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OPLINK REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF FISCAL 2007

Revenues Increase 16% Sequentially and 81% Over the Prior Year; Net Income Continues to Improve

FREMONT, Calif., Jan 25, 2007 (BUSINESS WIRE) -- Oplink Communications, Inc. (Nasdaq: OPLK), a leading photonic components, intelligent modules, and subsystems solution provider, today reported financial results for the second quarter of fiscal 2007, ended December 31, 2006.

For the second quarter of fiscal 2007, Oplink reported revenues of $23.0 million, an increase of 16% over the prior quarter and 81% over the prior year. Net income for the second quarter increased to $3.1 million, or $0.14 per diluted share, in accordance with accounting principles generally accepted in the United States (GAAP). This compares to a GAAP net loss of $594,000, or ($0.03) per share, reported in the prior year and GAAP net income of $2.8 million, or $0.12 per diluted share, reported in the prior quarter.

Non-GAAP net income for the second quarter of fiscal 2007 was $4.5 million, or $0.20 per diluted share, which excludes $1.1 million in stock compensation expense and a one-time charge of $268,000 for compensation related to the modification of a stock option exercise price. This compares to non-GAAP net income of $1.2 million, or $0.05 per diluted share, which excludes $1.1 million for in-process research and development expense and $643,000 in stock compensation expense, reported in the prior year. This also compares to non-GAAP net income of $3.8 million, or $0.17 per diluted share, which excludes $1.1 million in stock compensation expense, reported in the prior quarter.

Oplink added $5.7 million to its cash and cash equivalents and short and long-term investment balance and closed the second quarter with $197.3 million.

"We continue to be very pleased with our revenue growth and improving operating performance, which are the result of our increasing market share and broadening customer relationships," commented Joe Liu, president and CEO of Oplink. "Global market demand for Oplink's cost-competitive components and subsystems remained solid in the quarter, with notably good activity in North America. We continue to expand our relationships to include more systems-level manufacturing services.

"Looking ahead, we expect to gain momentum as we increase our 2.5G and 10G CWDM/DWDM systems ODM total solution contribution to our customers. Our key customers have continued winning major contracts and we are confident in our design-in customer relationships and pleased with the expected level of order activity for the near future."

Business Outlook

The Company anticipates revenue for the third quarter to increase approximately 12% sequentially. In addition, Oplink expects to generate earnings per diluted share of approximately $0.15 to $0.16 on a GAAP basis. On a non-GAAP basis, excluding stock compensation expense and non-recurring charges, if any, the Company expects earnings per diluted share of approximately $0.20 to $0.21.

Oplink presents each of the fiscal quarters and fiscal year end as if it ended on the last day of each calendar quarter or twelve-month period, respectively. Oplink operates and reports using interim fiscal quarters and twelve-month periods, which end on the Sunday closest to the end of each calendar quarter and twelve-month period. Historical per share data appearing above have been appropriately adjusted to reflect the one-for-seven (1-for-7) reverse stock split effected on November 9, 2005.

Conference Call Information

The Company will host a corresponding conference call and live webcast at 2:00 p.m. Pacific Time on January 25, 2007. To access the conference call, dial (800) 240-7305 for the US or Canada and (303) 262-2143 for international callers. The webcast will be available live on the Investor Relations section of the Company's corporate website at http://investor.oplink.com and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 4:00 p.m. Pacific Time on January 25, 2007 until 11:59 p.m. Pacific Time on January 28, 2007 by dialing (800) 405-2236 ((303) 590-3000 for callers outside the U.S. and Canada) and entering pass code 11081073.

Non-GAAP Financial Measures

In this earnings release and during our earnings conference call and webcast as described above, we use or plan to discuss certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A reconciliation between non-GAAP and GAAP measures can be found in the accompanying tables. We believe that, while these non-GAAP measures are not a substitute for GAAP results, they provide a basis for evaluating the Company's cash requirements for ongoing operating activities. These non-GAAP measures have been reconciled to the nearest GAAP measure as required under Securities and Exchange Commission rules.

About Oplink

Incorporated in 1995, Oplink is a leading provider of design, integration and optical manufacturing solutions (OMS) for optical networking components and subsystems. The Company offers advanced and cost-effective optical-electrical components and subsystem manufacturing through its facilities in Zhuhai and Shanghai, China. In addition, Oplink maintains a full complement of optical-centric front-end design, application, and customer service functions at its headquarters in Fremont, California. The Company's customers include telecommunications, data communications and cable TV equipment manufacturers around the globe. Oplink is committed to providing fully customized, photonic foundry services incorporating its subsystems manufacturing capabilities. To learn more about Oplink, visit its web site at: http://www.oplink.com/.

Cautionary Statement

This news release contains forward-looking statements, including without limitation the guidance given for anticipated revenue and earnings per share for the third quarter of fiscal 2007 and statements regarding our expectations of continued momentum as carriers expand their infrastructure investments and our customers are awarded contracts, our customer relationships and the expected level of order activity in the near term, that involve risks and uncertainties, which may cause results to differ substantially from expectations. These risks include, but are not limited to, the potential widespread downturn in the overall economy in the United States and other parts of the world and the telecommunications industry, including reductions in telecommunication spending activity, possible reductions in customer orders, challenges to successfully integrate and realize anticipated benefits of acquisitions of businesses or technologies, Oplink's reliance upon third parties to supply components and materials for its products, intense competition in Oplink's target markets and potential pricing pressure that may arise from changing supply-demand conditions in the industry, the need to retain and motivate key personnel, and other risks detailed from time to time in Oplink's periodic reports filed with the Securities and Exchange Commission, including the Company's latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

The foregoing information represents Oplink's outlook only as of the date of this press release, and Oplink undertakes no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.


======================================================================
OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
======================================================================

                                             December 31,   June 30,
                                             ------------ ------------
                                                2006         2006
                                             (Unaudited)      (1)
                                             ------------ ------------
ASSETS
Current assets:
 Cash and cash equivalents                     $  17,529    $   7,856
 Short-term investments                          134,722      117,395
 Accounts receivable, net                         19,422       13,369
 Inventories, net                                 11,446        7,953
 Prepaid expenses and other current assets         3,669        2,435
                                             ------------ ------------

    Total current assets                         186,788      149,008

Long-term investments                             45,000       63,029
Property, plant and equipment, net                22,811       23,443
Goodwill and intangible assets, net                1,509        1,694
Other assets                                         172          781
                                             ------------ ------------

    Total assets                               $ 256,280    $ 237,955
                                             ------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                              $   6,868    $   4,516
 Accrued liabilities and other current
  liabilities                                      6,058        6,216
                                             ------------ ------------

    Total current liabilities                     12,926       10,732

Non-current liabilities                               79           83
                                             ------------ ------------

    Total liabilities                             13,005       10,815
                                             ------------ ------------

Stockholders' equity                             243,275      227,140
                                             ------------ ------------

    Total liabilities and stockholders'
     equity                                    $ 256,280    $ 237,955
                                             ------------ ------------

 (1) The June 30, 2006 condensed consolidated balance sheet has been
      derived from audited financial statements at that date.


======================================================================
OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
======================================================================
                             Three Months Ended      Six Months Ended
                         --------------------------- -----------------
                         December September December December December
                            31,      30,       31,      31,      31,
                          2006      2006     2005     2006     2005
                         --------------------------- -----------------
                           (Un-     (Un-      (Un-     (Un-     (Un-
                         audited) audited)  audited) audited) audited)

Revenues                 $22,953   $19,714  $12,651  $42,667  $23,334
                         -------- --------- -------- -------- --------

Cost of revenues:

 Cost of revenues         16,497    13,491    9,164   29,988   17,222

 Stock compensation
  expense                     75        65       66      140      121
                         -------- --------- -------- -------- --------

   Total cost of revenues 16,572    13,556    9,230   30,128   17,343
                         -------- --------- -------- -------- --------

Gross profit               6,381     6,158    3,421   12,539    5,991
                         -------- --------- -------- -------- --------

Operating expenses:

 Research and development  1,429     1,571    1,338    3,000    2,826

 Sales and marketing       1,280     1,382      886    2,662    1,771

 General and
  administrative           1,772     1,499    1,701    3,271    3,337

 In-process research and
  development                  -         -    1,120        -    1,120

 Stock compensation
  expense                  1,031     1,009      577    2,040    1,119

 Amortization of
  intangible and other
  assets                      35        35       18       70       18
                         -------- --------- -------- -------- --------

   Total operating
    expenses               5,547     5,496    5,640   11,043   10,191
                         -------- --------- -------- -------- --------

Income (loss) from
 operations                  834       662   (2,219)   1,496   (4,200)

Interest and other
 income, net               2,330     2,175    1,625    4,505    3,166
                         -------- --------- -------- -------- --------

Income (loss) before
 provision for income
 taxes                     3,164     2,837     (594)   6,001   (1,034)

Provision for income
 taxes                        33        82        -      115        -
                         -------- --------- -------- -------- --------

Net income (loss)         $3,131    $2,755    $(594)  $5,886  $(1,034)
                         -------- --------- -------- -------- --------

Net income (loss) per
 share:

 Basic                     $0.14     $0.13   $(0.03)   $0.27   $(0.05)
                         -------- --------- -------- -------- --------

 Diluted                   $0.14     $0.12   $(0.03)   $0.26   $(0.05)
                         -------- --------- -------- -------- --------

Shares used in per share
 calculation:

 Basic                    22,000    21,557   21,318   21,778   21,296
                         -------- --------- -------- -------- --------

 Diluted                  23,022    22,552   21,318   22,810   21,296
                         -------- --------- -------- -------- --------


RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME

                             Three Months Ended      Six Months Ended
                         --------------------------- -----------------
                         December September December December December
                            31,      30,       31,      31,      31,
                          2006      2006     2005     2006     2005
                         --------------------------- -----------------

Net income (loss), GAAP   $3,131    $2,755    $(594)  $5,886  $(1,034)

Adjustments to measure
 non-GAAP:

 Compensation related to
  stock option
  modification               268         -        -      268        -

 In-process research and
  development                  -         -    1,120        -    1,120

 Stock compensation
  expense                  1,106     1,074      643    2,180    1,240

                         -------- --------- -------- -------- --------

Non-GAAP net income       $4,505    $3,829   $1,169   $8,334   $1,326
                         -------- --------- -------- -------- --------

Net income per share,
 non-GAAP:

 Basic                     $0.20     $0.18    $0.05    $0.38    $0.06
                         -------- --------- -------- -------- --------

 Diluted                   $0.20     $0.17    $0.05    $0.37    $0.06
                         -------- --------- -------- -------- --------

Shares used in per share
 calculation:

 Basic                    22,000    21,557   21,318   21,778   21,296
                         -------- --------- -------- -------- --------

 Diluted                  23,022    22,552   21,974   22,810   21,980
                         -------- --------- -------- -------- --------


======================================================================
OPLINK COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
======================================================================
                                                    Six Months Ended
                                                   -------------------
                                                      December 31,
                                                    2006       2005
                                                   -------------------
                                                       (Unaudited)
Cash flows from operating activities:
 Net income (loss)                                 $ 5,886    $(1,034)
 Adjustments to reconcile net income (loss) to
  net cash provided by operating activities:
   Depreciation and amortization                     2,550      3,783
   Stock compensation expense                        2,180      1,240
   In-process research and development                   -      1,120
   Other                                                92         94
   Change in assets and liabilities                 (7,665)    (3,866)
                                                   --------   --------
     Net cash provided by operating activities       3,043      1,337
                                                   --------   --------

Cash flows from investing activities:
 Net maturities of investments                         583     11,630
 Net purchases of property and equipment            (1,225)      (604)
 Acquisition of business, net of cash acquired           -     (4,365)
                                                   --------   --------
     Net cash (used in) provided by investing
      activities                                      (642)     6,661
                                                   --------   --------

Cash flows from financing activities:
 Proceeds from issuance of common stock              7,257        648
 Repurchase of common stock                              -        (11)
                                                   --------   --------
     Net cash provided by financing activities       7,257        637
                                                   --------   --------

Effect of exchange rate changes on cash                 15         40

Net increase in cash and cash equivalents            9,673      8,675

Cash and cash equivalents, beginning of period       7,856     29,710
                                                   --------   --------

Cash and cash equivalents, end of period           $17,529    $38,385
                                                   --------   --------

SOURCE: Oplink Communications, Inc.

The Blueshirt Group for Oplink
Erica Abrams, 415-217-5864 (Investor Relations)
erica@blueshirtgroup.com

Copyright Business Wire 2007

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