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CORRESP
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corresp

    September 30, 2005

    SUBMITTED VIA EDGAR

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Attention: Stephen Krikorian, Accounting Branch Chief

Dear Mr. Krikorian:

    Re: Catapult Communications Corporation

    Form 10-K: For the Fiscal Year Ended September 30, 2004

    Filed December 10, 2004

    Form 10-Q: For the Fiscal Period Ended June 30, 2005

    Filed August 8, 2005

    File No. 000-24701

In response to your letter of August 19 and further to our letter of August 23, Catapult is pleased
to provide the following information.

Form 10-K for the Fiscal Year Ended September 30, 2004

Consolidated Financial Statements

Note 11. Income Taxes, page 53

    1.

    Tell us more about the tax benefits recorded in 2003 and 2004. Tell us how you discovered
that each adjustment was necessary, the period the adjustments relate to and why the original
entries were not correct. In this regard, explain the facts and circumstances leading to your
determination in 2004 that $2.3 million of additional taxes
would not be due. Also explain why
there was $830,000 in additional taxes recoverable from a previous period identified in 2003.
In addition, tell how you considered the tax adjustments recorded in 2003 and 2004 in your
assessment of disclosure controls and procedures.

     In fiscal 2003, we recorded three unusual tax benefits:

    i)

    We recorded a benefit of $735,000 as a result of adjustments made to bring the amount
of estimated tax provided for in our consolidated financial statements for fiscal 2002
into agreement with the revised amount reported in our tax return subsequently filed for
that year. Of this amount, $598,000 related to a transfer pricing adjustment, $110,000
related to tax-exempt interest and $27,000 related to

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    other minor adjustments. This benefit was calculated in the preparation of the fiscal 2002
tax return and the completion of the supporting transfer pricing study, and was recorded in
the quarter ended June 30, 2003 when the tax return for fiscal 2002 was completed and
filed. The original tax provision made in 2002 was recorded based on the Company’s best
estimate of the respective transfer pricing in light of information available at the time.
A transfer pricing study subsequently completed to provide support for the Company’s 2002
tax return indicated the need for a transfer pricing adjustment, based on newly available
information that reflected the projected impact of the downturn in the telecommunications
business sector on the Company’s business. The tax-exempt interest was also discovered in
the course of preparing the 2002 tax return. The details included in
Note 11 to our consolidated financial statements
incorrectly identified the amount of this benefit as $830,000. We will correct this
disclosure in future filings.

    ii)

    We recorded a benefit of approximately $775,000 as a result of foreign tax credits
arising from withholding taxes paid on the liquidation proceeds of
the Japanese subsidiary, Tekelec Limited, that we
acquired from Tekelec in 2002. In order to liquidate this subsidiary, we required approval from
the Japanese authorities, the timing of which could not reasonably have been anticipated.
This benefit was considered a discrete event and was recorded in the period in which the
approval was received and the withholding taxes became due and were paid. These
withholding taxes were paid in September 2003 and the benefit was recorded in the quarter
ended September 30, 2003. Of the total benefit recorded, approximately $62,000 was carried
back to prior tax years, $126,000 was utilized in fiscal 2003 and the balance of $587,000
was carried forward to be utilized in future years. A deferred tax asset has been recorded
for the foreign tax credits carried forward based on the Company’s expectation of
generating U.S. book and taxable income, a portion of which will be considered foreign
source. Further, the Company will have the ability to generate additional foreign sourced
income from its foreign subsidiaries to the extent that such earnings are not permanently
reinvested pursuant to APB 23.

    iii)

    We recorded a benefit of approximately $970,000 representing the reduction in
estimated foreign taxes payable related to transfer pricing and withholding taxes in our
continuing Japanese subsidiary, Catapult Communications K.K., based on the successful completion of
negotiations with the relevant tax authorities. On October 20, 2003, the Japanese tax
authorities formally advised us that they had completed an audit and did not propose any
adjustments with respect to transfer pricing or withholding tax. Accordingly, the
estimated taxes payable were revised to the extent that it was judged likely that they
were no longer required. We believe that the original taxes payable were appropriately
recorded given the uncertainties related to international transfer pricing and withholding
tax requirements, and that the benefit resulting from their release was correctly
identified, evaluated and recorded in the period in which we received information
indicating that the estimated taxes payable were no longer required.

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In
addition to these three unusual benefits, we recorded tax benefits in fiscal 2003 related to normal
recurring factors, including research and development credits and foreign tax credits related to a
dividend received from the earnings of our continuing Japanese subsidiary.

In fiscal 2004 we recorded a discrete tax benefit of approximately $2.3 million due to a reduction
in the estimated taxes payable (this includes amounts accumulated in the current year effective tax
rate during the first three quarters of fiscal 2004 and a release of a previously established tax
reserve recorded as of September 2003) at the end of the fiscal year as a result of a determination
that additional taxes for which we had previously recognized liabilities would not be due. This
determination was made as a result of confirmation by the Internal Revenue Service on October 6,
2004 that it had completed its audit of our U.S. tax return for the fiscal year ended September 30,
2001 and had made no changes to our reported tax. The Company had accumulated tax reserves related
to U.S. federal transfer pricing, research and development credit and Subpart F exposure, and the
associated state tax exposures. The examination by the IRS began in August 2003 and concluded in
August 2004 after the IRS had reviewed all the areas for which the Company had accumulated tax
reserves. Accordingly, based on preliminary confirmation received in August 2004 and final
confirmation received in October 2004, the Company released the associated reserves to the extent
that it was judged likely that they were no longer required. We believe that the original tax
reserves were appropriately recorded given the uncertainties related to transfer pricing, research
and development credit and Subpart F tax, and that the benefit resulting from their release was
correctly identified, evaluated and recorded in the period in which we received information
indicating that the reserves were no longer required. At the beginning of each fiscal year, the
Company assesses the need for tax reserves related to tax contingencies associated with continuing
operations. To the extent the need for such reserves is considered probable based on all available
facts and tax law and regulation, the Company makes its single best estimate and provides for that
amount. The needed amount is included as part of the annual effective tax rate. At each quarter,
the Company assesses the continuing need for tax reserves based on all facts. To the extent facts
or law change, the annual effective tax rate is adjusted and a cumulative adjustment is made in the
period pursuant to FIN 18. At each reporting period, if there has been a tolling of the statute,
resolution with a tax authority or other similar discrete event necessitating a release of the
reserve, such release is made. This was the case with the $2.3 million released in the fourth
quarter of 2004.

In our assessment of disclosure controls and procedures, we determined that the original tax
reserves and provisions made by the Company were appropriately recorded in light of the information
available when they were recorded, and that the tax adjustments made by the Company in fiscal 2003
and 2004 were appropriately calculated and were recognized and disclosed in the appropriate
periods.

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Item 9A, Controls and Procedures, page 59

    2.

    We note your disclosure here and in your Form 10-Q for the period ended June 30, 2005 that
[y]our Chief Executive Officer and [y]our Chief financial Officer have concluded that [y]our
disclosure controls and procedures are effective to ensure that information [you] are required
to disclose in reports that it files or submits 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.” Please confirm, if true, that your officers
concluded that your disclosure controls and procedures are also effective to ensure that
information required to be disclosed in the reports that you file or submit under the Exchange
Act is accumulated and communicated to your management, including your chief executive officer
and chief financial officer, to allow timely decisions regarding disclosure. See Exchange Act
Rule 13a-15(e).

We confirm
that, based on the evaluations of the effectiveness of our disclosure
controls and procedures performed at the end of fiscal 2004 and the
quarter ended June 30, 2005, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be
disclosed in the reports that
we file or submit under the Securities Exchange Act of 1934 is
accumulated and communicated to our management, including our chief
executive officer and chief financial officer, to allow timely
decisions regarding disclosure. We
further confirm that our future filings on Forms 10-K and 10-Q will contain disclosure, if true,
substantially as set forth below in response to Item 307 of Regulation S-K. We believe that the
inclusion of the additional language should adequately address the concerns discussed in the
comment. We do not believe that it is necessary to amend our Form 10-K for the fiscal year ended
September 30, 2004 or our Form 10-Q for the quarter ended June 30, 2005 to reflect the additional
language because we believe that the existing text in those filings to the effect that “such
information is recorded, processed, summarized and reported within the time periods specified...”
can fairly be read to implicitly include the conclusion that the relevant information “is
accumulated and communicated to management...as appropriate to allow timely decisions regarding
required disclosure...”. We do not believe that amendments would add material disclosure to the
existing filings at this point.

The suggested future text for future filings is as follows:

Evaluation of disclosure controls and procedures.

     “Our management evaluated, with the participation of our Chief Executive Officer and our Chief
Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this Quarterly [Annual] Report on Form 10-Q [10-K]. Based on this evaluation, our Chief
Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and
procedures are effective to ensure that information we are required to disclose in reports that we
file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our
management, including our principal executive and principal financial officers, as appropriate to
allow timely decisions regarding required disclosure, and that such information is recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange
Commission rules and forms.”

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     Should the Staff have any additional comments or questions, please direct them to the undersigned
by telephone at 650 314-1057 or by fax at 650 960-1029.

    Yours truly,

    /s/ CHRIS STEPHENSON

    Chris Stephenson

    Chief Financial Officer

c.c. Henry P. Massey, Jr., Wilson Sonsini Goodrich & Rosati