Struggling components vendor Bookham Inc. (Nasdaq: BKHM; London: BHM) announced some debt-erasing moves and an extended contract with key customer Nortel, but investors reacted by chasing the stock down as much as 11 percent today.

All told, Bookham is taking care of $45.9 million in secured notes and $25.5 million in convertible debentures, in both cases converting much of the debt into stock. (See Bookham Refinances.)

Bookham extended its contract with Nortel Networks Ltd. , which represented 54 percent of Bookham's revenues in the September quarter, according to Securities and Exchange Commission (SEC) documents. Nortel committed to buying $72 million in components from Bookham, extended the companies' pricing agreement through December, and agreed to a lockup of its 4 million Bookham shares until July 1.

Last March, a similar announcement nearly doubled Bookham's share prices in a day. Nortel had agreed to a 12-month contract that included pricing more favorable to Bookham and also guaranteed $50 million in purchases; it's that contract that was extended today. (See Bookham Soars on Nortel News.)

So why is the stock down today? Possibly because Bookham had to pay cash and issue tons of new shares to make all this happen -- 10.3 million shares, plus warrants for another 1.1 million shares. (Bookham had roughly 45 million shares outstanding as of yesterday.)

Here's how it all breaks down:

All warrants come with a price of $7 per share.

One factor that might have prompted the deals is that Bookham's stock has recovered from a dismal 2005, when its value fell 82 percent. (See 2004 Top Ten: Stock Gains & Pains.) The share price has more than doubled since early summer as Bookham has progressed with its long-term cost-cutting moves, which include the offshoring of some work to Asia. (See Bookham Ships More Jobs to China.)

Bookham stock traded down 45 cents (7%) at $6.00 midday. Earlier, the stock had fallen 73 cents (11%) to $5.72.

— Craig Matsumoto, Senior Editor, Light Reading