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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2013

	Or

£	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

(State or other jurisdiction of

incorporation or organization)

No. 77-0411346

(I.R.S. Employer

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 R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 R No £

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 £

Accelerated filer R

Non-accelerated filer £

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 £ No R

The number of outstanding shares of the Registrant’s common stock, $0.001 par value, as of April 28, 2013, was 19,039,659.

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OPLINK COMMUNICATIONS, INC.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2013 and July 1, 2012	3
	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2013 and April 1, 2012	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2013 and April 1, 2012	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2013 and April 1, 2012	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signature		32
Exhibit Index

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PART I. FINANCIAL INFORMATION

ITEM 1- FINANCIAL STATEMENTS

OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)	March 31,			July 1,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	66,133		$	81,233
Short-term investments		107,322			85,382
Accounts receivable, net		40,853			33,165
Inventories		20,782			19,091
Deferred tax assets		1,478			1,609
Prepaid expenses and other current assets		7,556			8,633
Total current assets		244,124			229,113

Property, plant and equipment, net		45,004			45,392
Long-term investments		3,054			9,606
Goodwill and acquired intangible assets, net		1,268			1,648
Deferred tax assets, non-current		7,652			7,151
Other assets		12,825			12,279
Total assets	$	313,927		$	305,189

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	13,111		$	11,739
Accrued liabilities		15,290			11,995
Income tax payable		809			465
Total current liabilities		29,210			24,199

Income tax payable, non-current		7,465			6,858
Deferred tax liabilities, non-current		675			675
Other non-current liabilities		1,291			1,325
Total liabilities		38,641			33,057

Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, $0.001 par value, 34,000 shares authorized; 19,038 and 19,130 shares issued and outstanding as of March 31, 2013 and July 1, 2012, respectively		19			19
Additional paid-in capital		431,081			433,330
Accumulated other comprehensive income		11,625			15,092
Accumulated deficit		(167,439	)		(176,309	)
Total stockholders’ equity		275,286			272,132
Total liabilities and stockholders’ equity	$	313,927		$	305,189

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)

(In thousands, except per share data)	Three Months Ended						Nine Months Ended
	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Revenues	$	44,124		$	43,978		$	134,107		$	130,683
Cost of revenues		28,474			30,470			85,298			89,704
Gross profit		15,650			13,508			48,809			40,979

Operating expenses:
Research and development		6,647			6,024			18,545			16,751
Sales and marketing		4,006			3,319			11,704			9,429
General and administrative		2,644			2,267			8,040			9,106
Amortization of acquired intangible assets		91			91			273			573
Legal settlement		--			--			--			3,317
Net (gain) loss on sale and disposal of property and equipment		(258	)		19			(270	)		(366	)
Total operating expenses		13,130			11,720			38,292			38,810

Operating income		2,520			1,788			10,517			2,169
Interest income and other, net		201			93			879			408
Income before provision (benefit) for income taxes		2,721			1,881			11,396			2,577
Provision (benefit) for income taxes		670			(977	)		2,526			(11	)
Net income	$	2,051		$	2,858		$	8,870		$	2,588

Net income per share:
Basic	$	0.11		$	0.15		$	0.47		$	0.13
Diluted	$	0.11		$	0.14		$	0.46		$	0.13

Weighted average shares:
Basic		19,029			19,200			19,072			19,364
Diluted		19,252			19,795			19,370			19,982

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 COMPREHENSIVE INCOME

(Unaudited)

(In thousands)	Three Months Ended					Nine Months Ended
	March 31, 2013			April 1, 2012		March 31, 2013			April 1, 2012
Net income	$	2,051		$	2,858	$	8,870		$	2,588
Other comprehensive income (loss), net of taxes:
Currency translation adjustments		(169	)		1,030		605			2,320
Change in net unrealized gain (loss) on investments, net		(1,259	)		2,763		(4,072	)		2,803
Other comprehensive income (loss), net		(1,428	)		3,793		(3,467	)		5,123
Comprehensive income	$	623		$	6,651	$	5,403		$	7,711

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)

	Nine Months Ended
(in thousands)	March 31, 2013			April 1, 2012
Cash flows from operating activities:
Net income	$	8,870		$	2,588
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		5,436			4,632
Amortization of acquired intangible assets		381			1,173
Amortization of premium on investments		425			113
Net gain on sale and disposal of property and equipment		(270	)		(366	)
Stock-based compensation expense		4,413			4,452
Deferred income taxes		(221	)		623
Changes in assets and liabilities:
Accounts receivable		(7,587	)		(955	)
Inventories		(532	)		5,456
Prepayments and other assets		469			(2,370	)
Accounts payable		1,481			194
Accrued liabilities and other liabilities		4,296			1,196
Net cash provided by operating activities		17,161			16,736

Cash flows from investing activities
Acquisition of business, net		(1,090	)		--
Purchases of available-for-sale investments		(96,986	)		(157,098	)
Sales and maturities of available-for-sale investments		85,386			171,631
Purchases of held-to-maturity investments		(8,312	)		(7,279	)
Purchase of non-marketable equity security		--			(200	)
Proceeds from sales of property and equipment		5,988			406
Purchases of property and equipment		(10,194	)		(10,758	)
Net cash used for investing activities		(25,208	)		(3,298	)

Cash flows from financing activities
Proceeds from issuance of common stock		2,240			1,296
Repurchases of common stock		(8,320	)		(19,922	)
Tax withholdings related to net share settlements of restricted stock units		(984	)		(1,223	)
Net cash used for financing activities		(7,064	)		(19,849	)

Effect of exchange rates on cash and cash equivalents		11			10
Net decrease in cash and cash equivalents		(15,100	)		(6,401	)
Cash and cash equivalents at beginning of period		81,233			52,644
Cash and cash equivalents at end of period	$	66,133		$	46,243

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)

Note 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 and in Taiwan.

Oplink designs, manufactures and sells optical networking components and subsystems. Its products expand optical bandwidth, amplify optical signals, monitor and protect wavelength performance, redirect light signals, ensure signal connectivity and provide signal transmission and reception within an optical network. Its products enable greater and higher quality bandwidth over longer distances, which reduces network congestion and transmission cost per bit. Its 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.

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.

Oplink’s product portfolio also includes optical transmission products that broaden the addressable markets as well as the range of solutions that Oplink can now offer its customers. Oplink’s transmission products consist of a comprehensive line of high-performance fiber optic modules, including fiber optic transmitters, receivers, transceivers, and transponders, primarily for use in metropolitan area network (“MAN”), local area network (“LAN”), and fiber-to-the-home (“FTTH”) applications. Fiber optic modules are pre-assembled components that are used to build network equipment. Oplink’s transmission products convert electronic signals into optical signals and back into electronic signals, thereby facilitating the transmission of information over fiber optic communication networks.

Oplink also offers communications system equipment makers a broadened suite of precision-made, cost-effective, and reliable optical connectivity products to establish multiple-use, quick pluggable fiber links among network devices for bandwidth deployment, as well as in a test and measurement environment for a wide range of system design and service applications.

Note 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 (“U.S.”) 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 U.S., 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 as of March 31, 2013, the results of its operations for the three and nine month periods ended March 31, 2013 and April 1, 2012 and its cash flows for the nine month periods ended March 31, 2013 and April 1, 2012. 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 included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2012. The July 1, 2012 condensed consolidated balance sheet data was derived from audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2012 but does not include all disclosures required for annual periods. Certain reclassifications have been made to conform to the current period’s presentation and to present legal settlement seperately on the condensed consolidated statements of operations.

The Company operates and reports using a fiscal year, which ends on the Sunday closest to June 30. Fiscal 2013 and Fiscal 2012 are 52-week fiscal years.

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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. The Company presents the financial information of some of its foreign operating subsidiaries in its consolidated financial statements utilizing accounts as of a date one month earlier than the accounts of its parent company 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.

There have been no significant changes in the Company’s significant accounting policies that were disclosed in its Annual Report on Form 10-K for the fiscal year ended July 1, 2012.

Note 3 - Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires an entity to present parenthetically (on the face of the financial statements, in the notes, or in some cases, cross-referenced to related footnote disclosures) significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. The amendment is effective prospectively for annual and interim periods beginning after December 15, 2012. The Company adopted this amendment in the three months ended March 31, 2013 and the adoption did not have a material impact on its consolidated financial statements.

In July 2012, the FASB issued ASU No. 2012-02, Topic 350: Intangibles - Goodwill and Other, which amends Topic 350 to allow an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. An entity would not be required to determine the fair value of the indefinite-lived intangible unless the entity determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than the carrying value. This standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and early adoption is permitted. The Company does not believe that the adoption will have a material impact on its consolidated financial statements.

In September 2011, the FASB issued and amended ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to test goodwill for impairment under the two-step process. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and early adoption is permitted. The Company adopted this guidance at the beginning of fiscal 2013 and the adoption of this guidance did not have a material impact on its consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05: Presentation of Comprehensive Income, which requires an entity to present items of net income and other comprehensive income either in one continuous statement or in two separate, but consecutive, statement of net income and other comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective in fiscal years (including interim periods) beginning after December 15, 2011. The Company adopted this guidance at the beginning of fiscal 2013 and the adoption of this guidance did not have a material impact on its consolidated financial statements.

Note 4 - Net Income Per Share

Basic net income per share is computed by dividing the net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and dilutive potential common shares outstanding during the period, if dilutive.

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Potentially dilutive common equivalent shares are composed of the incremental common shares issuable upon the exercise of stock options, the vesting of awards and purchases under the employee stock purchase plan. The following is the computations of the basic and diluted net income per share and the anti-dilutive common stock equivalents excluded from the computations for the periods presented (in thousands, except per share data):

	Three Months ended				Nine Months ended
	March 31, 2013		April 1, 2012		March 31, 2012		April 1, 2012
Numerator:
Net income	$	2,051	$	2,858	$	8,870	$	2,588

Denominator:
Weighted average common shares outstanding		19,029		19,200		19,072		19,364
Dilutive effect of employee stock options and restricted stock units		223		595		298		618
Weighted average common shares outstanding, assuming dilution		19,252		19,795		19,370		19,982

Net income per share:
Basic	$	0.11	$	0.15	$	0.47	$	0.13
Diluted	$	0.11	$	0.14	$	0.46	$	0.13

Anti-dilutive stock options and awards not included in net income per share calculation		1,750		970		1,605		1,034

Note 5 – Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income by component and related tax effects for the three months ended March 31, 2013 were as follows (in thousands):

	Unrealized Losses on Available-for-Sale Securities			Foreign Currency Translation Adjustment			Total
December 30, 2012	$	(2,263	)	$	15,316		$	13,053
Other comprehensive income before reclassification		(1,243	)		(169	)		(1,412	)
Amounts reclassified from accumulated other comprehensive income		(16	)(1)		--			(16	)
Other comprehensive loss, net		(1,259	)		(169	)		(1,428	)
March 31, 2013	$	(3,522	)	$	15,147		$	11,625

(1) This component of accumulated other comprehensive income is included in the Interest income and other, net on the Company's condensed consolidated statements of operations for the three months ended March 31, 2013.

Note 6 - Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash equivalents consist primarily of money market funds and corporate commercial paper.

Note 7 - Investments

The Company generally invests its excess cash in certificates of deposit, debt instruments of the U.S. Treasury, government agencies, corporations with strong credit ratings and equity securities in publicly traded companies. 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

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modified to take advantage of trends in yields and interest rates. The available-for-sale investments are reported at their fair value. Unrealized gains and losses on these securities are reported as a separate component of accumulated other comprehensive income until realized. The investment securities which the Company has the ability and intent to hold until maturity are classified as held-to-maturity investments and are stated at amortized cost.

Investments at March 31, 2013 and July 1, 2012 were as follows (in thousands):

	March 31, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
Short-term investments:	Cost		Gains		Losses			Fair Value
Available-for-sale:
United States Treasury	$	35,984	$	6	$	--		$	35,990
Corporate commercial paper		30,990		--		--			30,990
Public company equity securities		12,430		552		(3,930	)		9,052
Corporate debt securities		6,608		1		(3	)		6,606
Certificates of deposit		6,338		--		--			6,338
Municipal bonds		613		--		--			613
Held-to-maturity:
Corporate debt securities		17,733		12		(10	)		17,735
Total short-term investments	$	110,696	$	571	$	(3,943	)	$	107,324

Long-term investments:
Held-to-maturity:
Corporate debt securities	$	3,054	$	--	$	(15	)	$	3,039
Total long-term investments	$	3,054	$	--	$	(15	)	$	3,039

Total investments	$	113,750	$	571	$	(3,958	)	$	110,363

	July 1, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
Short-term investments:	Cost		Gains		Losses			Fair Value
Available-for-sale:
United States Treasury	$	14,985	$	--	$	--		$	14,985
Corporate commercial paper		39,969		1		(1	)		39,969
Public company equity securities		12,676		852		--			13,528
Corporate debt securities		4,311		--		(7	)		4,304
Certificates of deposit		9,448		--		--			9,448
Held-to-maturity:
Corporate debt securities		3,148		--		(1	)		3,147
Total short-term investments	$	84,537	$	853	$	(9	)	$	85,381

Long-term investments:
Held-to-maturity:
Corporate debt securities	$	9,606	$	--	$	(15	)	$	9,591
Total long-term investments	$	9,606	$	--	$	(15	)	$	9,591

Total investments	$	94,143	$	853	$	(24	)	$	94,972

The gross unrealized losses related to available for sale and held to maturity investments were primarily due to changes in market interest rates and fluctuations in stock prices of our public company equity securities. The Company has determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis to meet its cash or working capital requirements or contractual or regulatory obligations.

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The following tables show the gross unrealized losses and fair value of the Company’s investments, aggregated by length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	March 31, 2013
	Less Than 12 Months					Total
	Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss
Available-for-sale:
Corporate debt securities	$	2,508	$	(3	)	$	2,508	$	(3	)
Public company equity securities		3,123		(3,930	)		3,123		(3,930	)
Held-to-maturity:
Corporate debt securities		6,191		(10	)		6,191,		(10	)
Total short-term investments		11,822		(3,943	)		11,822		(3,943	)
Held-to-maturity:
Corporate debt securities		3,039		(15	)		3,039		(15	)
Total long-term investments		3,039		(15	)		3,039		(15	)
Total investments	$	14,861	$	(3,958	)	$	14,861	$	(3,958	)

	July 1, 2012
	Less Than 12 Months					Total
	Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss
Available-for-sale:
Corporate commercial paper	$	16,996	$	(1	)	$	16,996	$	(1	)
Corporate debt securities		3,076		(7	)		3,076		(7	)
Held-to-maturity:
Corporate debt securities		811		(1	)		811		(1	)
Total short-term investments		20,883		(9	)		20,883		(9	)
Held-to-maturity:
Corporate debt securities		9,591		(15	)		9,591		(15	)
Total long-term investments	$	9,591	$	(15	)	$	9,591	$	(15	)
Total investments	$	30,474	$	(24	)	$	30,474	$	(24	)

As of March 31, 2013 and July 1, 2012, there were no individual securities that had been in a continuous loss position for 12 months or longer.

The amortized cost and estimated fair value of debt securities at March 31, 2013 and July 1, 2012 by contractual maturities are shown below (in thousands):

	March 31, 2013				July 1, 2012
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Available-for-sale investments:
Due in one year or less	$	80,533	$	80,537	$	68,713	$	68,706
Total available-for-sale investments	$	80,533	$	80,537	$	68,713	$	68,706

Held-to-maturity investments:
Due in one year or less	$	17,733	$	17,735	$	3,148	$	3,147
Due in one year to five years		3,054		3,039		9,606		9,591
Total held-to-maturity investments	$	20,787	$	20,774	$	12,754	$	12,738

Total investments	$	101,320	$	101,311	$	81,467	$	81,444

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Non-Marketable Equity Securities

The Company accounts for its equity investments in privately held companies under the cost method. These investments are subject to periodic impairment review and measured and recorded at fair value when they are deemed to be other-than-temporarily impaired. In determining whether a decline in the value of its investment has occurred and is other than temporary, an assessment was made by considering available evidence, including the general market conditions, the investee’s financial condition, near-term prospects, market comparables and subsequent rounds of financing. The valuation also takes into account the investee’s capital structure, liquidation preferences for its capital and other economic variables. The valuation methodology for determining the decline in value of non-marketable equity securities is based on inputs that require management judgment. The aggregate carrying value of the Company’s non-marketable equity securities was $0.6 million, and was classified within other assets on the Company’s condensed consolidated balance sheets as of March 31, 2013 and July 1, 2012. The Company did not recognize any impairment loss during the three and nine months ended March 31, 2013 and April 1, 2012, respectively.

Note 8 - Fair Value Measurements

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.

The Company’s Level 1 financial assets generally include money market funds and public company equity securities. 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 were no changes in valuation techniques or related inputs in the three months ended March 31, 2013.

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The following table presents the Company’s financial assets which were measured at fair value on a recurring basis at March 31, 2013 and July 1, 2012 (in thousands):

	March 31, 2013
	Level 1		Level 2		Level 3		Total
Financial assets
Cash equivalents:
Money market funds	$	27,958	$	--	$	--	$	27,958
Corporate commercial paper		--		4,999		--		4,999
Short-term investments:
Public company equity securities		9,052		--				9,052
U.S. government treasury		--		35,990		--		35,990
Corporate commercial paper		--		30,990		--		30,990
Corporate debt securities		--		6,606				6,606
Certificates of deposit		--		6,338		--		6,338
Municipal bonds				613				613
Total financial assets	$	37,010	$	85,536	$	--	$	122,546

Financial liabilities	$	--	$	--	$	--	$	--

	July 1, 2012
	Level 1		Level 2		Level 3		Total
Financial assets
Cash equivalents:
Money market funds	$	25,837	$	--	$	--	$	25,837
Corporate commercial paper		--		14,998		--		14,998
Short-term investments:
Public company equity securities		13,528		--				13,528
Corporate commercial paper		--		39,969		--		39,969
U.S. government treasury		--		14,985		--		14,985
Certificates of deposit		--		9,448		--		9,448
Corporate debt securities		--		4,304				4,304
Total financial assets	$	39,365	$	83,704	$	--	$	123,069

Financial liabilities	$	--	$	--	$	--	$	--

As of March 31, 2013 and July 1, 2012, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). There were no transfers of assets or liabilities between Level 1 and Level 2 of the fair value measurement hierarchy in the three and nine months ended March 31, 2013 and in the twelve months ended July 1, 2012.

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Note 9 – Balance Sheet Components (in thousands)

	March 31, 2013			July 1, 2012
Inventories, net:
Raw materials	$	7,169		$	11,617
Work-in-process		6,565			5,318
Finished goods		7,048			2,156
	$	20,782		$	19,091
Property, plant and equipment, net:
Production and engineering equipment	$	63,866		$	60,237
Computer hardware and software		7,633			7,395
Building and leasehold improvements		33,902			33,352
Land		4,350			4,358
Construction in progress		901			509
		110,652			105,851
Less: Accumulated depreciation		(65,648	)		(60,459	)
	$	45,004		$	45,392
Other assets:
Long term deposit	$	2,910		$	2,910
Investments in privately held companies		600			600
Technology license		463			536
Deferred income tax charge		7,127			7,816
Other		1,725			417
	$	12,825		$	12,279
Accrued liabilities:
Payroll and related expenses	$	7,410		$	5,469
Employee withholdings and related expenses		1,108			396
Accrued professional fees		1,113			1,115
Accrued sales commission		567			540
Accrued sales return		302			186
Advance deposits from customers		226			568
Accrued warranty		360			360
Other		4,204			3,361
	$	15,290		$	11,995

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Note 10 - Goodwill and Acquired Intangible Assets, Net

The Company had goodwill of $0.6 million on its condensed consolidated balance sheets as of March 31, 2013 and July 1, 2012. During the three and nine months ended March 31, 2013 and April 1, 2012, there were no indicators of impairment for the goodwill.

The following table presents details of the intangible assets acquired as a result of acquisitions as of March 31, 2013 and July 1, 2012 (in thousands):

	Estimated
	Useful Life	Gross		Accumulated
March 31, 2013	(in Years)	Amount		Amortization		Net
Technology	4-6	$	9,592	$	9,132	$	460
Customer relationships	3-7		5,671		5,556		115
Trade name	3-6		1,775		1,655		120
Total		$	17,038	$	16,343	$	695

	Estimated
	Useful Life	Gross		Accumulated
July 1, 2012	(in Years)	Amount		Amortization		Net
Technology	4-6	$	9,592	$	9,015	$	577
Customer relationships	3-7		5,671		5,535		136
Trade name	3-6		1,775		1,412		363
Total		$	17,038	$	15,962	$	1,076

The following table presents details of the amortization expense of acquired intangible assets as reported in the condensed consolidated statements of operations (in thousands):

	Three Months Ended				Nine Months Ended
	March 31, 2013		April 1, 2012		March 31, 2013		April 1, 2012
Cost of revenues	$	36	$	36	$	108	$	600
Operating expenses		91		91		273		573
Total	$	127	$	127	$	381	$	1,173

Based on the purchased intangible assets recorded at March 31, 2013, and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated amortization expense is expected to be as follows (in thousands):

Fiscal years	Amount
Remainder of FY 2013	$	103
2014		247
2015		177
2016		87
2017		32
After 2017		49
	$	695

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Note 11 - Stock-Based Compensation

Stock-based compensation expense 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-based compensation is generally accounted for as an equity instrument.

The following table represents details of stock-based compensation expense by function line item for the three and nine months ended March 31, 2013 and April 1, 2012 (in thousands):

	Three Months Ended				Nine Months Ended
	March 31, 2013		April 1, 2012		March 31, 2013		April 1, 2012
Cost of revenues	$	81	$	92	$	253	$	290
Research and development		366		359		1,004		1,063
Sales and marketing		416		506		1,553		1,520
General and administrative		470		377		1,603		1,579
Total stock-based compensation expense	$	1,333	$	1,334	$	4,413	$	4,452

Stock-based compensation expense of $8,000 was capitalized as inventory as of March 31, 2013 and April 1, 2012.

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.

Valuation Assumptions

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						Nine Months Ended
	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Expected term	4.6 years			4.6 years			4.6 years			4.6 years
Risk-free interest rate		0.74	%		0.71	%		0.62	%		0.81	%
Volatility		39	%		49	%		45	%		57	%
Dividend yield		0	%		0	%		0	%		0	%
Weighted average grant-date fair value	$	5.23		$	7.66		$	6.17		$	8.04

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						Nine Months Ended
	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Expected term	1.3 years			1.3 years			1.3 years			1.3 years
Risk-free interest rate		0.22	%		0.15	%		0.22	%		0.15	%
Volatility		41	%		58	%		41	%		58	%
Dividend yield		0	%		0	%		0	%		0	%

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 four purchase periods in each 24-month offering period.

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Equity Incentive Program

The Company 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. 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.

The following table summarizes activity under the equity incentive plans for the indicated periods:

				Options						Awards
							Weighted			Restricted			Weighted
	Shares			Number of			Average			Stock			Average
	Available			Options			Exercise			Awards/Units			Grant Date
(in thousands, except per share data)	for Grant			Outstanding			Price			Outstanding			Fair Value
Balance, July 1, 2012		1,896			1,666			$	15.63		548			$	16.20
Granted		(852	)		809				16.41		33				16.32
Exercised or vested		--			(235	)			6.47		(239	)			16.20
Canceled		51			(43	)			17.15		(7	)			16.87
Balance, March 31, 2013		1,095			2,197			$	16.87		335			$	16.20

The Company settles employee stock option exercises and RSUs with newly issued common shares.

As of March 31, 2013, the unrecognized stock-based compensation expense related to stock options to purchase the Company’s common stock was $4.3 million, which is expected to be recognized over a weighted average period of 3.3 years. The unrecognized stock-based compensation expense related to unvested RSUs was $3.0 million, which is expected to be recognized over a weighted average period of 1.5 years.

A majority of the vested restricted stock units were net share settled. During the nine months ended March 31, 2013 and April 1, 2012, the Company withheld 0.1 million shares, based upon the Company’s closing stock price on the vesting date to settle the employees’ minimum statutory obligation for the applicable income and other employment taxes. The Company then remitted cash to the appropriate taxing authorities. Total payments for the employees’ tax obligations to the relevant taxing authorities were $1.0 million and $1.2 million for the nine months ended March 31, 2013 and April 1, 2013, and are reflected as a financing activity within the condensed consolidated statements of cash flows. The payments had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued on the vesting date and were recorded as a reduction of additional paid-in capital.

Employee Stock Purchase Plan

The Company’s employee stock purchase plan 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. During the nine months ended March 31, 2013 and April 1, 2012, the Company issued 0.1 million shares of common stock under the plan. As of March 31, 2013, 1.4 million shares were available for issuance under the Company’s employee stock purchase plan.

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Note 12 - Repurchase of Common Stock

On October 27, 2011, the Company announced that its Board of Directors approved a new program to repurchase up to $40 million of its outstanding common shares. In fiscal 2012, the Company repurchased 0.6 million shares at an average price of $14.30 per share for a total purchase price of $8.4 million. The Company did not repurchase any shares during the three months ended March 31, 2013. During the nine months ended March 31, 2013, the Company repurchased 0.6 million shares at an average price of $14.35 per share for a total purchase price of $7.9 million. As of March 31, 2013, approximately $23.7 million was available for future purchase under this share repurchase program. Repurchases under the program will be made in open market or privately negotiated transactions in compliance with the Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements and other factors.

Note 13 - Commitments and Contingencies

Indemnification Agreements

The Company has entered into certain indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties, generally their business partners or customers, for losses suffered or incurred by the indemnified party in connection with any patent, or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. Based on negotiation and special circumstances of each case, the terms of the agreements may vary. The maximum potential amount of future payments the Company could be required to make under these agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature; to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified; and to obtain directors’ and officers’ insurance if available on reasonable terms, which the Company currently has in place.

Product Warranties

The Company provides reserves for the estimated cost of product warranties at the time revenues are recognized based on 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. On a quarterly basis, the Company assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the warranty liability, which is included as a component of “Accrued liabilities” on the condensed consolidated balance sheet as disclosed in Note 9, is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Balance as of beginning of period	$	360		$	360		$	360		$	360
Accruals for warranties issued during the period		69			49			192			147
Adjustments related to pre-existing warranties including expirations and changes in estimates		15			(6	)		(18	)		(17	)
Cost of warranty repair		(84	)		(43	)		(174	)		(130	)
Balance as of end of period	$	360		$	360		$	360		$	360

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Contractual Obligations

Contractual obligations as of March 31, 2013 is summarized below (in thousands):

			Contractual Obligations Due by Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Purchase obligations	$	14,758	$	14,408	$	350	$	--	$	--
Operating leases		259		196		63		--		--
Capital expenditure		1,946		1,873		73		--		--
Total	$	16,963	$	16,477	$	486	$	--	$	--

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 and cash flows.

Note 14 - Segment

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 chief executive officer has been identified as the chief operating decision maker (“CODM”). The Company’s CODM is ultimately responsible and actively involved in the allocation of resources and the assessment of the Company’s operational and financial performance.

The geographic breakdown of revenues by customers’ bill-to location was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	March 31, 2013		April 1, 2012		March 31, 2013		April 1, 2012
Revenues:
United States	$	17,711	$	16,367	$	51,871	$	44,491
China		12,365		8,922		36,558		31,702
Europe		5,543		6,931		17,331		21,037
Japan		3,760		5,043		10,095		12,356
Other		4,745		6,715		18,252		21,097
Total	$	44,124	$	43,978	$	134,107	$	130,683

The Company’s top five customers, although not the same five customers, together accounted for 54% and 44% of revenues for the three months ended March 31, 2013 and April 1, 2012, respectively; and 51% and 44% of revenues for the nine months ended March 31, 2013 and April 1, 2012, respectively.

The breakdown of property, plant and equipment, net by geographical location was as follows (in thousands):

	March 31, 2013		July 1, 2012
China	$	34,063	$	35,100
United States		5,941		5,825
Taiwan		5,000		4,467
Total	$	45,004	$	45,392

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Note 15 - Income Taxes

The Company accounts for income taxes under the asset and 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 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 continues to monitor the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company must increase its provision for taxes by recording a valuation allowance against the deferred tax assets.

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 March 31, 2013, the Company’s total unrecognized tax benefits were $16.1 million, of which $13.6 million, if recognized, would affect the Company’s effective tax rate. The Company had accrued interest and penalties related to unrecognized tax benefits of approximately $0.9 million as of March 31, 2013.

The Company is required to make its 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. The Company recorded a tax provision of $0.7 million and a tax benefit of $1.0 million for the three months ended March 31, 2013 and April 1, 2012, respectively and a tax provision of $2.5 million and a tax benefit of $11,000 for the nine months ended March 31, 2013 and April 1, 2012, respectively. The effective tax rate for the three and nine months ended March 31, 2013 was lower than`U.S. federal statutory rate primarily due to earnings in jurisdictions with tax rates lower than the federal statutory rate. The effective tax rate could increase in the future due to changes in the taxable income mix between various jurisdictions.

On January 2, 2013, The American Taxpayer Relief Act of 2012 was signed into law, which retroactively extended the Federal research and development tax credit from January 1, 2012 through December 31, 2013. As a result of the retroactive extension, the Company recorded a tax benefit of $0.2 million for qualifying amounts incurred in calendar year 2012 in the three months ended March 31, 2013.

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, Taiwan and China. The tax years 2004 to 2011 remain open in several jurisdictions.

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

This report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” ”estimate” or “assume” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth below and under the captions “Risk Factors” in addition to the other information set forth herein. We caution you that our business and financial performance are subject to substantial risks and uncertainties. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Report on Form10-Q.

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 accompanying Notes in this report, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, related financial information and Audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended July 1, 2012 filed with the Securities and Exchange Commission (“SEC”).

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, ensure bandwidth distribution connectivity 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 consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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.

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 the three and nine months ended March 31, 2013 compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended July 1, 2012 as filed with the SEC. 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 July 1, 2012.

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Results of Operations

Revenues

	Three Months Ended				Change		Percentage Change			Nine Months Ended				Change			Percentage Change
	(In thousands, except percentage)
	March 31, 2013		April 1, 2012							March 31, 2013		April 1, 2012
Revenues	$	44,124	$	43,978	$	146		0.3	%	$	134,107	$	130,683		$	3,424		2.6	%

The increase in revenues for the three months ended March 31, 2013 compared to the three months ended April 1, 2012 was primarily due to an increase in revenues in our transmission products as a result of the ramp up of new products. In addition, revenues from our conditioning and monitoring products and multiplexing products increased as a result of increased unit shipments for these products. Partially offsetting these increases was a decrease in revenues in amplifier products as a result of lower unit shipments in the three months ended March 31, 2013 compared to the three months ended April 1, 2012. Furthermore, the average selling prices for most of our products declined, which is a characteristic of the industry in which we operate.

The increase in revenues for the nine months ended March 31, 2013 compared to the nine months ended April 1, 2012 was primarily due to an increase in revenues in our transmission products. In addition, revenues from conditioning and monitoring products increased driven by the higher unit shipments. Partially offsetting these increases was a decrease in revenues in our switching and routing, optical amplification and multiplexer products as result of lower unit shipments.

Historically, a relatively small number of customers have accounted for a significant portion of our revenues. Our top five customers, although not necessarily the same five customers, together accounted for 54% and 44% of revenues for the three months ended March 31, 2013 and April 1, 2012, respectively, and 51% and 44% of revenues for the nine months ended March 31, 2013 and April 1, 2012, respectively.

For the three months ending June 30, 2013, we expect our revenues to be in the range of $43 million to $47 million.

Gross Profit

	Three Months Ended								Change			Percentage Change			Nine Months Ended								Change			Percentage Change
	(In thousands, except percentage)
	March 31, 2013				April 1, 2012										March 31, 2012				April 1, 2012
Gross profit		$	15,650			$	13,508			$	2,142		15.9	%		$	48,809			$	40,979			$	7,830		19.1	%
Gross profit margin			35.5	%			30.7	%									36.4	%			31.4	%

Gross profit increased for the three months ended March 31, 2013 compared to the three months ended April 1, 2012 primarily driven by lower material and direct labor costs. The gross profit for the three months ended March 31, 2013 and April 1, 2012 was positively impacted by sales of previously reserved inventory of $0.8 million and $1.1 million.

Gross profit increased for the nine months ended March 31, 2013 compared to the nine months ended April 1, 2012 primarily driven by higher revenues and lower material and direct labor costs, partially offset by higher manufacturing overhead expenses. The gross profit for the nine months ended March 31, 2013 and April 1, 2012 was positively impacted by sales of previously reserved inventory of $2.9 million and $3.1 million, respectively.

Our gross profit margin increased for the three months ended March 31, 2013 compared to the three months ended April 1, 2012 primarily due to lower material costs as a percentage of revenues and lower labor costs as a percentage of revenues.

Our gross profit margin increased for the nine months ended March 31, 2013 compared to the nine months ended April 1, 2012 primarily due to lower material costs as a percentage of revenues and lower labor costs as a percentage of revenues, partially offset by higher manufacturing overhead expenses as a percentage of revenues.

We expect our gross profit margin for the three months ending June 30, 2013 to be mostly flat compared to the three months ended March 31, 2013.

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Research and Development (R&D)

	Three Months Ended						Change			Percentage Change			Nine Months Ended						Change				Percentage Change
	(In thousands, except percentage)
	March 31, 2013			April 1, 2012									March 31, 2013			April 1, 2012
Research and development		$	6,281		$	5,665		$	616		10.9	%		$	17,542		$	15,688		$	1,854			11.8	%
Stock-based Compensation			366			359			7		1.9	%			1,003			1,063			(60	)		(5.6	%)
Total expenses		$	6,647		$	6,024		$	623		10.3	%		$	18,545		$	16,751		$	1,794			10.7	%

Research and development expenses increased $0.6 million and $1.8 million for the three and nine months ended March 31, 2013 compared to the three and nine months ended April 1, 2012. The increase was primarily due to higher salary expenses and other employee related compensation expenses associated with increases in headcount and employee compensation in China and our mobile interactive business. In addition, R&D material and consulting expenses increased primarily attributable to the increased new product development activities.

We expect our research and development expenses, excluding stock compensation expense, to be higher for the three months ending June 30, 2013 compared to the three months ended March 31, 2013 as a result of a continuous increase in headcount and R&D material spending related to new product development projects .

Sales and Marketing

	Three Months Ended						Change				Percentage Change			Nine Months Ended						Change			Percentage Change
	(In thousands, except percentage)
	March 31, 2013			April 1, 2012										March 31, 2012			April 1, 2012
Sales and marketing		$	3,590		$	2,813		$	777			27.6	%		$	10,150		$	7,909		$	2,241		28.3	%
Stock-based Compensation			416			506			(90	)		(17.8	% )			1,554			1,520			34		22.4	%
Total expenses		$	4,006		$	3,319		$	687			20.7	%		$	11,704		$	9,429		$	2,275		24.1	%

Sales and marketing expenses increased $0.7 million and $2.3 million for the three and nine months ended March 31, 2013 compared to the three and nine months ended April 1, 2012. The increase was primarily due to increases in salary and other employee related compensation expenses as a result of an increase in headcount associated with our mobile interactive business.

We expect our sales and marketing expenses, excluding stock compensation expense, to increase slightly for the three months ending June 30, 2013 compared to the three months ended March 31, 2013.

General and Administrative

	Three Months Ended						Change			Percentage Change			Nine Months Ended						Change				Percentage Change
	(In thousands, except percentage)
	March 31, 2013			April 1, 2012									March 31, 2013			April 1, 2012
General and administrative		$	2,174		$	1,890		$	284		15.0	%		$	6,437		$	7,527		$	(1,090	)		(14.5	%)
Stock-based Compensation			470			377			93		24.7	%			1,603			1,579			24			1.5	%
Total expenses		$	2,644		$	2,267		$	377		16.6	%		$	8,040		$	9,106		$	(1,066	)		(11.7	%)

General and administrative expenses increased $0.4 million for the three months ended March 31, 2013 compared to the three months ended April 1, 2012. The increase was primarily due to increases in outside consulting fees and salary and employee benefits.

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General and administrative expenses decreased $1.1 million for the nine months ended March 31, 2013 compared to the nine months ended April 1, 2012. The decrease was primarily due to lower legal expense as we settled the patent litigation with Finisar in December 2011, partially offset by an increase in salary and employee benefits.

We expect our general and administrative expenses, excluding stock compensation expense, to remain at same level for the three months ending June 30, 2013 compared to the three months ended March 31, 2013.

Legal Settlement Expense

	Three Months Ended				Change		Percentage Change			Nine Months Ended				Change				Percentage Change
	(In thousands, except percentage)
	March 31, 2013		April 1, 2012							March 31, 2013		April 1, 2012
Legal settlement	$	--	$	--	$	--		0	%	$	--	$	3,317		$	(3,317	)		(100	%)

On December 14, 2011, we and our subsidiary, Optical Communication Products, Inc. entered into a Settlement and Cross License Agreement with Finisar Corporation (“Finisar”), which agreement resolved and settled all pending litigation between the parties and their respective affiliates. As part of the settlement, we paid $4 million to Finisar for a fully paid-up license to the Finisar patents asserted against us in the various lawsuits, we granted a license to Finisar to our patents asserted against Finisar in the various lawsuits, and all legal proceedings initiated by each party in all jurisdictions were dismissed. We determined that the portion of the $4.0 million attributable to past damage was approximately $3.3 million and was included in the condensed consolidated statement of operations for the nine months ended April 1, 2012. The remaining amount of $0.7 million was recorded as a prepaid royalty, of which $0.1 million was included in prepaid and other current assets and $0.6 million was included in other assets on our condensed consolidated balance sheets as of April 1, 2012. Amortization expense has been charged to cost of sales over the period which we expect to benefit from the patents beginning in January 2012. During the three months and nine months ended March 31, 2013, $24,000 and $0.1 million were amortized as cost of sales. During the three months and nine months ended April 1, 2012, $24,000 was amortized as cost of sales. As of March 31, 2013, $0.1 million was included in prepaid and other current assets and $0.5 million was included in other assets on our condensed consolidated balance sheets.

Amortization of Acquired Intangible Assets

	Three Months Ended				Change		Percentage Change			Nine Months Ended				Change				Percentage Change
	(In thousands, except percentage)
	March 31, 2013		April 1, 2012							March 31, 2013		April 1, 2012
Amortization of intangible assets	$	91	$	91	$	--		0	%	$	273	$	573		$	(300	)		(52.4	%)

Amortization of intangible assets decreased $0.3 million for the nine months ended March 31, 2013 compared to the nine months ended April 1, 2012, primarily due to intangible assets from certain acquisitions becoming fully amortized.

Net (Gain) loss on Sale and Disposal of Property and Equipment

	Three Months Ended					Change			Percentage Change			Nine Months Ended						Change			Percentage Change
	(In thousands, except percentage)
	March 31, 2013			April 1, 2012								March 31, 2013			April 1, 2012
Net (gain) loss on sale and disposal of assets	$	(258	)	$	19	$	(277	)		1,457.9	%	$	(270	)	$	(366	)		$	96		(26.2	%)

Net (gain) loss on sale and disposal of assets increased $0.3 million for the three months ended March 31, 2013 compared to the three months ended April 1, 2012. The increase was primarily attributable to a gain recognized from the sale of a facility of $6.0 million in San Jose, California.

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Interest Income and other, Net

	Three Months Ended				Change		Percentage Change			Nine Months Ended				Change			Percentage Change
	(In thousands, except percentage)
	March 31, 2013		April 1, 2012							March 31, 2013		April 1, 2012
Interest income and other, net	$	201	$	93	$	108		116.1	%	$	879	$	408		$	471		115.4	%

Interest income and other, net increased $0.5 million for the nine months ended March 31, 2013 compared to the nine months ended April 1, 2012. The increase was primarily attributable to a gain recognized related to the release of an accrued liability associated with the OCP acquisition in fiscal 2007 and a gain recognized related to sales of marketable equity securities during the nine months ended March 31, 2013 while we had no such gains in the same period one year ago. In addition, the foreign currency gain increased during the nine months ended March 31, 2013 compared to the nine months ended April 1, 2012.

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. Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter we update our estimate of the annual effective tax rate, and if our estimated annual tax rate changes, we make a cumulative adjustment in that quarter.

We are subject to income tax in the U.S. as well as other tax jurisdictions in which we conduct business. Earnings from non-U.S. activities are subject to local country income tax. We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries as such earnings are to be reinvested indefinitely. We recorded a tax provision of $0.7 million and a tax benefit of $1.0 million for the three months ended March 31, 2013 and April 1, 2012, respectively and a tax provision of $2.5 million and a tax benefit of $11,000 for the nine months ended March 31, 2013 and April 1, 2012, respectively. The increase in provision for income taxes for the three months ended March 31, 2013 compared to the three months ended April 1, 2012 was primarily due to changes in geographic distribution of profits and updates of our estimate of the annual effective tax rates. The increase in provision for income taxes for the nine months ended March 31, 2013 compared to the same periods last year, was primarily due to an increase in income before taxes and changes in geographic distribution of profits. The effective tax rate was less than the statutory rate primarily due to earnings in jurisdictions with tax rates lower than the US federal tax rate.

Although we files U.S. federal, various state, and foreign tax returns, our only major tax jurisdictions are the United States, California, Taiwan and China. The tax years 2004 to 2011 remain open in several jurisdictions.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through issuances of equity. As of March 31, 2013, we had cash, cash equivalents and short-term and long-term investments of $176.5 million and working capital of $214.9 million.

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We believe that our current cash, cash equivalent and short-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.

Nine Months Ended March 31, 2013

Our operating activities provided cash of $17.2 million in the nine months ended March 31, 2013, an increase of $0.4 million, compared to the nine months ended April 1, 2012. The net cash provided by operating activities in the nine months ended March 31, 2013 was primarily attributable to a net income of $8.9 million adjusted by non-cash charges of $10.2 million and changes in net working capital of $1.9 million. Non-cash charges in the nine months ended March 31, 2013 included $5.8 million in depreciation and amortization and $4.4 million in stock-based compensation expense. Net cash used by working capital related items was primarily driven by an increase in accounts receivable of $7.6 million, partially offset by an increase in accrued liability and others of $4.3 million and an increase in accounts payable of $1.5 million.

The increase in accounts receivable in the nine months ended March 31, 2013 was primarily due to higher revenue in the first nine months of fiscal 2013 compared to fiscal 2012 and timing of shipments. In addition, the increase in shipments to customers who have longer payment terms also contributed to the accounts receivable increase. 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, if customers delayed their payments, or if we offered extended payment terms to our customers, both of which are more likely to occur during challenging economic times when our customers may have difficulty gaining access to sufficient credit on a timely basis.

The increase in accrued liabilities and other liabilities in the nine months ended March 31, 2013 was primarily due to increases in accrued bonus, salary payable and business taxes payable in China and a higher income tax payable as a result of higher net income before tax in the first nine months of fiscal 2013.

The increase in accounts payable was due to a timing of payments to our vendors and an increase in our inventory purchases.

Our investing activities used cash of $25.2 million in the nine months ended March 31, 2013 primarily due to purchases of investments of $105.3 million, partially offset by cash proceeds from sales and maturities of investments of $85.4 million. In addition, we used $10.2 million to purchase property and equipments, partially offset by cash proceeds from the sale of a facility of $6.0 million in San Jose, California. We also paid $1.1 million for a small business acquisition in the nine months ended March 31, 2013. We expect net capital expenditures to be approximately $8 million for fiscal 2013. This estimate includes $4.2 million net capital expenditures in the nine months ended March 31, 2013.

Our financing activities used cash of $7.1 million in the nine months ended March 31, 2013 due to $8.3 million of cash spent on the repurchases of our common stock and $1.0 million in tax withholding payments related to net share settlements of restricted stock units, partially offset by $2.2 million cash proceeds from the exercise of employee stock options and the issuance of common stock under our employee stock purchase plan.

Nine Months Ended April 1, 2012

Our operating activities provided cash of $16.7 million for the nine months ended April 1, 2012, primarily attributable to a net income of $2.6 million adjusted by non-cash charges of $4.6 million in depreciation expenses, $4.5 million in stock-based compensation expenses, $1.2 million in amortization of intangible assets and $0.6 million in deferred income tax. Net cash provided by working capital related items was $3.5 million for the nine months ended April 1, 2012.

For the nine months ended April 1, 2012, the change in working capital was primarily driven by a decrease in inventories of $5.5 million, an increase in accrued and other liability of $1.2 million partially offset by an increase in prepaid and other assets of $2.4 million and an increase in accounts receivable of $1.0 million.

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The decrease in inventory in the nine months ended April 1, 2012 was primarily attributable to a decrease in revenues and our efforts to align our inventory levels to meet current and future demand.

The increase in accrued and other liabilities in the nine months ended April 1, 2012 was primarily due to increased salary and other employee related benefit accrual, higher accrued R&D bonus, partially offset by lower legal and other professional service expense related accruals.

The increase in prepaid and other assets in the nine months ended April 1, 2012 was primarily due to increases in balance of bankers’ acceptance notes, employee benefits related receivable and a $0.6 million prepaid license fees resulting from the litigation settlement with Finisar.

The increase in accounts receivable in the nine months ended April 1, 2012 was primarily due to the longer payment terms extended to our customers.

For the nine months ended April 1, 2012, our investing activities used cash of $3.3 million due to purchase of property and equipment of $10.8 million and purchase of available for sale and held to maturity investments of $164.3 million, partially offset by sales and maturities of available for sale investments of $171.6 million and proceeds from sales of equipment of $0.4 million, respectively. In addition, we used $0.2 million to purchase non-marketable equity securities in the nine months ended April 1, 2012.

For the nine months ended April 1, 2012, our financing activities used cash of $19.8 million due to $19.9 million cash used to repurchase our common stock and $1.2 million in tax withholding payments related to net share settlements of restricted stock units partially offset by $1.3 million cash proceeds from the exercise of employee stock options and the issuance of stock under our employee stock purchase plan.

Off-Balance Sheet Arrangements

As of March 31, 2013, we did not have any off-balance sheet financing arrangements and have never established any special purpose entities as defined under SEC Regulation S-K Item 303(a)(4)(ii).

Recent Accounting Pronouncement

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated condensed financial statements, please see “Note 3 - Recent Accounting Pronouncement” in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q.

Contractual Obligations

Our contractual obligations as of March 31, 2013 is summarized below:

			Contractual Obligations Due by Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Purchase obligations	$	14,758	$	14,408	$	350	$	--	$	--
Operating leases		259		196		63		--		--
Capital expenditure		1,946		1,873		73		--		--
Total	$	16,963	$	16,477	$	486	$	--	$	--

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risk related to fluctuations in interest rates, in foreign currency exchange rates and marketable and non-marketable equity security prices 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 primarily in highly liquid debt instruments of commercial paper, money market funds, government and non-government debt securities and corporate bonds. We invest our excess cash in short-term and long term investments to utilize higher yields generated by these investments. The majority of these investments pay a fixed rate of interest. Investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. We do not hold any instruments for trading purposes. As of March 31, 2013 and April 1, 2012, the gross unrealized losses on our investments classified as available-for-sale and held-to-maturity securities were immaterial. We have the intent and the ability to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value up to (or beyond) the initial cost of the investments. 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 debt securities as of March 31, 2013 and April 1, 2012 were temporary in nature. However, liquidating investments before maturity could have a material impact on our interest income. Declines in interest rates could have a material impact on interest income for our investment portfolio.

The following table summarizes our investment securities:

	Carrying			Average Rate			Carrying			Average Rate
	Value at			of Return at			Value at			of Return at
	March 31,			March 31,			July 1,			July 1,
(in thousands, except percentages)	2013			2013			2012			2012
				(Annualized)						(Annualized)
Investment Securities:
Cash equivalents - variable rate		$	27,448		0.05	%		$	23,856		0.07	%
Cash equivalents - fixed rate			5,517		0.05	%			16,979		0.14	%
Short-term investments - fixed rate			98,270		0.32	%			71,855		0.31	%
Long-term investments - fixed rate			3,054		0.41	%			9,606		0.57	%
Total		$	134,289					$	122,296

Foreign Currency Exchange Rate Exposure

We operate in the United States, primarily manufacture in China, and the majority of our sales to date have been made in U.S. dollars. The majority of expenses from our China operations are incurred in the Chinese Renminbi (“RMB”). As a result, currency fluctuations between the U.S. dollar and the RMB could cause foreign currency transaction gains or losses that we would recognize in the period incurred. A 10% fluctuation in the dollar at March 31, 2013 would have an immaterial impact on our net dollar position in outstanding trade receivables and payables.

We use the U.S. dollar as the reporting currency for our consolidated financial statements. Any significant revaluation of the RMB may materially and adversely affect our results of operations upon translation of our Chinese subsidiaries’ financial statements into U.S. dollars. We generate a significant amount of our revenue in RMB and the majority of our labor and manufacturing overhead expenses are in RMB. Additionally, a significant portion of our operating expenses are in RMB. Therefore, a fluctuation in RMB against the U.S. dollar could impact our gross profit, gross profit margin and operating expenses upon translation to U.S. dollars. A 10% appreciation or depreciation in RMB against the U.S. dollar would have an immaterial impact on our results of operations for the three and nine months ended March 31, 2013.

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We expect our international revenues 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.

Equity price risk

We are also exposed to equity price risk inherent in our portfolio of publicly traded equity securities, which had an estimated fair value of $9.1 million at March 31, 2013. We monitor these investments for impairment and make appropriate reductions in carrying value when an impairment is deemed to be other-than-temporary. We do not purchase our equity securities with the intent to use them for speculative purposes. The hypothetical adverse changes of 10%, 20% and 30% in the stock prices of our publicly traded equity securities as of March 31, 2013 are as follows (in thousands):

		Valuation of Securities
		Given An x% Decrease
		in Each Stock’s Price
	Fair Value		(30%)		(20%)		(10%)
As of March 31, 2013
Publicly traded equity securities	$9,052	$	6,336	$	7,242	$	8,147

The privately held company in which we invested is in the startup or development stage. This investment is inherently risky because the market for the technologies or products this company is developing is in the early stages and may never materialize. We could lose our entire investment in this company. Our evaluation of the investment in privately held company is based on the general market conditions, the investee’s financial condition, near-term prospects, market comparables and subsequent rounds of financing. The valuation also takes into account the investee’s capital structure, liquidation preferences for its capital and other economic variables. As of March 31, 2013 and July 1, 2012, the aggregate cost of investments in privately-held companies was $0.6 million, and was included in other assets on our condensed consolidated balance sheets.

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.

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PART II. OTHER INFORMATION

ITEM 1- LEGAL PROCEEDINGS

None

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 July 1, 2012.

We are devoting substantial resources to our Mobile Interactive business venture, which is a new and unproven business, and which might not be successful.

We are increasing our expenditures in our new business area referred to as Mobile Interactive or Internet of Things. The first product line from this venture is a remote interactive security and monitoring system for home and business. The process of developing a new business line involves considerable risk and uncertainty. As such, we can make no assurances that any of the products we launch from this business will be commercially successful. The risks we face in making this new business a success include the following:

·	the risk that the products and services we offer fail to perform adequately, due to software bugs, networking issues, faulty installation by customers or other problems;

·	the risk that we are misjudging the market opportunity for these new products and services;

·	the risk that we will not be successful in developing an adequate sales channel for these new products and services;

·	the risk that competition in the target markets is more intense than we anticipate; and

·	the risk that our supply chain for components is unable to meet potential demand, thus limiting potential sales.

If we fail to adequately address any of these risks, our new Mobile Interactive venture may fail. As part of our ramp-up for our upcoming product launch from this venture, we are purchasing substantial amounts of inventory. If we are not successful in our product launch, we may need to write off some or this entire inventory, which would result in an immediate and substantial reduction to our net income for the period in which we record the write-off. We are also materially increasing our research and development and sales and marketing expenses for this new business venture, which may not result in corresponding new revenue, which would harm our operating results.

We depend on third parties to supply some of our key materials and components.

We depend on third parties to supply the materials and components we use to manufacture our products. A number of our third-party suppliers are currently experiencing capacity issues, and we are facing shortages and/or delays in the availability and delivery of materials and components. Difficulties in obtaining materials and components may delay or limit our product shipments, which could result in lost orders and/or our increased lead-times for delivering products to our customers. We obtain some of our key materials and components from a single or limited number of suppliers and generally do not have long-term supply contracts with them. We could also experience discontinuation of key components, price increases and late deliveries from our suppliers. In addition, some of our suppliers are competitors who may choose not to supply components to us in the future.

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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Repurchase of Common Stock

On October 27, 2011, we announced that its Board of Directors approved a new program to repurchase up to $40 million of its outstanding common shares. In fiscal 2012, we repurchased 0.6 million shares at an average price of $14.30 per share for a total purchase price of $8.4 million. There were no repurchases made during the three months ended March 31, 2013 under this program. During the nine months ended March 31, 2013, we repurchased 0.6 million shares at an average price of $ $14.35 per share for a total purchase price of $7.9 million. As of March 31, 2013, approximately $23.7 million was available for future purchase under this share repurchase program. Repurchases under the program will be made in open market or privately negotiated transactions in compliance with the Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements and other factors.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

None.

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS

Exhibit Index

See “Exhibit Index” appearing at the end of this Quarterly Report.

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SIGNATURE

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.
Date: May 10, 2013		/S/ Shirley Yin Shirley Yin Chief Financial Officer (Principal Financial Officer)

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Exhibit Index

Exhibit No.		Description
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.
101.INS	**	XBRL Instance Document.
101.SCH	**	XBRL Taxonomy Extension Schema Document.
101.CAL	**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	**	XBRL Taxonomy Extension Presentation Linkbase Document.

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.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.