2007 and incorporated herein by reference.
 
(6)   Previously filed as Exhibit 3.1 to the Registrant’s Report on Form 8-K filed on December 20, 2007 and incorporated herein by reference.
 
**   The certifications attached as Exhibits 32.1 and 32.2 accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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

(Registrant)
 
 
DATE: February 11, 2010  By:   /s/ Shirley Yin    
    Shirley Yin   
    Chief Financial Officer
(Principal Financial and Accounting Officer) 
 
 

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Exhibit 31.1
CERTIFICATIONS
I, Joseph Y. Liu, certify that:
1.   I have reviewed this quarterly report on Form 10-Q of Oplink Communications, Inc.;
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 11, 2010
         
     
  /s/ Joseph Y. Liu    
  Joseph Y. Liu   
  President and Chief Executive Officer
(Principal Executive Officer) 
 

 

         
Exhibit 31.2
CERTIFICATIONS
I, Shirley Yin, certify that:
1.   I have reviewed this quarterly report on Form 10-Q of Oplink Communications, Inc.;
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 11, 2010
         
     
  /s/ Shirley Yin    
  Shirley Yin   
  Chief Financial Officer
(Principal Financial Officer) 
 

 

         
Exhibit 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.§ 1350, as adopted), Joseph Y. Liu, Chief Executive Officer of Oplink Communications, Inc. (the “Company”), hereby certifies that, to the best of his knowledge:
1. The Company’s Quarterly Report on Form 10-Q for the period ended January 3, 2010, to which this Certification is attached as Exhibit 32.1 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition at the end of the period covered by the Quarterly Report and results of operations of the Company for the periods covered by the Quarterly Report.
In Witness Whereof, the undersigned has set his hand hereto as of the 11th day of February, 2010.
         
   
/s/ Joseph Y. Liu      
Joseph Y. Liu   
Chief Executive Officer   
   
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in such filing.

 

Exhibit 32.2
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.§ 1350, as adopted), Shirley Yin, Chief Financial Officer of Oplink Communications, Inc. (the “Company”), hereby certifies that, to the best of her knowledge:
1. The Company’s Quarterly Report on Form 10-Q for the period ended January 3, 2010, to which this Certification is attached as Exhibit 32.2 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition at the end of the period covered by the Quarterly Report and results of operations of the Company for the periods covered by the Quarterly Report.
In Witness Whereof, the undersigned has set her hand hereto as of the 11th day of February, 2010.
         
     
/s/ Shirley Yin    
Shirley Yin   
Chief Financial Officer   
 
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in such filing.