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[Photon Dynamic, Inc. Letterhead]

VIA EDGAR

June 13, 2005

David Burton

Staff Accountant

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

    Re:

    Photon Dynamics, Inc. (File No. 000-27234)

    Form 8-K, Item 4.02, Filed May 4, 2005

Gentlemen:

     On behalf of Photon Dynamics, Inc., we are responding to comments received from the staff (the
"Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated June 6, 2005,
with respect to the current report referenced above (the “Comments”). The numbering of the
paragraphs below corresponds to the numbering of the Comments, which for the Staff’s convenience,
have been incorporated into this response letter.

Form 8-K dated May 2, 2005

Item 4.02(a). Non-Reliance on Previously Issued Financial Statements

    1.

    We note that you intend to file restated financial statements. However, you have not
indicated when you intend to do so. Please tell us when you intend to file restated
financial statements. We may have further comment after you file the restated financial
statements.

We respectfully advise the Staff that we currently expect to file our Amendment No. 1 to
Annual Report on Form 10-K for the year ended September 30, 2004 (the “Form 10-K”), and our
Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended December 31, 2004
(the “Form 10-Q”), on or before August 9, 2005.

    2.

    Please tell us if your certifying officers have reconsidered the effect on the adequacy
of your disclosure controls and procedures as of the end of the period covered by your Form
10-K for the fiscal year ended September 30, 2004 and Form 10-Q for the period ended
December 31, 2004 in light of the material error you have disclosed. Additionally, tell us
what effect the error had on your current evaluation of disclosure controls and procedures
as of your fiscal year end September 30, 2004.

In the Form 10-K, we stated that “subject to limitations described below, our disclosure
controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-

David Burton

Securities and Exchange Commission

June 13, 2005

Page 2 of 3

15(e)) are effective to provide reasonable assurance that the information required to be
disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.” Immediately below that statement we
had disclosed that we had identified a number of material weaknesses, identifying each of
the material weaknesses and the remedial steps we were taking and intending to take to
address these material weaknesses. In addition, we also stated that we had identified a
number of significant deficiencies that did not rise to the level of material weaknesses.
In our Form 10-Q, we provided an update as to the status of the material weaknesses and
significant deficiencies and how we were addressing them, concluding again that, with the
exception of those disclosures, we had concluded that our disclosure controls and procedures
were adequate to provide reasonable assurance that the information required to be disclosed
would be recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

The statements made by our certifying officers, as of the time that they were made, were
accurate. We had undergone an extensive evaluation of our internal control over financial
reporting as a result of the material weaknesses that we had already discovered, and had
made our conclusions based, in part, upon that evaluation.

With the benefit of hindsight and having discovered the additional error that caused us to
conclude that we need to restate the financial statements for fiscal 2004, as well as the
reasons therefore, our management is in the process of enhancing our internal control over
financial reporting and disclosure controls and procedures. We continue to assess the
status of our internal control over financial reporting and disclosure controls and
procedures as of the two dates and anticipate that we will amend Item 9A of the Form 10-K
and Item 4 of the 10-Q when we make our amendment filings, anticipated to be on or before
August 9, 2005. However, given the extensive disclosure that we already provided in the
10-K and 10-Q, we have not yet determined what, if any, additional disclosure is necessary.

Please note that we also provided to investors a caveat, consistent with guidance from the
Commission on the limits of giving such caveats, that our management did not expect that our
disclosure controls and procedures or internal control over financial reporting will prevent
all errors, and that our conclusions were only that the disclosure controls and procedures
can provide only reasonable, not absolute, assurance that the control system’s objectives
will be met.

Please also note that our current Chief Financial Officer, Maureen Lamb, joined Photon
Dynamics on May 31, 2005. As a result, Ms. Lamb is currently in the process of assessing
our disclosure controls and procedures.

* * * *

David Burton

Securities and Exchange Commission

June 13, 2005

Page 3 of 3

     In addition, pursuant to your request, Photon Dynamics acknowledges:

    •

    Photon Dynamics is responsible for the adequacy and accuracy of the disclosure
in the filing;

    •

    Staff comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the filing; and

    •

    Photon Dynamics may not assert Staff comments as a defense is any proceeding
initiated by the Commission or any person under the federal securities laws of the
United States.

     Please do not hesitate to call me at (408) 360-3026 if you have any questions or would like
any additional information regarding this matter.

Sincerely,

/s/ Jeffrey Hawthorne

Jeffrey Hawthorne

President and Chief Executive Officer