SecProbe.io

May 1, 201 3

Via E -mail
Chih -Hsiang (Thompson) Lin
President and Chief Executive Officer
Applied Optoelectronics, Inc.
13115 Jess Pirtle Blvd.
Sugar Land, TX 77478

Re: Applied Optoelectronics, Inc.
 Confidential Draft Registration Statement on Form S -1
Submitted April 4, 2013
  CIK No. 0001158114

Dear Dr. Lin:

We have reviewed your draft registration statement  and have the following comments.  In
some of our comments,  we may ask you to provide us with information so we may better
understand your disclosure.

Please respond to this letter by providing the requested information and either submitting
an amended draft registration statement or publicly filing your registra tion statement on
EDGAR.  If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

 After reviewing the information you provide in response to these  comm ents and your
amended draft registration statement or filed registration statement,  we may have  additional
comments .

Prospectus Summary, page 1

1. Please provide us support for your statements regarding your leadership throughout this
prospectus, including statements regarding you being the second largest provider.  Also,
provide us support for your claims in :
 the sentence that begins at the bottom o f page 1 and continues on page 2,
 the sentence that begins at the bottom of page 3 and continues on to page 4,
 the last sentence of the first and fourth bullet points on page 76, and
 the penultimate sentence of the fourth full bullet point on page 77,
and ensure that your disclosure makes clear against whom you are comparing yourself.

Chih -Hsiang (Thompson) Lin
Applied Optoelectronics, Inc.
May 1, 201 3
Page 2

 2. Please provide us support for the market and industry data that you cite in the section
entitled “Overview” on page 1 and in the section entitled “Industry Background” on p age
2. Include support for your statement about the “only economic way to deliver the desired
bandwidth.”  Clearly mark the material you provide to identify the data you cite in your
document, and tell us whether  you commissioned any of the data disclosed in  your
prospectus other than the Ovum data mentioned on page 37.

3. Please tell us (1) what objective criteria you used to determine that the list of customers
named in the first two full sentences on page 2 accurately represents your business and
(2) whether you have identified each of the customers that satisfy these criteria.  Do you
derive a substantial portion of your revenue from each of the manufacturers other than
Cisco?  Do unnamed manufacturers contribute more revenue than any of the five
manufacturers you name?  Also tell us why you believe this level of detail is approp riate
for a prospectus summary, and why you believe repeating this information on page 4 is
appropriate for a summary.

In addition, please tell us how you chose which companies to name in the first full bullet
point on page 3 and how you are aware of wh at compatibility issues are important to
them.

4. If you believe it is appropriate to highlight the results mentioned at the top of page 2,
please highlight with at least equal prominence the magnitude of your losses in the
periods mentioned and your accum ulated deficit.

5. With a view toward providing more specific information, please tell us when the “recent”
shift mentioned in the third paragraph of your Overview began.

6. We note the amount of detail in your prospectus summary. We also note that you rep eat
much of this detail later in your prospectus.  Please review the detail in your industry
background, solutions, strength, and strategy sections of your prospectus summary to
ensure that you have included only disclosure that is appropriate for a prospe ctus
summary and not detail that overwhelms disclosure regarding the most significant aspects
of the offering.  Also, please tell us why you believe it is appropriate to highlight data in
your prospectus summary and then, on page 37, tell investors not to place “undue weight”
on the information you have chosen to highlight.

7. If a substantial portion of your business is attributable to a single country that creates
risks like those you mention beginning on page 30, please prominently highlight in your
prospectus summary the extent of your business in that country, including the portion of
your operations and assets in that country and the extent of your revenue from that
country.  Ensure that this disclosure is highlighted clearly and not overwhelmed by de tail
that is inappropriate for a prospectus summary.

Chih -Hsiang (Thompson) Lin
Applied Optoelectronics, Inc.
May 1, 201 3
Page 3

 Summary Consolidated Financial Data, page 9
8. Please reconcile the amount shown as “Total stockholders’ equity (deficit)” on page 12
with the corresponding amount shown on your balance sheet on page F -3.
9. We note that you include non -recur ring consultant fee as part of n on-GAAP adjustments
shown on page 11.  Please tell us how you considered the guidance from  Item
10(e)(1)(ii)(B) of Regulation S -K in concluding that these charges are non -recurring.

We are dependent on our key customers, page 13

10. Please tell us (1) the extent of your revenue from each of Arris Group and Motorola and
(2) whether one of those companies primarily uses products from a competitor of yours.

We depend on key personnel, page 20

11. In an appropriately ca ptioned risk factor, please explain the anti -takeover effect of the
bank approval required for a change in your executive officers.

We may be involved in intellectual property disputes, page 26

12. Please clarify why you “cannot be certain that [y]our prod ucts would not be found
infringing the intellectual property rights of others.”  Have you not researched others’
intellectual property rights?

If we fail to maintain effective internal control, page 27

13. Please clarify why there can be no assurance that your internal controls will be able to
avoid accounting errors as you state in the last paragraph of this risk factor.  Are you not
designing internal controls to provide that assurance?

As an “emerging growth company” within the meaning of the Securities Act, page 36

14. Please supplementally provide us with copies of all written communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized to do so on your
behalf, present to potential investors in reliance on Section 5(d) of the Securities Act,
whether or not they retain copies of the communications. Similarly, please
supplementally provide us with any research reports about you that are published or
distribute d in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by
Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is
participating or will participate in your offering.

Chih -Hsiang (Thompson) Lin
Applied Optoelectronics, Inc.
May 1, 201 3
Page 4

 Special Note Re garding Forward Looking Statements and Industry Data, page 37

15. Please file as an exhibit to this registration statement the consent of Ovum, Inc. that
expressly states that Ovum consents to the quotation and summarization of its research
included in your r egistration statement.

Use of Proceeds, page 38

16. Please tell us what portion of the proceeds will be used to repay debt and when the debt
was incurred.  Also disclose the portion of the proceeds that you intend to use for each of
the purposes mentioned in the second sentence of the second paragraph.  If you do not
have a specific plan for a significant portion of the proceeds, please say so clearly and
discuss the principal reasons for the offering.

Capitalization, page 39
17. Tell us, with a view toward d isclosure in your filing, whether there are any contingencies
associated with the assumed conversion of the preferred stock upon consummation of the
offering.  For instance, tell us whether there are contingencies related to the size of the
offering, the o ffering price or the valuation assigned to the company.
18. The balance sheet on page F -3 identifies the preferred stock as “redeemable.”  Please
revise the capitalization table, the summary data on page 12 and any other similar
disclosures to consistently i dentify the preferred stock as “redeemable.”

Dilution, page 41
19. Please revise to begin with actual net tangible book value per share and separately show
the impact of the assumed conversion of preferred stock in arriving at pro forma net
tangible book value per share.

Management’s Discussion and Analysis , page 45

20. We note your disclosure on page 46 regarding the significance of new design wins on
your performance.  Please provide us your analysis of why you believe Regulation S -K
Item 303 and Rule 408 do not require that you disclose the number of new design wins in
each period presented.

Revenue, page 47

21. Please provide us support for your statement in the last sentence on page 47 regarding
your competitors.

Chih -Hsiang (Thompson) Lin
Applied Optoelectronics, Inc.
May 1, 201 3
Page 5

 Results of Operations, page 51

Comparis on of Years Ended December 31, 2012 and 2011 , page 54
22. Please expand to disclose the dollar amount of sales in each of your target end -markets,
reconciled to total revenues for each of the periods discussed in MD&A.  If material,
please also quantify and de scribe the impact of changes in prices and changes in
exchange rates on revenues.  Also, address the underlying reasons for the $1.2 million
decrease in sales in other markets in 2012, including FTTH, where you anticipate
revenues, as a percentage, will in crease in the future.

Critical Accounting Policies and Estimates, page 66

Revenue recognition, page 67
23. Please revise to describe the nature, terms and conditions of sales through indirect
channels referred to on page 85.  Separately describe your revenue  practices for those
indirect channel sales.  Also, clarify whether such sales are recorded on a gross or net
basis and describe the factors you considered in arriving at your determination.
24. With respect to direct sales, if material to an understanding o f your revenue practices,
please expand to also address any post shipment obligations, return policies, refund rights
or customer acceptance provisions and clarify how these matters are considered in your
revenue recognition practices.

Stock -based compensation expense, page 67

25. Please file as exhibits the consents of the appraiser s mentioned in the first paragraph of
this section and in the second paragraph on page 69  as required by Rule 436.
26. Please tell us whether you have had any preliminary pricing discussions with your
underwriters.  If so, please tell us about the substance of those discussions and tell us
whether those discussions were  considered in determining the estima ted fair value of
your common  stock.
27. Once pricing information is available, please revise to provide a specific discussion of
each significant factor contributing to any significant difference b etween the estimated
fair value of your common stock and the estimated offering price (or pricing range) for
the 12 months prior to the contemplated offering . Please also disclose the aggregate
intrinsic value of all outstanding options based on th e midpoint of the estimated offering
price range .  Note that we are deferring final evaluation of share -based compensation
until the estimated offering price is specified, and we may have further comments in that
regard when you file an amendment containing that information.

Chih -Hsiang (Thompson) Lin
Applied Optoelectronics, Inc.
May 1, 201 3
Page 6

 28. With respect to the valuation performed in January 2013, please expand to describe the
key assumptions that form the basis for your determination that the fair value of a share
of your common stock was $.25 in January 2013.
29. For the twelve months ended December 31, 2012, please expand for the following:
 Provide a  table disclosing  for each grant:  the date of grant, the number of
instruments granted, the exercise price, the fair v alue of the underlying stock, and the
fair value of the instruments granted .  This information may be summarized by
month.
 Provide a  description of the methods and assumptions used in estimating the fair
value of both the underlying sto ck and the instrum ents granted at each grant date.
Describe the reasons for any significant changes in methods or assumptions during
the year.  Also, clarify whether the valuations were contemporaneous or retrospective
and describe whether the valuations were performed by related parties.
 Please update the disclosures for any significant grants after December 31, 2012.
30. We refer to the five year table of stock -based compensation on page 44.  We note that
while your revenues have significantly increased and your losses have s ignificantly
decreased over the past five years, expense recognized for stock -based compensation has
steadily decreased over that period.   With emphasis on the most recent three years,
please provide us an analysis that fully explains the reasons for the steady decrease in the
expense for stock -based compensation and that explains why these decreases are
reasonable in light of the growth of your business during the periods presented in your
filing.  In that regard, describe to us:
 Any changes in methods or  models applied over the period.  If so, describe the
reasons and the related impact on stock -based compensation.
 Any changes in key assumptions or the methods used in arriving at those
assumptions over the period.  If so, describe the reasons and the rela ted impact on
stock -based compensation.

Industry Background, page 72

31. Please tell us the extent to which your products are in the Kansas City network that you
mention in the third paragraph.

Continue to penetrate FTTH, page 78

32. In an appropriate section of your document, please balance your disclosure regarding the
advantages of WDM -PON technology with any material challenges of the technology.
Also clarify whether the WDM -PON technology is your proprietary property.

Chih -Hsiang (Thompson) Lin
Applied Optoelectronics, Inc.
May 1, 201 3
Page 7

 Differen tiated semiconductor laser manufacturing, page 78

33. Please balance your disclosure of the advantages of the MBE process with any material
disadvantages.

Our Products, page 80

34. Please tell us the criteria you used to determine which products to highlight on pages 81 -
83.

35. Please revise so that the terms you use here and throughout your prospectus are
understandable.  For example, we note your use of MSO, OEM, and ODM.

36. We note your disclosure on page 47 that your results are heavily dependent on your
product mix during a period.  We note other discussions of the effect of product mix in
your document on pages 17, 55 and 59.  Please provide the three -year revenue history by
class of similar products or services as required by Regulation S -K Item 101(c)(1)(i) so
that investors can see the changes in your product mix during those periods.

Patents, page 84

37. Please disclose the duration of your material patents.

38. In an ap propriate section of your document, please disclose the duration of the licenses
that you mention in the last risk factor on page 29.  Also explain the portion of your
business affected by those licenses.

Executive Officers and Directors, page 89

39. For ea ch director, please discuss clearly the specific experience, qualifications, attributes
or skills that led to the conclusion that the person should serve as a director for the
registrant at this time in light of the registrant’s business and structure.

Director Compensation, page 93

40. Please provide us your analysis of whether Regulation S -K Item 402(r)(3) or Item 404(a)
require disclosure regarding the transactions mentioned in the first two paragraphs on
page F