Announced in March, the merger would have created a vertically integrated company, pairing Oplink's optical components with Avanex's subsystems business.

Each company had begun nosing into the other's market, making a merger seem like a logical choice. At the time, officials on both sides said the combined company's market capitalization would be $610 million.

Oplink officials were not immediately available for comment.

Shareholders' opinions might have been swayed by a letter from Zhimin Liu, a former Oplink senior fellow. In documents filed with the Securities and Exchange Commission, Liu expressed concern about "severe adverse developments" at Avanex since the merger announcement.

Specifically, Liu noted that Avanex chief technical officer Simon Cao had left the company and vacated his board seat on June 30 and that Avanex had been sued on May 31 by Hon Hai Precision Industry Inc. for more than $40 million.

Given Avanex's new situation, Liu thought the acquisition was too risky for Oplink. According to Liu, Oplink shareholders would own 50 percent of the combined company, but Oplink would contribute 77 percent of the gross profits for calendar 2002.

According to his letter, Liu owns 3 million shares of Oplink stock. He had been chief executive officer of Telelight Communications Inc. when that company was acquired by Oplink in April 2000. He stayed on as Oplink senior fellow until October 2001.

Oplink has scheduled a conference call on Aug. 20 at 5:00 p.m. Eastern time to discuss the scuttled merger.