UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 28, 2009

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

For the transition period from                      to                     

OCLARO, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		20-1303994 (I.R.S. Employer Identification Number)

2584 Junction Avenue, San Jose, California 95134
(Address of principal executive offices, zip code)

(408) 383-1400
(Registrant’s telephone number, including area code)

Bookham, Inc.
(Former name, former address and former fiscal year, if changed since last report)

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

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No o

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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o     No þ

Number of shares of common stock outstanding as of April 28, 2009: 186,020,922

 

 

OCLARO, INC.

TABLE OF CONTENTS

				Page
PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited):
		Condensed Consolidated Balance Sheets as of March 28, 2009 and June 28, 2008		3
		Condensed Consolidated Statements of Operations for the three and nine months ended March 28, 2009 and March 29, 2008		4
		Condensed Consolidated Statements of Cash Flows for the nine months ended March 28, 2009 and March 29, 2008		5
		Notes to Condensed Consolidated Financial Statements		6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		34
Item 4.		Controls and Procedures		35
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings		35
Item 1A.		Risk Factors		38
Item 2.		Submission of Matters to a Vote of Security Holders		54
Item 5.		Other Information		54
Item 6.		Exhibits		54
Signatures				55
EX-4.1
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

OCLARO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value amount)

		March 28, 2009				June 28, 2008
ASSETS
Current assets:
Cash and cash equivalents		$	31,831			$	32,863
Short-term investments			5,936				17,845
Restricted cash			514				1,154
Accounts receivable, net			35,542				45,665
Inventories			56,089				59,612
Prepaid expenses and other current assets			3,436				6,007
Total current assets			133,348				163,146
Goodwill			—				7,881
Other intangible assets, net			1,789				7,829
Property and equipment, net			31,029				32,962
Other non-current assets			1,220				272
Total assets		$	167,386			$	212,090
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	14,577			$	21,501
Accrued expenses and other liabilities			20,842				20,789
Total current liabilities			35,419				42,290
Other long-term liabilities			3,028				1,336
Deferred gain on sale-leaseback			13,628				19,402
Total liabilities			52,075				63,028
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock: 5,000 shares authorized; none issued and outstanding			—				—
Common stock:
$0.01 par value per share; 175,000 shares authorized; 100,881 shares issued and outstanding at March 28, 2009 100,740 shares issued and outstanding at June 28, 2008			1,009				1,007
Additional paid-in capital			1,166,735				1,163,598
Accumulated other comprehensive income			24,695				44,036
Accumulated deficit			(1,077,128	)			(1,059,579	)
Total stockholders’ equity			115,311				149,062
Total liabilities and stockholders’ equity		$	167,386			$	212,090

The accompanying notes form an integral part of these condensed consolidated financial statements.

OCLARO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)

		Three Months Ended								Nine Months Ended
		March 28,				March 29,				March 28,				March 29,
		2009				2008				2009				2008
Revenues		$	46,992			$	59,703			$	163,727			$	172,941
Cost of revenues			36,103				46,320				127,504				133,787
Gross margin			10,889				13,383				36,223				39,154
Operating expenses:
Research and development			6,215				7,570				21,047				24,430
Selling, general and administrative			9,246				11,711				28,904				35,199
Amortization of intangible assets			264				667				1,171				4,017
Restructuring and severance charges			60				672				2,028				2,451
Legal settlements			3,705				54				3,829				931
Impairment of goodwill and other intangible assets			4,034				—				11,915				—
Gain on sale of property and equipment			(16	)			(596	)			(8	)			(2,312	)
Total operating expenses			23,508				20,078				68,886				64,716
Operating loss			(12,619	)			(6,695	)			(32,663	)			(25,562	)
Other income (expense):
Other expense			(5	)			—				(700	)			—
Interest income			70				414				527				1,160
Interest expense			(109	)			(97	)			(433	)			(484	)
Gain (loss) on foreign exchange			(599	)			995				15,763				3,315
Total other income (expense)			(643	)			1,312				15,157				3,991
Loss before income taxes			(13,262	)			(5,383	)			(17,506	)			(21,571	)
Income tax provision (benefit)			19				17				43				(30	)
Net loss		$	(13,281	)		$	(5,400	)		$	(17,549	)		$	(21,541	)
Net loss per share:
Basic and diluted		$	(0.13	)		$	(0.05	)		$	(0.18	)		$	(0.24	)
Shares used in computing net loss per share:
Basic and diluted			100,420				99,316				100,280				90,955

The accompanying notes form an integral part of these condensed consolidated financial statements.

OCLARO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

		Nine Months Ended
		March 28, 2009				March 29, 2008
Cash flows from operating activities:
Net loss		$	(17,549	)		$	(21,541	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			9,833				13,249
Stock-based compensation			3,303				5,643
Amortization of deferred gain on sale-leaseback			(698	)			(801	)
Impairment of short-term investments			706				—
Impairment of goodwill and other intangible assets			11,915				—
Accretion on short-term investments			(127	)			(37	)
Gain on sale of property and equipment			(8	)			(2,312	)
Changes in operating assets and liabilities:
Accounts receivable, net			(1,181	)			(11,229	)
Inventories			1,103				(1,407	)
Prepaid expenses and other current assets			2,010				5,285
Other assets			(1,036	)			(44	)
Accounts payable			(5,977	)			(1,663	)
Accrued expenses and other liabilities			1,849				(3,736	)
Net cash provided by (used in) operating activities			4,143				(18,593	)
Cash flows from investing activities:
Purchases of property and equipment			(8,475	)			(7,459	)
Proceeds from sales of property and equipment			32				2,713
Purchases of available-for-sale investments			(6,945	)			(14,029	)
Sales and maturities of available-for-sale investments			18,300				—
Transfer from restricted cash			566				4,875
Net cash provided by (used in) investing activities			3,478				(13,900	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net			—				40,787
Proceeds from bank loan payable			—				2,501
Repayment of bank loan payable			—				(4,313	)
Repayment of other loans			(46	)			(28	)
Amount paid to repurchase shares from a former officer			—				(2	)
Net cash provided by (used in) financing activities			(46	)			38,945
Effect of exchange rate on cash and cash equivalents			(8,607	)			(3,720	)
Net increase (decrease) in cash and cash equivalents			(1,032	)			2,732
Cash and cash equivalents at beginning of period			32,863				36,631
Cash and cash equivalents at end of period		$	31,831			$	39,363

The accompanying notes form an integral part of these condensed consolidated financial statements.

OCLARO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Nature of Business

Oclaro, Inc., a Delaware corporation (“Oclaro” or the “Company”), designs, manufactures and markets optical components, modules and subsystems that generate, detect, amplify, combine and separate light signals principally for use in high-performance fiber optics communications networks. Due to its advantages of higher capacity and transmission speed, optical transmission has become the predominant technology for large-scale communications networks. For the three and nine months ended March 28, 2009, the Company’s primary operating segment is its telecommunications (“telecom”) segment, which addresses this optical communications market; and the Company’s remaining product lines, which address certain other optics and photonics markets, such as material processing, inspection and instrumentation, and research and development, and which leverage the resources, infrastructure and expertise of its telecom segment, comprise its non-telecom segment. References herein to the “Company” mean Bookham, Inc. and its subsidiaries’ consolidated business activities prior to April 27, 2009 and Oclaro, Inc. and its subsidiaries’ consolidated business activities since April 27, 2009, the date Bookham. Inc. effected the merger with Avanex Corporation.

On April 27, 2009, Bookham, Inc. (“Bookham”) and Avanex Corporation (“Avanex”) completed a merger (the “Merger”) of Avanex with and into a subsidiary of Bookham with Avanex being the surviving corporation as a wholly-owned subsidiary of Bookham. In a separate transaction that also occurred on April 27, 2009, following the closing of the merger of Avanex into Bookham, Bookham changed its name to Oclaro, Inc. This name change was effected pursuant to Section 253 of the General Corporation Law of the State of Delaware by the merger of a wholly-owned subsidiary of Bookham, Inc. (the “Subsidiary”) into Bookham, Inc. Bookham, Inc. was the surviving corporation in this merger with the Subsidiary and, in connection with the merger, amended its Restated Certificate of Incorporation to change its name to Oclaro, Inc. pursuant to a Certificate of Ownership and Merger filed on April 27, 2009 with the Secretary of State of the State of Delaware.

The Company’s condensed consolidated balance sheet as of March 28, 2009 and statements of operations and statements of cash flows for the three and nine months ended March 28, 2009 do not include any assets or liabilities assumed in the Merger or any results of operations from Avanex.

Note 2. Basis of Preparation

The accompanying unaudited condensed consolidated financial statements as of March 28, 2009 and for the three and nine months ended March 28, 2009 and March 29, 2008 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 10 of Regulation S-X, and include the accounts of the Company and all of its subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company’s consolidated financial position and operations have been included. The consolidated results of operations for the three and nine months ended March 28, 2009 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending June 27, 2009.

The condensed consolidated balance sheet as of June 28, 2008 has been derived from the audited consolidated financial statements as of such date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2008 (the “2008 Form 10-K”).

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently actual results could differ materially from those estimates and assumptions. Descriptions of these estimates and assumptions are included in the 2008 Form 10-K.

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. These reclassifications had no effect on the consolidated operating results and did not result in a change in cash and cash equivalents, as previously reported by the Company.

Revenue Recognition for Financially Distressed Customers

The Company’s revenue recognition policy, which is more fully described in its 2008 Form 10-K, follows Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin, (“SAB”), No. 104, Revenue Recognition in Financial Statements. Specifically, the Company recognizes product revenue when (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped and title has transferred, (iii) collectability is reasonably assured, (iv) fees are fixed or determinable and (v) there are no uncertainties with respect to customer acceptance.

In the second quarter of fiscal 2009 the Company issued billings of (i) $4.1 million for products that were shipped to Nortel Networks Corporation (“Nortel”), but for which payment was not received prior to its bankruptcy filing on January 14, 2009, and (ii) $1.3 million for products that were shipped to a contract manufacturer for which payment might not have been received due to the Nortel bankruptcy filing. As a result, an aggregate of $5.4 million in revenue was deferred, and therefore was not recognized as revenues or accounts receivable in the consolidated financial statements at the time of such billings, as the Company determined that such amounts were not reasonably assured of collectability in accordance with its revenue recognition policy. In the third quarter of fiscal 2009, the Company recognized revenues of $0.6 million from Nortel and $1.3 million from the related contract manufacturer upon receipt of payment for billings which had been previously deferred. The Company recognizes revenues from financially distressed customers when collectability becomes reasonably assured, assuming all other criteria for revenue recognition have been met.

As of March 28, 2009, the Company had contractual receivables from Nortel totaling $3.5 million which are not reflected in the accompanying condensed consolidated balance sheet. To the extent that collectability becomes reasonably assured for these deferred billings in future periods, our future results will benefit from the recognition of these amounts.

Note 3. Fair Value

In the Company’s first quarter of fiscal 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements, for all financial assets and financial liabilities and for all non-financial assets and non-financial liabilities recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets, primarily marketable securities, and liabilities at fair value.

The Company’s cash equivalents and short-term investment instruments are classified within Level 1, Level 2 or Level 3 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities and money market securities. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include investment-grade corporate bonds, mortgage-backed and asset-backed securities and foreign currency forward exchange contracts. Such instruments are generally classified within Level 2 of the fair value hierarchy.

In September 2008, Lehman Brothers Holdings Inc. (“Lehman”) filed a petition under Chapter 11 of the U.S. Bankruptcy Code. At March 28, 2009, the Company held a Lehman security with par value of $0.8 million. As of March 28, 2009, the Company does not have an estimate of the recovery value of this security, but has reduced the carrying value of this security to $0.1 million based on Level 3 inputs. For the nine months ended March 28, 2009, the Company has recorded impairment charges for the Lehman security of $0.7 million, which are included in other expense in the condensed consolidated statement of operations.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are shown in the table below by their corresponding balance sheet caption and consisted of the following types of instruments at March 28, 2009:

		Fair Value Measurement at Reporting Date Using
		Quoted Prices				Significant
		in Active				Other				Significant
		Markets for				Observable				Unobservable
		Identical Assets				Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
		(thousands)
Assets:
Cash and cash equivalents (1):
Money market funds		$	15,544			$	—			$	—			$	15,544
Short-term investments:
United States agency securities			5,357				—				—				5,357
United States corporate bonds			—				499				80				579
Total assets measured at fair value		$	20,901			$	499			$	80			$	21,480
Liabilities:
Accrued expenses and other liabilities
Unrealized loss on hedges		$	—			$	2,301			$	—			$	2,301
Total liabilities measured at fair value		$	—			$	2,301			$	—			$	2,301

Derivative Financial Instruments

The Company’s operating results are subject to fluctuations based upon changes in the exchange rates between the currencies in which it collects revenues and pays expenses. A majority of the Company’s revenues are denominated in U.S. dollars, while a significant portion of its expenses are denominated in U.K. pounds sterling, the Chinese yuan and the Swiss franc, in which it pays expenses in connection with operating its facilities in Caswell, U.K., Shenzhen, China and Zurich, Switzerland. The Company currently enters into foreign currency forward exchange contracts in an effort to mitigate a portion of its exposure to fluctuations between the U.S. dollar and the U.K. pound sterling.

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, requires the Company to recognize all derivatives, such as foreign currency forward exchange contracts, on the condensed consolidated balance sheet at fair value regardless of the purpose for holding the instrument. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through operating results or recognized in accumulated other comprehensive income until the hedged item is recognized in operating results in the condensed consolidated statements of operations. As of December 28, 2008, the first day of its fiscal third quarter, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 requires additional disclosures related to the use of derivative instruments, the accounting for derivatives and how derivatives impact financial statements.

At the end of each accounting period, the Company marks-to-market all foreign currency forward exchange contracts that have been designated as cash flow hedges and changes in fair value are recorded in accumulated other comprehensive income until the underlying cash flow is settled and the contract is recognized in other income (expense) in the condensed consolidated statements of operations. As of March 28, 2009, the Company held fourteen outstanding foreign currency forward exchange contracts to sell U.S. dollars and buy U.K. pounds sterling, which have all been designated as cash flow hedges. These contracts had an aggregate notional value of approximately $16.5 million of put and call options expiring at various times between May 2009 and December 2009. To date, the Company has not entered into any such contracts for longer than 12 months and, accordingly, all amounts included in accumulated other comprehensive income as of March 28, 2009 will generally be reclassified into other income (expense) within the next 12 months. As of March 28, 2009, each of the fourteen designated cash flow hedges was determined to be fully effective; therefore, the Company has recorded an unrealized loss of $2.3 million to accumulated other comprehensive income related to recording the fair value of these foreign currency forward exchange contracts for accounting purposes. For the three and nine months ended March 28, 2009,

losses of $1.2 million and $1.8 million, respectively, were reclassified from accumulated other comprehensive income into other income (expense).

Note 4. Balance Sheet Details

The following table provides details regarding the Company’s cash, cash equivalents and short-term investments at the dates indicated:

		March 28, 2009				June 28, 2008
		(thousands)
Cash and cash equivalents:
Cash-in-bank		$	16,287			$	16,361
Money market funds			15,544				10,022
Commercial paper			—				6,480
		$	31,831			$	32,863
Short-term investments:
United States agency securities		$	5,357			$	2,977
United States corporate bonds			579				14,868
		$	5,936			$	17,845

As of March 28, 2009 and June 28, 2008, all of the Company’s short-term investments had a maturity of less than one year.

The following table provides details regarding the Company’s inventories at the dates indicated:

		March 28, 2009				June 28, 2008
		(thousands)
Inventories:
Raw materials		$	19,189			$	21,140
Work-in-process			25,934				24,786
Finished goods			10,966				13,686
		$	56,089			$	59,612

The following table provides details regarding the Company’s property and equipment, net at the dates indicated:

		March 28, 2009				June 28, 2008
		(thousands)
Property and equipment, net:
Buildings		$	15,763			$	18,411
Plant and machinery			78,991				78,652
Fixtures, fittings and equipment			953				1,098
Computer equipment			11,470				13,846
			107,177				112,007
Less: accumulated depreciation			(76,148	)			(79,045	)
		$	31,029			$	32,962

The following table provides details regarding the Company’s accrued expenses and other liabilities at the dates indicated:

		March 28, 2009				June 28, 2008
		(thousands)
Accrued expenses and other liabilities:
Trade creditor accruals		$	2,569			$	4,090
Compensation and benefits related accruals			5,816				6,724
Warranty accrual			2,020				2,598
Unrealized loss on hedges			2,301				—
Other accruals			6,673				5,657
Current portion of restructuring accrual			1,463				1,720
		$	20,842			$	20,789

Note 5. Goodwill and Other Intangible Assets

The Company reviews its goodwill and other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, and also reviews goodwill annually in accordance with SFAS No. 142, Goodwill and Other Intangibles. The values assigned to goodwill and other intangible assets are based on estimates and judgments regarding expectations for the success and life cycle of products and technologies acquired.

During the three months ended December 27, 2008, the Company observed indicators of potential impairment of its goodwill, including the impact of the current general economic downturn on the Company’s future prospects and the continued decline of its market capitalization, which caused the Company to conduct a preliminary interim goodwill impairment analysis. Specifically, indicators emerged for SFAS No. 142 purposes within the New Focus reporting unit, which includes the technology acquired in the March 2004 acquisition of New Focus, Inc. (“New Focus”) and is in the Company’s non-telecom segment, and one other reporting unit in the non-telecom segment that includes the technology acquired in the March 2006 acquisition of Avalon Photonics AG (the “Avalon” reporting unit). These indicators led the Company to conclude that a SFAS No. 142 impairment test was required to be performed during the second quarter for goodwill in these reporting units.

Goodwill is tested for impairment using a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the fair value of a reporting unit, a second step of the impairment test is performed whereby the Company hypothetically applies purchase accounting to the reporting unit using the fair values from the first step in order to determine the implied fair value of a reporting unit’s goodwill.

The Company determined, in its preliminary first step goodwill impairment analysis, that its goodwill in the New Focus and Avalon reporting units was in fact impaired. Based upon preliminary calculations, the Company recorded $7.9 million for the impairment loss in its statement of operations for the three months ended December 27, 2008 as management concluded in the second quarter that the loss was probable and that the amount of loss was reasonably determinable. During the third quarter ended March 28, 2009, the Company completed its full evaluation of the second step impairment analysis, which indicated that the goodwill of $7.9 million was fully impaired. The impairment will not result in any current or future cash expenditures.

During the third quarter of fiscal 2009, in conjunction with its full evaluation of the second step goodwill impairment analysis, the Company also evaluated the fair value of the intangible assets of these two reporting units, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Based on this testing, the Company has determined that the intangibles of New Focus reporting unit were impaired by $2.8 million and that the intangibles of the Avalon reporting unit were impaired by $1.2 million. The Company recorded $4.0 million for the impairment loss related to these intangibles in its statements of operations for the third quarter of fiscal 2009. At March 28, 2009, remaining intangible assets subject to the amortization provisions of SFAS No. 142, net of accumulated amortization and impairment charges, were $1.8 million.

Note 6. Restructuring Liabilities

The following table summarizes the activity related to the Company’s restructuring liability for the nine months ended March 28, 2009:

		Accrued																Accrued
		Restructuring Costs				Amounts Charged to				Amounts Paid or				Adjustments				Restructuring Costs
		at June 28, 2008				Restructuring Costs				Written-off				and Reversals				at March 28, 2009
										(thousands)
Lease cancellations and commitments		$	2,074			$	1,693			$	(1,041	)		$	—			$	2,726
Termination payments to employees and related costs			754				383				(985	)			(53	)			99
Total accrued restructuring charges			2,828			$	2,076			$	(2,026	)		$	(53	)			2,825
Less non-current accrued restructuring charges			(1,108	)															(1,362	)
Accrued restructuring charges included within accrued expenses and other liabilities		$	1,720															$	1,463

In connection with earlier plans of restructuring and cost reduction efforts, the Company continued to make scheduled payments drawing down the related lease cancellations and commitments and made further payments to terminated employees and for related costs. In the first quarter of fiscal 2009, the Company accrued an additional $1.5 million in expense related to existing restructuring plans for revised estimates of the cash flows for lease cancellations and commitments. Remaining net payments of lease cancellations and commitments in connection with the Company’s earlier restructuring and cost reduction efforts are included in the restructuring accrual as of March 28, 2009 and are expected to be paid out through April 2011.

For the three and nine months ended March 28, 2009, the Company made payments of $0.4 million and $1.0 million, respectively, related to lease commitments and made payments of $0.1 million and $1.0 million, respectively, in personnel related costs in connection with transferring certain non-telecom manufacturing activities from its San Jose, California facility to its Shenzhen, China facility. Separation payments under the restructuring and cost reduction efforts were accrued and charged to restructuring in the period that both the benefit amounts were determined and the amounts had been communicated to the affected employees.

Note 7. Accounting for Uncertainty in Income Taxes

FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken, or expected to be taken, in a company’s income tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 utilizes a two-step approach for evaluating uncertain tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. Step one, referred to as recognition, requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two, measurement, is based on the largest amount of benefit which is more likely than not to be realized on ultimate settlement.

The Company’s total amount of unrecognized tax benefits as of June 28, 2008 was approximately $92.3 million. For the nine months ended March 28, 2009, Approximately $1.3 million of these unrecognized tax benefits were released due to the expiration of various tax attributes. The Company has no unrecognized tax benefits that, if recognized, would affect its effective tax rate for the nine months ended March 28, 2009. Included in unrecognized tax benefits at March 28, 2009 is $0.2 million related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the Company’s provision for (benefit from) income taxes. As of March 28, 2009, the Company did not have any accrual for payment of interest and penalties related to unrecognized tax benefits.

The Company files U.S. federal, U.S. state and foreign tax returns and has determined its major tax jurisdictions are the United States, the United Kingdom and China. Tax returns in the following jurisdictions remain open to examination by the appropriate governmental agencies: U.S. federal and China for tax years 2005 to 2009, Switzerland and various U.S. states for tax years 2003 to 2009 and the United Kingdom for tax years 2002 to 2008. The Company’s Canadian income tax returns are currently under examination for the tax years 2005 and 2006. Management does not anticipate any significant adjustments to its financial position or results of operations as a result of this examination.

Note 8. Credit Agreement

On August 2, 2006, the Company and its wholly-owned subsidiaries Bookham Technology plc, New Focus and Bookham (U.S.) Inc. (collectively the “Borrowers”) entered into a credit agreement with Wells Fargo Foothill, Inc. and other lenders for a three year $25.0 million senior secured revolving credit facility (the “Credit Agreement”). On April 27, 2009, the Company amended the Credit Agreement, extending the term to August 1, 2012 and modifying certain other terms (the “Amended Credit Agreement”), as further described in Note 15, Subsequent Events.

Under the Credit Agreement, advances are available based on 80 percent of “qualified accounts receivable”, as defined in the Credit Agreement. The obligations of the Borrowers under the Credit Agreement are guaranteed by the Company, Ignis Optics, Inc., Bookham (Canada) Inc., Bookham Nominees Limited and Bookham International Ltd., each a wholly-owned subsidiary of the Company (together, the “Guarantors” and together with the Borrowers, the “Obligors”), and are secured pursuant to a security agreement (the “Security Agreement”) by the assets of the Obligors, including a pledge of the capital stock holdings of the Obligors in certain of their direct subsidiaries. Any new direct subsidiary of the Obligors is required to execute a guaranty agreement and join in the Security Agreement. Pursuant to the terms of the Credit Agreement, borrowings made under the Credit Agreement bear interest at a rate based on either the London Interbank Offered Rate (LIBOR) plus 2.75 percentage points or the bank’s prime rate plus 1.25 percentage points. In the absence of an event of default, any amounts outstanding under the Credit Agreement may be repaid and re-borrowed at any time until maturity.

The obligations of the Borrowers under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes customary events of default, including payment defaults, defaults in the performance of affirmative and negative covenants, the material inaccuracy of representations or warranties, a cross-default related to other indebtedness in an aggregate amount of $1.0 million or more, bankruptcy and insolvency related defaults, defaults relating to such matters as ERISA and judgments and a change of control default. The Credit Agreement contains negative covenants applicable to the Company, the Borrowers and their subsidiaries, including financial covenants requiring the Borrowers to maintain a minimum level of earnings before interest, taxes, depreciation and amortization (“EBITDA”) if the Borrowers have not maintained “minimum liquidity” (defined as $30 million of qualified cash and excess availability, each as also defined in the Credit Agreement), as well as restrictions on liens, capital expenditures, investments, indebtedness, fundamental changes to the borrower’s business, dispositions of property, making certain restricted payments (including restrictions on dividends and stock repurchases), entering into new lines of business and transactions with affiliates. As of March 28, 2009 and June 28, 2008, there were no borrowings under the Credit Agreement. As of March 28, 2009, the Company was in compliance with all covenants under the Credit Agreement. There was $0.3 million in an outstanding letter of credit with a vendor secured by this credit facility which expires in February 2010. As of June 28, 2008, there were $4.8 million in outstanding letters of credit with vendors secured by this credit facility.

In connection with the Credit Agreement, the Company agreed to pay a monthly servicing fee of $3,000 and an unused line fee equal to 0.375 percentage points per annum, payable monthly on the unused amount of revolving credit commitments. To the extent there are letters of credit outstanding under the Credit Agreement, the Borrowers are obligated to pay the administrative agent a letter of credit fee at a rate equal to 2.75 percentage points per annum.

Note 9. Commitments and Contingencies

Guarantees

The Company follows the provisions of FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. The Company has the following financial guarantees:

•

In connection with the sale by New Focus of its passive component line to Finisar, Inc., New Focus agreed to indemnify Finisar for claims related to the intellectual property sold to Finisar. This obligation expires in May 2009 and has no limitation on maximum liability. The Company has not historically paid out any amounts related to this indemnification obligation and does not expect to in the future, therefore no accrual has been made for this indemnification obligation.

	•		The Company indemnifies its directors and certain employees as permitted by law, and has entered into indemnification agreements with certain directors and senior officers. The Company has not recorded a liability associated with these indemnification arrangements as the Company historically has not incurred any costs associated with such indemnification arrangements and does not expect to in the future. Costs associated with such indemnification arrangements may be mitigated, in whole or only in part, by insurance coverage that the Company maintains.
	•		The Company also has indemnification clauses in various contracts that it enters into in the normal course of business, such as those issued by its banks in favor of several of its suppliers or indemnification in favor of customers in respect of liabilities they may incur as a result of purchasing the Company’s products should such products infringe the intellectual property rights of a third party. The Company has not historically paid out any amounts related to these indemnification obligations and does not expect to in the future, therefore no accrual has been made for these indemnification obligations.

Provision for warranties

The Company accrues for the estimated costs to provide warranty services at the time revenue is recognized. The Company’s estimate of costs to service its warranty obligations is based on historical experience and expectation of future conditions. To the extent the Company experiences increased warranty claim activity or increased costs associated with servicing those claims, the Company’s warranty costs will increase, resulting in a decrease in gross profit and an increase in net loss.

		Three Months Ended								Nine Months Ended
		March 28,								March 28,
		2009				March 29, 2008				2009				March 29, 2008
						(thousands)
Warranty provision — beginning of period		$	2,174			$	2,331			$	2,598			$	2,569
Warranties issued			558				465				2,180				1,768
Warranties utilized or expired			(664	)			(152	)			(2,152	)			(1,702	)
Currency translation adjustment			(48	)			73				(606	)			82
Warranty provision — end of period		$	2,020			$	2,717			$	2,020			$	2,717

Litigation

On June 26, 2001, a putative securities class action captioned Lanter v. New Focus, Inc. et al., Civil Action No. 01-CV-5822 was filed against New Focus and several of its officers and directors, or the Individual Defendants, in the United States District Court for the Southern District of New York. Also named as defendants were Credit Suisse First Boston Corporation, Chase Securities, Inc., U.S. Bancorp Piper Jaffray, Inc. and CIBC World Markets Corp., or the Underwriter Defendants, the underwriters in New Focus’s initial public offering. Three subsequent lawsuits were filed containing substantially similar allegations. These complaints have been consolidated.

On November 7, 2001, a Class Action Complaint was filed against Bookham Technology plc and others in the United States District Court for the Southern District of New York. On April 19, 2002, plaintiffs filed an Amended Class Action Complaint, described below. The Amended Class Action Complaint names as defendants Bookham Technology plc, Goldman, Sachs & Co. and FleetBoston Robertson Stephens, Inc., two of the underwriters of Bookham Technology plc’s initial public offering in April 2000, and Andrew G. Rickman, Stephen J. Cockrell and David Simpson, each of whom was an officer and/or director at the time of Bookham Technology plc’s initial public offering.

Various plaintiffs have filed similar actions asserting virtually identical allegations against more than 300 other public companies, their underwriters, and their officers and directors arising out of each company’s initial public offering. These actions, including the action against New Focus and the action against Bookham Technology plc, have been coordinated for pretrial purposes and captioned In re Initial Public Offering Securities Litigation, 21 MC 92.

On April 19, 2002, plaintiffs filed a Consolidated Amended Class Action Complaint in the New Focus action and an Amended Class Action Complaint in the Bookham Technology plc action (together, the “Amended Class Action Complaints”). The Amended Class Action Complaints assert claims under certain provisions of the securities laws of the

United States. They allege, among other things, that the prospectuses for Bookham Technology plc’s and New Focus’s initial public offerings were materially false and misleading in describing the compensation to be earned by the underwriters in connection with the offerings, and in not disclosing certain alleged arrangements among the underwriters and initial purchasers of ordinary shares, in the case of Bookham Technology plc, or common stock, in the case of New Focus, from the underwriters. The Amended Class Action Complaints seek unspecified damages (or, in the alternative, rescission for those class members who no longer hold our or New Focus’ common stock), costs, attorneys’ fees, experts’ fees, interest and other expenses. In October 2002, the Individual Defendants were dismissed, without prejudice, from the action subject to their execution of tolling agreements. In July 2002, all defendants filed Motions to Dismiss the Amended Class Action Complaints. The motions were denied as to Bookham Technology plc and New Focus in February 2003. Special committees of the board of directors authorized the companies to negotiate a settlement of pending claims substantially consistent with a memorandum of understanding negotiated among class plaintiffs, all issuer defendants and their insurers.

The plaintiffs and most of the issuer defendants and their insurers entered into a stipulation of settlement for the claims against the issuer defendants, including Bookham Technology plc and New Focus. This stipulation of settlement was subject to, among other things, certification of the underlying class of plaintiffs. Under the stipulation of settlement, the plaintiffs would dismiss and release all claims against participating defendants in exchange for a payment guaranty by the insurance companies collectively responsible for insuring the issuers in the related cases, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On February 15, 2005, the District Court issued an Opinion and Order preliminarily approving the settlement provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. The parties agreed to the modification narrowing the scope of the bar order, and on August 31, 2005, the District Court issued an order preliminarily approving the settlement.

On December 5, 2006, following an appeal from the underwriter defendants the United States Court of Appeals for the Second Circuit overturned the District Court’s certification of the class of plaintiffs who are pursuing the claims that would be settled in the settlement against the underwriter defendants. Plaintiffs filed a Petition for Rehearing and Rehearing En Banc with the Second Circuit on January 5, 2007 in response to the Second Circuit’s decision and have informed the District Court that they would like to be heard as to whether the settlement may still be approved even if the decision of the Court of Appeals is not reversed. The District Court indicated that it would defer consideration of final approval of the settlement pending plaintiffs’ request for further appellate review.

On April 6, 2007, the Second Circuit denied plaintiffs’ petition for rehearing, but clarified that the plaintiffs may seek to certify a more limited class in the District Court. In light of the overturned class certification on June 25, 2007, the District Court signed an Order terminating the settlement. The actions against Bookham Technology plc and New Focus remain stayed while litigation proceeds in six test cases against other companies which involve claims virtually identical to those that have been asserted against Bookham Technology plc and New Focus. On November 13, 2007, the issuer defendants in certain designated “focus cases” filed a motion to dismiss the second consolidated amended class action complaints that were filed in those cases. On March 26, 2008, the District Court issued an Opinion and Order denying, in large part, the motions to dismiss the amended complaints in the “focus cases.”

On April 2, 2009, the plaintiffs filed a motion for preliminary approval of a new proposed settlement between plaintiffs, the underwriter defendants, the issuer defendants and the insurers for the issuer defendants. It is uncertain if the litigations will settle. If settlement of the litigations does not occur and litigation against Bookham Technology plc and New Focus continues, the Company believes that both Bookham Technology plc and New Focus have meritorious defenses to the claims made in the Amended Class Action Complaints and therefore believes that such claims will not have a material effect on its financial position, results of operations or cash flows.

On March 4, 2008, Oclaro filed a declaratory judgment complaint captioned Bookham, Inc. v. JDS Uniphase Corp. and Agility Communications, Inc., Civil Action No. 5:08-CV-01275-RMW, in the United States District Court for the Northern District of California, San Jose Division. Oclaro’s complaint sought declaratory judgments that its tunable laser products do not infringe any valid, enforceable claim of U.S. Patent Nos. 6,658,035, 6,654,400 and 6,687,278, and that all claims of the aforementioned patents are invalid and unenforceable. Oclaro’s complaint also contained affirmative claims for relief against JDS Uniphase Corp. and Agility Communications, Inc. for statutory unfair competition, and for intentional interference with economic advantage.

On July 21, 2008, JDS Uniphase Corp. and Agility Communications, Inc. answered Oclaro’s complaint and asserted counterclaims against Oclaro for infringement of U.S. Patent Nos. 6,658,035, 6,654,400 and 6,687,278, which JDS Uniphase Corp. acquired from Agility Communications, Inc. On October 6, 2008, JDS Uniphase Corp. indicated that its infringement claims are directed at Oclaro’s LamdaFlex^TM TL500 VCJ; TL5000VLJ; TL3000; TL7000; TL8000 and TL9000 products.

JDS Uniphase Corp. sought unspecified compensatory damages, treble damages and attorneys’ fees from Oclaro, and an order enjoining Oclaro from future infringement of the patents-in-suit.

On November 7, 2008, JDS Uniphase Corp. petitioned the U.S. International Trade Commission to commence an investigation into alleged violations by Oclaro of Section 337 of the Tariff Act of 1930. On December 8, 2008, the U.S. International Trade Commission commenced investigation No. 337-TA-662 into Oclaro’s alleged importation into the United States, sale for importation, and sale within the United States after importation of tunable laser chips, assemblies, and products containing the same that infringe U.S. Patent Nos. 6,658,035 and 6,687,278. JDS Uniphase Corp. sought a general exclusion order prohibiting the importation of any Oclaro tunable laser chip, assembly, or product containing the same that infringes any claim of the aforementioned patents, as well as an order prohibiting sales after importation into the United States of any allegedly infringing products.

On April 10, 2009, Oclaro entered into a license and settlement agreement with JDS Uniphase Corp. pursuant to which Oclaro and JDS Uniphase Corp. have settled all claims between the parties arising out of Oclaro’s complaint filed in the United States District Court for the Northern District of California, San Jose Division, the complaint filed by JDS Uniphase Corp. and Agility Communications, Inc. in the United States District Court for the Northern District of California, San Jose Division, and the investigation and general exclusion order sought by JDS Uniphase Corp. in the U.S. International Trade Commission (collectively, the “Lawsuits”). The license and settlement agreement provides, among other things, that (i) Oclaro will pay JDS Uniphase Corp. an aggregate of $3.0 million in two equal installments, the first of which was paid on April 14, 2009 with the second installment due on or about April 15, 2010, for the settlement of all claims in the Lawsuits, (ii) each party will refrain from instituting any patent litigation against the other party for a period of four years, (iii) each party releases the other from any claim or counterclaim asserted in or arising from the Lawsuits, (iv) JDS Uniphase Corp. provides Oclaro and the customers for certain of its products with a patent license under the JDS Uniphase Corp. patents-in-suit, plus related patents, for the lives of the patents, and (v) beginning April 10, 2010, Oclaro will pay JDS Uniphase Corp. a royalty of up to $1.0 million per year for up to five years. Oclaro and JDS Uniphase Corp. have entered into a stipulation and order of dismissal, and JDS Uniphase Corp. has filed a motion to terminate the Lawsuits.

In connection with the settlement with JDS Uniphase Corp., for three and nine months ended March 28, 2009, the Company recorded legal settlement expense of $3.7 million and $4.0 million, respectively. Of these amounts, $3.0 million in each period represents settlement payments paid or payable to JDSU and $0.7 million and $1.0 million for three and nine months ended March 28, 2009, respectively, represents legal fees incurred in connection with the litigation.

On February 3, 2009, a purported class action complaint was filed against Avanex and its directors, Bookham, Inc., and Ultraviolet Acquisition Sub, Inc. in the Superior Court of California, Alameda County by two individuals who purport to be shareholders of Avanex. Plaintiffs purport to bring this action on behalf of all shareholders of Avanex. On March 3, 2009, these individuals filed an amended complaint. The amended complaint alleges that the defendants breached their fiduciary duties by failing to maximize shareholder value in connection with the contemplated merger of Avanex and Bookham, and that the joint proxy statement/prospectus fails to provide stockholders with material information or contains materially misleading information thereby rendering the stockholders unable to cast an informed vote on the proposed merger. The complaint also alleges that Avanex, Bookham, and Ultraviolet Acquisition Sub, Inc. aided and abetted the individual defendants’ alleged breach of fiduciary duties. The complaint seeks to permanently enjoin the merger with Bookham, monetary damages in an unspecified amount attributable to the alleged breach of duties, and legal fees and expenses. On April 8, 2009, the parties signed a memorandum of understanding which contemplates that they will draft and enter into a mutually acceptable settlement agreement, to be submitted to this Court for its approval. Certain salient elements of the memorandum of understanding include: (1) certification of a non-opt-out class of Avanex shareholders; (2) notice to the class, and opportunity to object to the settlement; (3) disclosure of additional information regarding the proposed transaction between Avanex and Bookham; (4) granting a release to the defendants; (5) payment of an attorney’s fee to plaintiff’s counsel, subject to the Court’s approval, of up to $230,000; and (6) defendants paying the costs of notice to the class.

Note 10. Stock-based Compensation

The Company accounts for stock-based compensation under SFAS No. 123R, Share-Based Payment, which requires companies to recognize in their statement of operations all share-based payments, including grants of stock options, based on the grant date fair value of such share-based awards. The application of SFAS No. 123R requires the Company’s management to make judgments in the determination of inputs into the Black-Scholes stock option pricing model which the Company uses to determine the grant date fair value of stock options it grants. This model requires assumptions to be made related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield. While the risk-free interest rate is a less subjective assumption, typically based on factual data derived from public sources, the expected stock

price volatility and option life assumptions require a greater level of judgment, which makes them critical accounting estimates.

The Company has not issued and does not anticipate issuing dividends to stockholders and accordingly uses a zero percent dividend yield assumption for all Black-Scholes stock option pricing calculations. The Company uses an expected stock-price volatility assumption that is based on historical realized volatility of the underlying common stock during a period of time. With regard to the weighted-average option life assumption, the Company evaluates the exercise behavior of past grants as a basis to predict future activity.

The assumptions used to value stock option grants for the three and nine months ended March 28, 2009 and March 29, 2008 are as follows:

		Three Months Ended								Nine Months Ended
		March 28,				March 29,				March 28,				March 29,
		2009				2008				2009				2008
Expected life		4.5 years				4.5 years				4.5 years				4.5 years
Risk-free interest rate			1.9	%			3.1	%			2.8	%			3.6	%
Volatility			84.6	%			73.0	%			74.0	%			75.2	%
Dividend yield			—				—				—				—

The amounts included in cost of revenues and operating expenses for stock-based compensation expenses for the three and nine months ended March 28, 2009 and March 29, 2008 were as follows:

		Three Months Ended								Nine Months Ended
		March 28,				March 29,				March 28,				March 29,
		2009				2008				2009				2008
						(thousands)
Stock-based compensation by category of expense:
Costs of revenues		$	290			$	380			$	969			$	1,703
Research and development			236				243				708				1,337
Selling, general and administrative			536				611				1,626				2,603
		$	1,062			$	1,234			$	3,303			$	5,643
Stock-based compensation by type of award
Stock options		$	904			$	922			$	2,573			$	3,099
Restricted stock awards			136				212				566				2,391
Inventory adjustment to cost of revenues			22				100				164				153
		$	1,062			$	1,234			$	3,303			$	5,643

As of March 28, 2009 and June 28, 2008, the Company had capitalized $0.2 million and $0.3 million, respectively, of stock-based compensation as inventory.

The following table summarizes the combined activity under all of the Company’s equity incentive plans for the nine months ended March 28, 2009:

		Awards				Stock				Weighted-				Restricted Stock				Weighted-
		Available				Options				Average				Awards / Units				Average Grant
		For Grant				Outstanding				Exercise Price				Outstanding				Date Fair Value
		(thousands)				(thousands)								(thousands)
Balances at June 28, 2008			9,603				6,822			$	5.87				1,503			$	2.91
Granted			(3,621	)			3,621			$	1.42				—			$	—
Exercised or released			—				—			$	—				(861	)		$	2.92
Cancelled or forfeited			1,065				(936	)		$	5.55				(211	)		$	4.38
Balances at March 28, 2009			7,047				9,507			$	3.94				431			$	2.47

The Company generally grants stock options that vest over a four to five year service period and restricted stock awards that vest over a one to four year service period, and in certain cases each may vest earlier based upon the achievement of specific performance-based objectives or pursuant to action by the Company’s Board of Directors or a committee of the Board.

Supplemental disclosure information about the Company’s stock options outstanding as of March 28, 2009 was as follows:

										Weighted-
						Weighted-				Average				Aggregate
						Average				Remaining				Intrinsic
		Shares				Exercise Price				Contractual Life				Value
		(thousands)								(years)				(thousands)
Options exercisable at March 28, 2009			3,931			$	6.73				6.6			$	—
Options expected to vest at March 28, 2009			9,136			$	4.03				6.7			$	67
Options outstanding at March 28, 2009			9,507			$	3.94				7.9			$	74

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $0.44 as of March 27, 2009, which would have been received by the option holders had all option holders exercised their options as of that date. There were no shares of common stock subject to in-the-money options which were exercisable as of March 28, 2009. The Company settles employee stock option exercises with newly issued shares of common stock.

Note 11. Earnings (Loss) Per Share

SFAS No. 128, Earnings Per Share, requires dual presentation of basic and diluted earnings per share on the face of the statement of operations. Basic earnings per share is computed using only the weighted-average number of shares of common stock outstanding for the applicable period, while diluted earnings per share is computed assuming conversion of all potentially dilutive securities, such as stock options, unvested restricted stock awards and units and warrants during such period.

For the three and nine months ended March 28, 2009 and March 29, 2008, there were no stock options, warrants or restricted stock awards factored into the computation of diluted shares outstanding since the Company incurred a net loss in these periods and their inclusion would be anti-dilutive.

For the three and nine months ended March 28, 2009, the effects of potentially dilutive securities (which include warrants, stock options and restricted stock awards) totaling 20.8 million and 20.3 million common shares, respectively, have been excluded from the calculation of diluted net loss per share because their inclusion would have been anti-dilutive. For the three and nine months ended March 29, 2008, the effects of potentially dilutive securities totaling 16.9 million common shares for each period have been excluded from the calculation of diluted net loss per share because their inclusion would have been anti-dilutive.

Note 12. Comprehensive Loss

For the three and nine months ended March 28, 2009 and March 29, 2008, the Company’s comprehensive loss was primarily comprised of its net loss, the change in the unrealized gain (loss) on currency instruments designated as hedges, unrealized gain (loss) on short-term investments and foreign currency translation adjustments. The components of comprehensive loss were as follows:

		Three Months Ended								Nine Months Ended
		March 28,				March 29,				March 28,				March 29,
		2009				2008				2009				2008
		(thousands)
Net loss		$	(13,281	)		$	(5,400	)		$	(17,549	)		$	(21,541	)
Other comprehensive income (loss):
Unrealized gain (loss) on currency instruments designated as hedges			1,635				(74	)			(2,388	)			(296	)
Unrealized gain (loss) on short-term investments			(33	)			14				11				14
Currency translation adjustments			(1,649	)			3,123				(16,964	)			3,685
Comprehensive loss		$	(13,328	)		$	(2,337	)		$	(36,890	)		$	(18,138	)

Note 13. Segments of an Enterprise and Related Information

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments, geographic areas and major customers in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Chief Executive Officer of the Company is the Company’s chief operating decision maker. As of March 28, 2009, the Company is organized and operates as two operating segments: (i) telecom and (ii) non-telecom. The telecom segment is responsible for the design, development, chip and filter level manufacturing, marketing and selling of optical solutions for telecommunications applications. The non-telecom segment is responsible for the design, development, marketing and selling of non-telecom products, which include photonics and microwave solutions, high power lasers, thin film filters and VCSELs (vertical cavity surface emitting lasers). The Company evaluates the performance of its segments and allocates resources based on consolidated revenues and overall performance.

Segment information for the three and nine months ended March 28, 2009 and March 29, 2008 is as follows:

		Three Months Ended								Nine Months Ended
		March 28,				March 29,				March 28,				March 29,
		2009				2008				2009				2008
		(thousands)
Revenues
Telecom		$	36,621			$	43,878			$	126,294			$	129,410
Non-telecom			10,371				15,825				37,433				43,531
Consolidated revenues		$	46,992			$	59,703			$	163,727			$	172,941

		Three Months Ended								Nine Months Ended
		March 28,				March 29,				March 28,				March 29,
		2009				2008				2009				2008
		(thousands)
Operating loss
Telecom		$	482			$	(7,849	)		$	(6,691	)		$	(23,651	)
Non-telecom			(4,316	)			1,846				(6,933	)			2,351
Total segment operating loss			(3,834	)			(6,003	)			(13,624	)			(21,300	)
Stock compensation			(1,062	)			(1,234	)			(3,303	)			(5,643	)
Legal settlements			(3,705	)			(54	)			(3,829	)			(931	)
Gain on sale of property and equipment			16				596				8				2,312
Impairment of goodwill and other intangible assets			(4,034	)			—				(11,915	)			—
Consolidated operating loss		$	(12,619	)		$	(6,695	)		$	(32,663	)		$	(25,562	)

The following table shows revenues by geographic area based on the delivery locations of the Company’s products:

		Three Months Ended								Nine Months Ended
		March 28,				March 29,				March 28,				March 29,
		2009				2008				2009				2008
						(thousands)
United States		$	11,596			$	13,885			$	42,577			$	42,242
Canada			3,804				8,998				11,702				30,454
Europe:
United Kingdom			3,929				2,471				9,789				6,735
Other			8,980				10,629				30,071				28,979
Asia:
China			15,058				16,778				42,490				42,041
Other			3,608				5,586				16,871				17,069
Rest of world			17				1,356				10,227				5,421
		$	46,992			$	59,703			$	163,727			$	172,941

The following table sets forth the Company’s long-lived tangible assets by geographic region as of the dates indicated:

		March 28, 2009				June 28, 2008
		(thousands)
United States		$	1,937			$	1,824
China			22,141				20,443
United Kingdom			2,682				6,296
Other			4,269				4,399
		$	31,029			$	32,962

Significant Customers and Concentration of Credit Risk

For the three months ended March 28, 2009, Huawei Technologies accounted for 19 percent and Nortel accounted for 14 percent of the Company’s revenues. For the three months ended March 29, 2008, Huawei Technologies and Nortel each accounted for 13 percent of the Company’s revenues. For the nine months ended March 28, 2009, Nortel and Huawei Technologies each accounted for 15 percent of the Company’s revenues. For the nine months ended March 29, 2008, Nortel accounted for 14 percent of the Company’s revenues.

As of March 28, 2009, Huawei Technologies accounted for 23 percent of accounts receivable. As of June 28, 2008, Nortel accounted for 15 percent and Huawei Technologies accounted for 12 percent of accounts receivable.

In the second quarter of fiscal 2009 the Company issued billings of (i) $4.1 million for products that were shipped to Nortel, but for which payment was not received prior to its bankruptcy filing on January 14, 2009, and (ii) $1.3 million for products that were shipped to a contract manufacturer for which payment might not have been received due to the Nortel bankruptcy filing. As a result, an aggregate of $5.4 million in revenue was deferred, and therefore was not recognized as revenues or accounts receivable in the accompanying consolidated financial statements at the time of such billings, as the Company determined that such amounts were not reasonably assured of collectability in accordance with its revenue recognition policy. In the third quarter of fiscal 2009, the Company recognized revenues of $0.6 million from Nortel and $1.3 million from the related contract manufacturer upon receipt of payment for billings which had been previously deferred. As of March 28, 2009, the Company had contractual receivables from Nortel totaling $3.5 million which are not reflected in the accompanying condensed consolidated balance sheet.

Note 14. Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended March 28, 2009 that are of significance, or potential significance, to the Company.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations and in April 2009, the FASB issued FASB Staff Position (“FSP”) No. 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. These standards establish principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired in a business combination. These standards also establish disclosure requirements that will enable users to evaluate the nature and financial effects of a business combination. SFAS No. 141R and FSP No. 141R-1 are effective for the Company for acquisitions made after June 27, 2009. The Company does not anticipate that the adoption of these pronouncements will have a significant impact on its financial statements; however, the implementation of SFAS No. 141R and FSP No. 141R-1 may have a material impact on the Company’s accounting for businesses acquired by the Company post-adoption.

In February 2008, the FASB issued FSP No. 157-2, Effective Date of FASB Statement No. 157. FSP No.157-2 delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2010. The Company is currently evaluating the impact that SFAS No. 157 will have on its consolidated financial statements when it is applied to non-financial assets and non-financial liabilities that are not measured at fair value on a recurring basis beginning in the first quarter of fiscal 2010. The major categories of non-financial assets and non-financial liabilities that are measured at fair value, for which the Company has not yet applied the provisions of SFAS No. 157, are goodwill and intangible assets.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets. FSP No. 142-3 amends the factors that should be considered in developing assumptions about renewal or extension used in estimating the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. FSP No. 142-3 is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R and other generally accepted accounting principles. FSP No.142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The measurement provisions of this standard will apply only to intangible assets of the Company acquired after June 27, 2009.

In April 2009, the FASB issued FSP SFAS No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP SFAS No. 157-4 provides guidelines for making fair value measurements more consistent with the principles presented in SFAS No. 157, Fair Value Measurements. The FSP relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The FSP is effective for the Company’s annual reporting for the fiscal year ending on June 27, 2009. The Company is currently evaluating the impact of the implementation of FSP SFAS No. 157-4 on its consolidated financial position, results of operations and cash flows.

In April 2009, the FASB issued FSP SFAS No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. FSP SFAS No. 107-1 and APB 28-1 enhances consistency in financial reporting by increasing the frequency of fair value disclosures. The FSP requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The disclosure requirement under this FSP is effective for the Company’s interim reporting period ending on September 26, 2009. The Company is currently evaluating the impact of the implementation of FSP SFAS No. 107-1 and APB 28-1 on its consolidated financial position, results of operations and cash flows.

In April 2009, the FASB issued FSP SFAS No. 115-2 and SFAS No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. FSP SFAS No. 115-2 and SFAS No. 124-2 provides additional guidance designed to create greater clarity and consistency in accounting and presenting impairment losses on securities. The FSP also requires increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The FSP is effective for the Company’s annual reporting for the fiscal year ending on June 27, 2009. The Company is currently evaluating the impact of the implementation of FSP SFAS No. 115-2 and SFAS No. 124-2 on its consolidated financial position, results of operations and cash flows.

Note 15. Subsequent Events

Merger of Oclaro Inc. and Avanex Corporation

On January 27, 2009, Oclaro announced that it had entered into a definitive agreement providing for the merger of Oclaro and Avanex Corporation (“Avanex”). On April 27, 2009, the Company consummated the combination with Avanex through the merger of Avanex with a wholly-owned subsidiary of the Company following approval by the stockholders of both companies. Under the terms of the merger agreement, Avanex stockholders received, at a fixed exchange ratio, 5.426 shares of Oclaro common stock for every share of Avanex common stock they owned. The Company issued 85,152,166 shares of its common stock for all of the outstanding shares of Avanex on April 27, 2009. Oclaro’s stockholders immediately before April 27, 2009 now own, following the merger, approximately 54.2 percent and Avanex’s stockholders now own approximately 45.8 percent of the combined company. The combination is intended to qualify as a tax-free reorganization for federal income tax purposes. The Company will account for this acquisition under the purchase method and the results of operations of Avanex (beginning with the closing date of the acquisition) and the estimated fair value of assets acquired and liabilities assumed will be included in the Company’s consolidated financial statements beginning in the fourth quarter of fiscal 2009. For accounting purposes, the fair value of the consideration paid to Avanex stockholders was $31.8 million, based on a price of $0.3731 per share of Oclaro common stock, which is the weighted-average of the closing market prices of Oclaro’s common stock for a period beginning two days before and ending two days after January 27, 2009.

Effective with the merger, Alain Couder, President and Chief Executive Officer of Oclaro, remains as President and Chief Executive Officer of the Company and remains a director on the Company’s board of directors. James Haynes remains as Chief Operating Officer and Jerry Turin remains as Chief Financial Officer of the Company. Under the merger agreement, the Company agreed to decrease the size of its board of directors by one member, to a total of seven members, and to appoint three current members of the Avanex board of directors to serve on the board. To create the required vacancies on the Company’s board, directors Joseph Cook, W. Arthur Porter, Peter Bordui and David Simpson resigned effective immediately prior to the merger. Effective with the merger, Dr. Giovanni Barbarossa, Chief Executive Officer of Avanex, along with former Avanex Directors Greg Dougherty and Joel Smith III, have joined the Company’s board of directors.

In a separate transaction that also occurred on April 27, 2009, following the closing of the merger of Avanex into Bookham, Bookham changed its name to Oclaro, Inc. This name change was effected pursuant to Section 253 of the General Corporation Law of the State of Delaware by the merger of a wholly-owned subsidiary of Bookham, Inc. (the “Subsidiary”) into Bookham, Inc. Bookham, Inc. was the surviving corporation in this merger with the Subsidiary and, in connection with the merger, amended its Restated Certificate of Incorporation to change its name to Oclaro, Inc. pursuant to a Certificate of Ownership and Merger filed on April 27, 2009 with the Secretary of State of the State of Delaware.

On April 27, 2009 the Company also amended its restated certificate of incorporation to increase the number of authorized shares of common stock from 175,000,000 shares to 450,000,000.

Renewal of Credit Agreement

On April 27, 2009, the Company and its wholly-owned subsidiaries Bookham Technology plc, New Focus and Bookham (U.S.) Inc. (collectively the “Borrowers”) amended its existing credit agreement with Wells Fargo Foothill, Inc. and other lenders for a $25.0 million senior secured revolving credit facility (the “Amended Credit Agreement”), extending the term to August 1, 2012 and modifying certain other terms. Under the Amended Credit Agreement, borrowings bear interest at a rate based on either LIBOR plus 3.50 percentage points or the bank’s prime rate plus 3.50 percentage points, subject to a minimum LIBOR rate of 2.50 percentage points and a minimum prime rate which is the greater of (i) 3.50 percentage points or (ii) the 90-day LIBOR rate plus 1.00 percentage point. In the absence of an event of default, any amounts outstanding under the Amended Credit Agreement may be repaid and re-borrowed at any time until maturity, which is August 1, 2012. The Amended Credit Agreement consents to the Avanex merger and requires Avanex Corporation to execute a guaranty agreement and join in the Security Agreement.

The Amended Credit Agreement contains negative covenants applicable to the Company, the Borrowers and their subsidiaries, including financial covenants requiring the Borrowers to maintain a minimum fixed charge coverage ratio if the Borrowers have not maintained “minimum liquidity” (defined as $30 million of qualified cash and excess availability, each as also defined in the Amended Credit Agreement), as well as restrictions on liens, investments, indebtedness, fundamental changes to the borrower’s business, dispositions of property, making certain restricted payments (including restrictions on dividends and stock repurchases), entering into new lines of business, and transactions with affiliates.

In connection with the Amended Credit Agreement, the Company paid a closing fee of $250,000 and agreed to pay a monthly servicing fee of $3,000 and an unused line fee equal to 0.50 percentage points per annum, payable monthly on the unused amount of revolving credit commitments. To the extent there are letters of credit outstanding under the Amended Credit Agreement, the Borrowers are obligated to pay the administrative agent a letter of credit fee at a rate equal to 3.50 percentage points per annum.

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

This Quarterly Report on Form 10-Q contains forward-looking statements about our plans, objectives, expectations and intentions. You can identify these statements by words such as “expect,” “anticipate,” “intend,” “scheduled,” “designed,” “plan,” “believe,” “seek,” “estimate,” “may,” “will,” “continue,” “proposed” and similar words. You should read these forward-looking statements carefully. These forward-looking statements discuss our future expectations, contain projections of our future results of operations or our financial condition or state other forward-looking information, and may involve known and unknown risks over which we have limited or no control. You should not place undue reliance on forward-looking statements and actual results may differ materially from those contained in forward-looking statements. We cannot guarantee any future results, levels of activity, performance or achievements. Moreover, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements, except as required by law. The factors discussed in the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this Quarterly Report on Form 10-Q identify important factors that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

Overview

We design, manufacture and market optical components, modules and subsystems that generate, detect, amplify, combine and separate light signals principally for use in high-performance fiber optics communications networks. Due to its advantages of higher capacity and transmission speed, optical transmission has become the predominant technology for large-scale communications networks. Our primary operating segment, which we refer to as our telecom segment, addresses the optical communications market. There are four particular drivers which we believe are contributing to growth in this market: (i) wireless and wire-line spending by telecommunications networking equipment companies, (ii) the introduction of new, more cost-effective product technologies, such as tunable products, (iii) the expansion of optical networking in the metro space, driven by the build out of broadband access networks such as fiber-to-the home initiatives and (iv) the competition among cable network operators offering voice, video and data services and traditional telephony service providers which results in increased utilization of optical networking technologies, including the long haul backbone where many of our product offerings are utilized. We believe drivers (i), (iii) and (iv) contribute to the overall demand for broadband capacity and therefore to the demand for the substantial portion of our telecom product offerings, while driver (ii) is of particular relevance to the demand for our tunable telecom products.

We are one of the largest vertically-integrated vendors of optical components used for fiber optic telecommunications network applications. Our customers include leading equipment systems vendors, including ADVA, Alcatel-Lucent, Ciena, Cisco, Huawei, Nortel Networks Corporation (“Nortel”), Tellabs and Tyco.

Our remaining product lines, which comprise our non-telecom segment, leverage our optical component technologies and expertise in manufacturing optical subsystems to address opportunities in other markets, including industrial, research, semiconductor capital equipment, military and biotechnology.

Our products typically have a long sales cycle. The period of time between our initial contact with a customer and the receipt of a purchase order is frequently a year or more. In addition, many customers perform, and require us to perform, extensive process and product evaluation and testing of components before entering into purchase arrangements.

Merger with Avanex Corporation

On January 27, 2009, we announced that we had entered into a definitive agreement to merge with Avanex Corporation (“Avanex”). On April 27, 2009, we consummated the combination with Avanex through the merger of Avanex with a wholly-owned subsidiary following approval by the stockholders of both companies. Under the terms of the merger agreement, Avanex stockholders received, at a fixed exchange ratio, 5.426 shares of our common stock for every share of Avanex common stock they owned on April 27, 2009. We issued 85,152,166 shares of our common stock for all of the outstanding shares of Avanex on April 27, 2009. Our stockholders immediately before April 27, 2009 now own, following the merger, approximately 54.2 percent and Avanex’s stockholders now own approximately 45.8 percent of the combined company. The combination is intended to qualify as a tax-free reorganization for federal income tax purposes. We will account for this acquisition under the purchase method and the results of operations of Avanex (beginning with the closing date of the acquisition) and the estimated fair value of assets acquired and liabilities assumed will be included in our consolidated financial statements beginning in the fourth quarter of fiscal 2009. For accounting purposes, the fair value of the consideration paid to Avanex stockholders was $31.8 million, based on a price of $0.3731 per share of Oclaro common stock, which is the weighted-average of the closing market prices of Oclaro’s common stock for a period beginning two days before and ending two days after January 27, 2009.

We anticipate that our revenues, primarily our telecom revenues, will be significantly higher in our fourth quarter of fiscal 2009, as revenues will include the results of Avanex subsequent to the close of the merger on April 27, 2009. We expect that our cost of revenues and operating expenses will correspondingly increase in future periods. We also anticipate incurring restructuring charges in our fourth quarter of fiscal 2009 in connection with the merger.

In a separate transaction that also occurred on April 27, 2009, following the closing of the merger with Avanex, Bookham changed its name to Oclaro, Inc. This name change was effected pursuant to Section 253 of the General Corporation Law of the State of Delaware by the merger of a wholly-owned subsidiary of Bookham, Inc. (the “Subsidiary”) into Bookham, Inc. Bookham, Inc. was the surviving corporation in this merger with the Subsidiary and, in connection with the merger, amended its Restated Certificate of Incorporation to change its name to Oclaro, Inc. pursuant to a Certificate of Ownership and Merger filed on April 27, 2009 with the Secretary of State of the State of Delaware.

On April 27, 2009 we also amended our restated certificate of incorporation to increase the number of authorized shares of common stock from 175,000,000 shares to 450,000,000.

Critical Accounting Policies

We believe that several accounting policies we have implemented are important to understanding our historical and future performance. We refer to such policies as “critical” because they generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable at the time—could have been used, and would have resulted in materially different reported financial results.

The critical accounting policies we identified in our Annual Report on Form 10-K for the year ended June 28, 2008 (or the 2008 Form 10-K), related to revenue recognition and sales returns, inventory valuation, accounting for acquisitions and goodwill, impairment of goodwill and other intangible assets and accounting for share-based payments. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies discussed in our 2008 Form 10-K.

Revenue Recognition for Financially Distressed Customers

Our revenue recognition policy, which is more fully described in our 2008 Form 10-K, follows Securities and Exchange Commission Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition in Financial Statements. Specifically, we recognize product revenue when (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped and title has transferred, (iii) collectability is reasonably assured, (iv) fees are fixed or determinable and (v) there are no uncertainties with respect to customer acceptance. We recognize revenues from financially distressed customers when collectability becomes reasonably assured, assuming all other criteria for revenue recognition have been met.

In the three months ended December 27, 2008, we issued billings of (i) $4.1 million for products that were shipped to Nortel, but for which payment was not received prior to its bankruptcy filing on January 14, 2009 and (ii) $1.3 million for products that were shipped to a contract manufacturer to Nortel for which payment may not be received as a result of the Nortel bankruptcy filing. As a result, an aggregate of $5.4 million in revenue was not recognized as revenues or accounts receivable in the condensed consolidated financial statements at the time of such billings, and such amounts were therefore deferred as

we determined that such amounts were not reasonably assured of collectability in accordance with our revenue recognition policy. The corresponding costs associated with these billings in the second quarter of fiscal 2009 were fully included in costs of revenues for the second quarter of fiscal 2009, as title to the products passed to the customer upon shipment or delivery, depending on the terms of the individual sale.

In the third quarter of fiscal 2009, we recognized revenues of $1.9 million from these customers upon receipt of payment for billings which had been previously deferred. This increased our revenues and gross margin and decreased our net loss for the three months ended March 28, 2009 by $1.9 million each. This also increased our gross margin rate for the three months ended March 28, 2009 by approximately 3.2 percentage points. For the nine months ended March 28, 2009, net revenue deferrals to these customers reduced our revenues and gross margin and increased our net loss by $3.5 million each. This also decreased our gross margin rate for the nine months ended March 28, 2009 by approximately 1.6 percentage points.

As of March 28, 2009, the Company had contractual receivables from Nortel totaling $3.5 million which are not reflected in the accompanying condensed consolidated balance sheet. To the extent that collectability becomes reasonably assured for these deferred billings in future periods, our future results will benefit from the recognition of these amounts.

Impairment of Goodwill and Other Intangible Assets

We review our goodwill and other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, and also review goodwill annually in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangibles. The values assigned to goodwill and other intangible assets are usually based on estimates and judgments regarding expectations for the success and life cycle of products and technologies acquired.

During the three months ended December 27, 2008, we observed indicators of potential impairment of our goodwill, including the impact of the current general economic downturn on our future prospects and the continued decline of our market capitalization, which caused us to conduct a preliminary interim goodwill impairment analysis. Specifically, indicators emerged for SFAS No. 142 purposes within the New Focus Inc. (“New Focus”) reporting unit, which includes the technology acquired in the March 2004 acquisition of New Focus, Inc. and is in our non-telecom segment, and one other reporting unit in our non-telecom segment that includes the technology acquired in the March 2006 acquisition of Avalon Photonics AG (the “Avalon” reporting unit). These indicators led us to conclude that a SFAS No. 142 impairment test was required to be performed during the second quarter for goodwill in these reporting units.

Goodwill is tested for impairment using a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assets assigned to a reporting unit exceeds the fair value of a reporting unit, a second step of the impairment test is performed whereby the Company hypothetically applies purchase accounting to the reporting units using the fair values from the first step in order to determine the implied fair value of a reporting unit’s goodwill.

We determined, in our preliminary first step goodwill impairment analysis, that our goodwill in the New Focus and Avalon reporting units was in fact impaired. Based upon preliminary calculations, we previously recorded $7.9 million for the impairment loss in our statement of operations for the three months ended December 27, 2008 as we concluded in the second quarter that the loss was probable and that the amount of loss was reasonably determinable. During the third quarter ended March 28, 2009, we completed our full evaluation of the second step impairment analysis, which indicated that the goodwill of $7.9 million was fully impaired. The impairment will not result in any current or future cash expenditures.

During the third quarter, in conjunction with our full evaluation of the second step goodwill impairment analysis, we also evaluated the fair value of the intangible assets of these two reporting units, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Based on this testing, we have determined that the intangibles of our New Focus reporting unit were impaired by $2.8 million and that the intangibles of our Avalon reporting unit were impaired by $1.2 million. We recorded $4.0 million for the impairment loss related to these intangibles in our statements of operations for the third quarter. At March 28, 2009, remaining intangible assets subject to the amortization provisions of SFAS No. 142, net of accumulated amortization and impairment charges, were $1.8 million.

Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended March 28, 2009 that are of significance, or potential significance, to us.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations and in April 2009, the FASB issued FASB Staff Position (“FSP”) No. 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. These standards establish principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired in a business combination. These standards also establish disclosure requirements that will enable users to evaluate the nature and financial effects of a business combination. SFAS No. 141R and FSP No. 141R-1 are effective for us for acquisitions made after June 27, 2009. We do not anticipate that the adoption of these pronouncements will have a significant impact on our financial statements; however, the implementation of SFAS No. 141R and FSP No. 141R-1 may have a material impact on our accounting for businesses we acquire post-adoption.

In February 2008, the FASB issued FSP No. 157-2, Effective Date of FASB Statement No. 157. FSP No.157-2 delays the effective date of SFAS No. 157, Fair Value Measurements for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2010. We are currently evaluating the impact that SFAS No. 157 will have on our consolidated financial statements when it is applied to non-financial assets and non-financial liabilities that are not measured at fair value on a recurring basis beginning in the first quarter of fiscal 2010. The major categories of non-financial assets and non-financial liabilities that are measured at fair value, for which we have not yet applied the provisions of SFAS No. 157, are goodwill and intangible assets.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets. FSP No. 142-3 amends the factors that should be considered in developing assumptions about renewal or extension used in estimating the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. FSP No. 142-3 is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R and other generally accepted accounting principles. FSP No.142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The measurement provisions of this standard will apply only to intangible assets we acquire after June 27, 2009.

In April 2009, the FASB issued FSP SFAS No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP SFAS No. 157-4 provides guidelines for making fair value measurements more consistent with the principles presented in SFAS No. 157, Fair Value Measurements. The FSP relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The FSP is effective for our annual reporting for the fiscal year ending on June 27, 2009. We are currently evaluating the impact of the implementation of FSP SFAS No. 157-4 on our consolidated financial position, results of operations and cash flows.

In April 2009, the FASB issued FSP SFAS No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. FSP SFAS No. 107-1 and APB 28-1 enhances consistency in financial reporting by increasing the frequency of fair value disclosures. The FSP requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The disclosure requirement under this FSP is effective for our interim reporting period ending on September 26, 2009. We are currently evaluating the impact of the implementation of FSP SFAS No. 107-1 and APB 28-1 on our consolidated financial position, results of operations and cash flows.

In April 2009, the FASB issued FSP SFAS No. 115-2 and SFAS No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. FSP SFAS No. 115-2 and SFAS No. 124-2 provides additional guidance designed to create greater clarity and consistency in accounting and presenting impairment losses on securities. The FSP also requires increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The FSP is effective for our annual reporting for the fiscal year ending on June 27, 2009. We are currently evaluating the impact of the implementation of FSP SFAS No. 115-2 and SFAS No. 124-2 on our consolidated financial position, results of operations and cash flows.

Results of Operations

The following table sets forth our condensed consolidated results of operations for the three month periods indicated, along with amounts expressed as a percentage of net revenues, and comparative information regarding the absolute and percentage changes in these amounts:

		Three Months Ended																				Increase
		March 28, 2009								March 29, 2008								Change				(Decrease)
		(thousands)				%				(thousands)				%				(thousands)				%
Revenues		$	46,992				100.0			$	59,703				100.0			$	(12,711	)			(21.3	)
Cost of revenues			36,103				76.8				46,320				77.6				(10,217	)			(22.1	)
Gross margin			10,889				23.2				13,383				22.4				(2,494	)			(18.6	)
Operating expenses:
Research and development			6,215				13.2				7,570				12.7				(1,355	)			(17.9	)
Selling, general and administrative			9,246				19.7				11,711				19.6				(2,465	)			(21.0	)
Amortization of intangible assets			264				0.6				667				1.1				(403	)			(60.4	)
Restructuring and severance charges			60				0.1				672				1.1				(612	)			(91.1	)
Legal settlements			3,705				7.9				54				0.1				3,651				6,761.1
Impairment of goodwill and other intangible assets			4,034				8.6				—				—				4,034				n/m	(1)
Gain on sale of property and equipment			(16	)			—				(596	)			(1.0	)			580				(97.3	)
Total operating expenses			23,508				50.1				20,078				33.6				3,430				17.1
Operating loss			(12,619	)			(26.9	)			(6,695	)			(11.2	)			(5,924	)			88.5
Other income (expense):
Other expense			(5	)			—				—				—				(5	)			n/m	(1)
Interest income			70				0.1				414				0.7				(344	)			(83.1	)
Interest expense			(109	)			(0.2	)			(97	)			(0.2	)			(12	)			12.4
Gain (loss) on foreign exchange			(599	)			(1.3	)			995				1.7				(1,594	)			n/m	(1)
Total other income (expense)			(643	)			(1.4	)			1,312				2.2				(1,955	)			n/m	(1)
Loss before income taxes			(13,262	)			(28.3	)			(5,383	)			(9.0	)			(7,879	)			146.4
Income tax provision			19				—				17				—				2				11.8
Net loss		$	(13,281	)			(28.3	)		$	(5,400	)			(9.0	)		$	(7,881	)			145.9

The following table sets forth our condensed consolidated results of operations for the nine month periods indicated, along with amounts expressed as a percentage of net revenues, and comparative information regarding the absolute and percentage changes in these amounts:

		Nine Months Ended																				Increase
		March 28, 2009								March 29, 2008								Change				(Decrease)
		(thousands)				%				(thousands)				%				(thousands)				%
Revenues		$	163,727				100.0			$	172,941				100.0			$	(9,214	)			(5.3	)
Cost of revenues			127,504				77.9				133,787				77.4				(6,283	)			(4.7	)
Gross margin			36,223				22.1				39,154				22.6				(2,931	)			(7.5	)
Operating expenses:
Research and development			21,047				12.8				24,430				14.1				(3,383	)			(13.8	)
Selling, general and administrative			28,904				17.7				35,199				20.4				(6,295	)			(17.9	)
Amortization of intangible assets			1,171				0.7				4,017				2.3				(2,846	)			(70.8	)
Restructuring and severance charges			2,028				1.2				2,451				1.4				(423	)			(17.3	)
Legal settlements			3,829				2.3				931				0.5				2,898				311.3
Impairment of goodwill and other intangible assets			11,915				7.3				—				—				11,915				n/m	(1)
Gain on sale of property and equipment			(8	)			—				(2,312	)			(1.3	)			2,304				(99.7	)
Total operating expenses			68,886				42.0				64,716				37.4				4,170				6.4
Operating loss			(32,663	)			(19.9	)			(25,562	)			(14.8	)			(7,101	)			27.8
Other income (expense):
Other expense			(700	)			(0.4	)			—				—				(700	)			n/m	(1)
Interest income			527				0.3				1,160				0.7				(633	)			(54.6	)
Interest expense			(433	)			(0.3	)			(484	)			(0.3	)			51				(10.5	)
Gain on foreign exchange			15,763				9.6				3,315				1.9				12,448				375.5
Total other income (expense)			15,157				9.2				3,991				2.3				11,166				279.8
Loss before income taxes			(17,506	)			(10.7	)			(21,571	)			(12.5	)			4,065				(18.8	)
Income tax provision (benefit)			43				—				(30	)			—				73				n/m	(1)
Net loss		$	(17,549	)			(10.7	)		$	(21,541	)			(12.5	)		$	3,992				(18.5	)

Revenues

Revenues for the three months ended March 28, 2009 decreased by $12.7 million, or 21.3 percent, compared to the three months ended March 29, 2008. The decrease was largely due to a decrease in sales from our telecom segment of $7.3 million and a decrease in non-telecom segment sales of $5.4 million. We believe our decrease in telecom sales for the three months ended March 28, 2009 was primarily attributable to the uncertainty in the worldwide financial markets, the related global economic downturn, and the resulting impact on certain of our customers and the overall markets for our products, which was partially offset by increases in sales to Huawei Technologies of $0.8 million and smaller increases in sales from certain other customers. For the three months ended March 28, 2009, Huawei Technologies accounted for $8.8 million, or 19 percent, of our total revenues and Nortel accounted for $6.8 million, or 14 percent, of our total revenues. For the three months ended March 29, 2008, Huawei Technologies accounted for $8.0 million, or 13 percent, of our total revenues and Nortel accounted for $7.9 million, or 13 percent, of our total revenues.

Revenues for the nine months ended March 28, 2009 decreased by $9.2 million, or 5.3 percent, compared to the nine months ended March 29, 2008. The decrease was largely due to a decrease in sales from our telecom segment of $3.1 million and a decrease in non-telecom segment sales of $6.1 million. We believe our decrease in telecom sales for the nine months ended March 28, 2009 compared to the same period in the prior year was primarily attributable to the uncertainty in the worldwide financial markets, the related global economic downturn, and the resulting impact on certain of our customers and the overall markets for our products, which was partially offset by increases in sales to Huawei Technologies of $8.3 million and smaller increases in sales from certain other customers. For the nine months ended March 28, 2009, Huawei Technologies accounted

for $25.2 million, or 15 percent, of our total revenues and Nortel accounted for $24.8 million, or 15 percent, of our total revenues. For the nine months ended March 29, 2008, Nortel accounted for $25.0 million, or 14 percent, of our total revenues.

Cost of Revenues

Our cost of revenues consists of the costs associated with manufacturing our products and includes the costs to purchase raw materials and manufacturing-related labor costs and related overhead, including stock-based compensation expense. It also includes costs associated with under-utilized production facilities and resources. Charges for inventory obsolescence, the cost of product returns and warranty costs are also included in cost of revenues. Costs and expenses of the manufacturing resources which relate to the development of new products are included in research and development expense.

Our cost of revenues for the three months ended March 28, 2009 decreased $10.2 million, or 22.1 percent, from the three months ended March 29, 2008. This decrease was primarily due to lower costs associated with lower sales volumes and cost reductions on components we purchase in connection with the manufacture of a number of our telecom products, primarily our tunable products. Our cost of revenues for the three months ended March 28, 2009 included $0.3 million of stock-based compensation charges compared to $0.4 million for the three months ended March 29, 2008.

Our cost of revenues for the nine months ended March 28, 2009 decreased $6.3 million, or 4.7 percent, from the nine months ended March 29, 2008. This decrease was primarily due to lower costs associated with lower sales volumes and telecom product cost reductions, primarily our tunable products, which was partially offset by $0.9 million in additional manufacturing overhead costs in connection with the transfer of manufacturing operations of our non-telecom segment from our San Jose, California facility to our facility in Shenzhen, China. Our cost of revenues for the nine months ended March 28, 2009 included $1.0 million of stock-based compensation charges compared to $1.7 million for the nine months ended March 29, 2008.

The costs associated with the $3.5 million of products shipped to Nortel in the second quarter of fiscal 2009, but for which revenue has been deferred in accordance with our revenue recognition policy, as described above, are fully included in costs of revenues for the nine months ended March 28, 2009, as title to the products passed to the customer upon shipment or delivery, depending on the terms of the individual sale, during the nine month period.

Gross Margin

Gross margin is calculated as revenues less cost of revenues. The gross margin rate is gross margin reflected as a percentage of revenues.

Our gross margin decreased by $2.5 million, or 18.6 percent, for the three months ended March 28, 2009, compared to the three months ended March 29, 2008. Our gross margin rate increased to 23.2 percent for the three months ended March 28, 2009, compared to 22.4 percent for the three months ended March 29, 2008. The increase in gross margin rate was primarily associated with our recognition of $1.9 million of revenues, and $1.9 million of related gross margin, from two customers upon receipt of payment for billings which had been previously deferred, which increased the gross margin rate for the three months ended March 28, 2009 by approximately 3.2 percentage points. Our gross margin rate would have otherwise decreased, primarily due to lower sales volumes in both of our operating segments for the three months ended March 28, 2009 as compared to March 29, 2008 due to the fixed nature of certain costs spread over lower volume.

Our gross margin decreased by $2.9 million, or 7.5 percent, for the nine months ended March 28, 2009, compared to the nine months ended March 29, 2008. Our gross margin rate decreased to 22.1 percent for the nine months ended March 28, 2009, compared to 22.6 percent in the nine months ended March 29, 2008. Gross margin and gross margin rate would have increased to $39.7 million and 23.7 percent, respectively, if not for the costs associated with the $3.5 million of products shipped to two customers in the second quarter of fiscal 2009, but for which revenue has been deferred in accordance with our revenue recognition policy. This increase, excluding the $3.5 million in product costs for which revenue has been deferred, was primarily due to cost reductions on components we purchase in connection with the manufacture of a number of our telecom products, primarily our tunable products, which was partially offset by $0.9 million of additional manufacturing overhead costs in connection with the transfer of manufacturing operations of our non-telecom segment from our San Jose, California facility to our facility in Shenzhen, China.

Research and Development Expenses

Research and development expenses consist primarily of salaries and related costs of employees engaged in research and design activities, including stock-based compensation charges related to those employees, costs of design tools and computer hardware, costs related to prototyping and facilities costs for certain research and development focused sites.

Research and development expenses decreased to $6.2 million for the three months ended March 28, 2009 from $7.6 million for the three months ended March 29, 2008. The decrease was primarily due to decreases in personnel costs of $0.7 million due to reductions in personnel and other miscellaneous decreases in spending of $1.4 million, as a result of our restructurings and cost reduction plans, which were partially offset by increased costs for materials used in research and development of $0.7 million. Approximately $1.3 million of the cost reductions was associated with lower expenses in our U.K. research and development activities as a result of the U.K. pound sterling weakening relative to the U.S. dollar.

Research and development expenses decreased to $21.0 million for the nine months ended March 28, 2009 from $24.4 million for the nine months ended March 29, 2008. The decrease was primarily due to decreases in personnel costs of $2.2 million and stock-based compensation of $0.6 million due to reductions in personnel and other miscellaneous decreases in spending of $2.7 million, as a result of our restructurings and cost reduction plans, which were partially offset by increased costs for materials used in research and development of $2.1 million. Approximately $2.5 million of the cost reductions was associated with lower expenses in our U.K. research and development activities as a result of the U.K. pound sterling weakening relative to the U.S. dollar.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel-related expenses, including stock-based compensation charges related to employees engaged in sales, general and administrative functions, legal and professional fees, facilities expenses, insurance expenses and certain information technology costs.

Selling, general and administrative expenses decreased to $9.2 million for the three months ended March 28, 2009 from $11.7 million for the three months ended March 29, 2008. The decrease was primarily the result of decreases in personnel costs of $0.8 million and stock-based compensation of $0.1 million as a result of restructuring and cost reduction plans and a reduction of $1.6 million in other miscellaneous expenses. Approximately $1.1 million of the cost reductions was associated with lower expenses in our U.K. sales, general and administrative activities as a result of the U.K. pound sterling weakening relative to the U.S. dollar.

Selling, general and administrative expenses decreased to $28.9 million for the nine months ended March 28, 2009 from $35.2 million for the nine months ended March 29, 2008. The decrease was primarily the result of decreases in personnel costs of $2.6 million and stock-based compensation of $1.0 million as a result of restructuring and cost reduction plans and a reduction of $2.7 million in other miscellaneous expenses. Approximately $2.1 million of the cost reductions was associated with lower expenses in our U.K. sales, general and administrative activities as a result of the U.K. pound sterling weakening relative to the U.S. dollar.

Restructuring and Severance Charges

In connection with earlier plans of restructuring, and the assumption of restructuring accruals upon the March 2004 acquisition of New Focus, we continue to make scheduled payments drawing down the related lease cancellations and commitments as well as making termination payments to employees and related costs. For the three months ended March 28, 2009 and March 29, 2008, we accrued $0.1 million and $0.7 million, respectively, in expenses for revised estimates related to these cancellations and commitments and termination payments to employees and related costs. For the nine months ended March 28, 2009 and March 29, 2008, we accrued $2.1 million and $2.5 million, respectively, in expenses for the same items.

Legal Settlement

On April 10, 2009, we settled outstanding litigation with JDS Uniphase Corporation (“JDSU”). In connection with the settlement of these lawsuits, for three and nine months ended March 28, 2009, we recorded legal settlement expense of $3.7 million and $4.0 million, respectively. Of these amounts, $3.0 million in each period represents settlement payments paid or payable to JDSU and $0.7 million and $1.0 million for the three and nine months ended March 28, 2009, respectively, represents legal fees incurred in connection with the JDSU litigation and settlement. For additional information on the JDSU lawsuits, see Part II., Item 1 — Legal Proceedings, elsewhere in this quarterly report on Form 10-Q.

For the nine months ended March 29, 2008, we recorded costs of $0.9 million associated with the settlement of a legal action in connection with our sale of land in Swindon, U.K. to a third party in 2005, which was settled in the three months ended June 28, 2008 for a gain of $3.8 million in that quarter.

Amortization of Intangible Assets

Subsequent to the three months ended March 29, 2008, certain of the purchased intangible assets from our prior business acquisitions became fully amortized. Additionally, purchased intangible assets related to our New Focus and Avalon reporting units were determined to be impaired in the third quarter of fiscal 2009, and written down to fair value as described above. Collectively, these events reduced our expense for amortization of purchased intangible assets for the three and nine months ended March 28, 2009 by $0.4 million and $2.8 million, respectively, as compared to the same three and nine month periods in the prior year. At March 28, 2009, remaining intangible assets subject to the amortization provisions of SFAS No. 142, net of accumulated amortization and impairment charges, were $1.8 million.

Impairment of Goodwill and Other Intangible Assets

During the three months ended December 27, 2008, we observed indicators of potential impairment of our goodwill, including the impact of the current general economic downturn on our future prospects and the continued decline of our market capitalization, which caused us to conduct a preliminary interim goodwill impairment analysis. We determined, in our preliminary first step goodwill impairment analysis, that our goodwill in the New Focus and Avalon reporting units was in fact impaired. Based upon preliminary calculations, we previously recorded $7.9 million for the impairment loss in our statement of operations for the three months ended December 27, 2008 as we concluded in the second quarter that the loss was probable and that the amount of loss was reasonably determinable. During the third quarter ended March 28, 2009, we completed our full evaluation of the second step impairment analysis, which indicated that the goodwill of $7.9 million was fully impaired. The impairment will not result in any current or future cash expenditures.

During the third quarter of fiscal 2009, in conjunction with our full evaluation of the second step goodwill impairment analysis, we also evaluated the fair value of the intangible assets of these two reporting units, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Based on this testing, we have determined that the intangibles of our New Focus reporting unit were impaired by $2.8 million and that the intangibles of our Avalon reporting unit were impaired by $1.2 million. We recorded $4.0 million for the impairment loss related to these intangibles in our statements of operations for the third quarter of fiscal 2009.

Other Income (Expense)

The $2.0 million decrease in other income (expense) for the three months ended March 28, 2009 when compared to the three months ended March 29, 2008 was primarily related to a decrease of $1.6 million related to the re-measurement of short term balances between our international subsidiaries due to the fluctuation in the dollar during the three months ended March 28, 2009 relative to our other local functional currencies during the period and a $0.3 million decrease in interest income for the three months ended March 28, 2009 due to lower average invested balances and lower average interest rates.

The $11.2 million increase in other income (expense) for the nine months ended March 28, 2009 when compared to the nine months ended March 29, 2008 was primarily related to an increase of $12.4 million in income related to the re-measurement of short term balances between our international subsidiaries due to the strong appreciation of the dollar during the nine months ended March 28, 2009 relative to our other local functional currencies during the period and an expense for the nine months ended March 28, 2009 of $0.7 million related to the fair value impairment of our short-term investment in a debt security of Lehman Brothers.

Income Tax Provision (Benefit)

We have incurred substantial losses to date and expect to incur additional losses in the future, and accordingly our income tax provision is negligible in each period presented. Based upon the weight of available evidence, which includes our historical operating performance and the recorded cumulative net losses in prior periods, we have provided a full valuation allowance against our net deferred tax assets at March 28, 2009 and June 28, 2008.

Liquidity and Capital Resources

Cash Flows from Operating Activities

		Nine Months Ended
		March 28,				March 29,
		2009				2008
		(thousands)
Net loss		$	(17,549	)		$	(21,541	)
Non-cash adjustments:
Depreciation and amortization			9,833				13,249
Stock-based compensation			3,303				5,643
Amortization of deferred gain on sale-leaseback			(698	)			(801	)
Impairment of short-term investments			706				—
Impairment of goodwill and other intangible assets			11,915				—
Accretion on short-term investments			(127	)			(37	)
Gain on sale of property and equipment			(8	)			(2,312	)
Total non-cash adjustments			24,924				15,742
Change in operating assets and liabilities			(3,232	)			(12,794	)
Net cash provided by (used in) operating activities		$	4,143			$	(18,593	)