Bookham Gets a Bargain
Marconi PLC (Nasdaq/London: MONI) dropped a bit of a bombshell this morning with an announcement of an agreement to sell its components division to Bookham Technology PLC (Nasdaq: BKHM; London: BHM) for 12,891,000 of its ordinary shares, currently worth a mere $29 million (see Bookham Buys Marconi Components ).
Investors think Bookham got a bargain, judging by reactions on the London Stock Exchange, where Bookham shares jumped 11.11 percent to £1.70 (US$2.48) in early trading, while Marconi dropped to £0.41 ($0.60), 3.53 percent down.
On the face of it, $29 million seems dirt cheap for Marconi’s components division, which has 500 staff and two sizeable sites in Caswell and Chelmsford in the U.K.
Marconi has some world-class component developments. These include a range of transmitters based on integration technology that can be scaled easily from 10 Gbit/s to 40 Gbit/s, according to Marconi (see Marconi Components: Up For Sale). It's also developing high performance modulators and Erbium Doped-Fiber Amplifiers (EDFAs).
Marconi has also developed a widely tunable, 5 milliwatt output power laser that could have a bright future. It recently claimed success in making samples of it, saying that it could now give Agility Communications Inc. a run for its money (see Marconi Claims Tunable Laser Advance). To put this in perspective, Agility has raised $186 million in financing to date and has fewer staff than Marconi (see Agility Gets $83M Third Round).
Marconi says the sale of its components division gives it a stake in Bookham of just under 10 percent. “Marconi sees real value in holding a substantial shareholding in a business that will become a leading provider of integrated photonic solutions,” says Mike Parton, Marconi’s CEO, in the company’s press release.
Bookham, like most companies aiming to develop integrated optical devices, has had a turbulent time in the past year or so. However, it appears to have solved some of its technical challenges and is now making more advanced subsystems than many of its rivals (see Bookham Claims Integration Milestone).
Steve Turley, Bookham's chief commercial officer, says there's synergy between Bookham's developments, which, unusually, are based on silicon-on-insulator Arrayed Waveguide Gratings (AWGs), and Marconi's devices, which are made in gallium arsenide and indium phosphide. These materials have very similar refractive indices, which facilitates integration, says Turley. Integrating gallium arsenide and indium phosphide with silica-on-silicon, the technology used by many other AWG developers, is tougher, Turley contends. "The III-V chips [made by Marconi] are much more valuable to us."
"There's very little overlap [between the devices made by Bookham and Marconi]," Turley adds. "It gives us a very good coverage of components from one end to the other." It means, for instance, that Bookham can tackle the integration of a complete "amplified node" comprising EDFAs, transmitters, and tunable lasers from Marconi and variable optical attenuators (VOAs), wavelength mux/demux devices, and optical channel monitors from Bookham.
Investing in Bookham might be a good idea for Marconi, although it doesn't appear to help in its efforts to reduce its mountainous debt (see Marconi Loss Tops £5B). In the past, Marconi has classified its components division as one of its "non-core" assets that it wants to sell in order to raise £500 million ($730 million) in cash by the end of March 2002.
— Peter Heywood, Founding Editor, Light Reading