Bookham Buys Some More
Is Bookham Technology plc (Nasdaq: BKHM; London: BHM) becoming the European version of JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU)?
Of course, it that were the case, that could be either a good or a bad thing -- depending on whether you were talking about JDSU the fast-rising acquisition machine of 2000 or JDSU the quick-dropping company plagued by billions of dollars in writeoffs and losses in 2001-2002.
Just a few days after agreeing to buy New Focus Inc. (Nasdaq: NUFO), Bookham has snapped up Ignis Optics, a U.S. manufacturer of datacom modules, in an all-share transaction valued at $15.5 million (see Bookham to Buy Ignis Optics and Bookham Gets a New Focus).
As JDS Uniphase did a few years ago, Bookham appears to be buying up companies large and small with the intention of amassing a "one-stop shop" for optical components. Its most recent purchase will plug a gap in its product portfolio, adding a full range of small-form factor pluggable XFP and SFP optical transceivers at multiple speeds and different reaches.
"To date we have not played significantly in the datacom market, which is a large market opportunity for our optical know-how and manufacturing capabilities. With this agreement to acquire Ignis, we are signaling our intent to enter this market," said Bookham's CEO, Giorgio Anania, in a statement this morning.
Ignis claims its expertise is in low-cost assembly techniques (see Ignis Makes Price Promise).
More acquisitions could be in the cards, as Bookham's cash position appears to be strong. The company's cash balance was £70.8 million ($115 million) at the close of the second quarter of 2003. If the New Focus deal goes through, it will add another £65 million ($105 million) to the coffers (see Bookham Gets a New Focus).
So far Bookham has chosen to fund most of its acquisitions with stock. The dilutive effect of the new share issue -- it will have to give up about 27% of its equity to buy New Focus -- could explain why its stock lost ground in Monday trading.
The stock has since recovered, helped by an upgrade from Neutral to Outperform from SoundView Technology, which views the long-term effect of the acquisitions positively. In his report, analyst Dennis Gallagher says the proposed acquisition of New Focus "removes liquidity concerns" and improves Bookham's "competitiveness in low-cost manufacturing, a perceived weakness."
Analysts now view Bookham as the number two in the optical components space, after JDS Uniphase. All the same, it's worth pointing out that Bookham has a long way to grow before it even begins to approach the size of JDSU. According to S&P Comstock, Bookham's market capitalization is approximately $461 million, while New Focus's is approximately $293 million. JDSU's market cap is $5.5 billion.
In related news, Marconi Corp. plc (OTC: MONIY) announced yesterday that it has disposed of its remaining shares in Bookham, netting £16.7 million ($27.8 million) from the proceeds of the sale (see Marconi Sells Bookham Shares). To put this in perspective, when Marconi sold its components business to Bookham back in 2001, the deal was valued at £19.7 million, worth about $29.1 million at the time (see Bookham Gets a Bargain).
Bookham could not be reached for comment.
— Pauline Rigby, Senior Editor, Light Reading