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Bookham Gets a New Focus

Bookham Technology Plc's (Nasdaq: BKHM; London: BHM) acquisition spree isn't over yet, judging by this morning's announcement that the U.K. components maker has signed a definitive agreement to buy New Focus Inc. (Nasdaq: NUFO), a U.S. vendor of photonic equipment for non-telecom markets.

Bookham will mint 84 million new ordinary shares as part of a share-for-share transaction estimated to be worth approximately £117.6 million (US$190.5 million) -- making this its largest acquisition to date.

Provided it is approved by the shareholders of both companies, the deal should close in December.

At least one industry expert thinks Bookham has gone bonkers. "I can't imagine why they're doing it," says Rob Plastow, an independent analyst and former founder of tunable laser startup Altitun. "I would have thought they had more than enough on their plate already," referring to the ongoing work of consolidating the company's earlier purchases.

Plastow was critical of Bookham's earlier acquisition of the optical components division of Marconi Corp. plc (OTC: MONIY). "Two turkeys don't make a Christmas hamper," he quipped at the time. (See Bookham Gets a Bargain.)

Bookham went on to also acquire the optical components division of Nortel Networks Corp. (NYSE/Toronto: NT). (See Bookham Buys Nortel's Components Biz.)

These two purchases were aimed at enabling Bookham to rival JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) as an optical components powerhouse. But the latest transaction has quite a different aim. Faced with the ever shrinking size of the components market, Bookham is now trying to reduce its exposure to telecom.

"On a pro forma basis, as if the two businesses had been combined for the first six months of 2003, Bookham’s non-telecom revenue contribution would increase from 6% to 20%," the company said in a statement this morning.

"We believe the acquisition of New Focus will enable us to achieve greater economies of scale, increasing manufacturing and cost efficiencies, while reducing our market risk and giving us greater financial strength," said Bookham's CEO Giorgio Anania.

Sounds good in theory. But it's worth noting that both Bookham and New Focus are loss-making -- and that Bookham has yet to demonstrate that it can successfully integrate any of the companies that it's acquired.

— Pauline Rigby, Senior Editor, Light Reading

desikar 12/4/2012 | 11:24:06 PM
re: Bookham Gets a New Focus Unless Bookham has been giving some thought to the issue, this sounds like they're hoping New Focus knows what to do with all of Bookham's "cool" technology capabilities (and there are indeed many).

Disciplined diversification takes a lot of management intensity and structure. Succeeding with as strategy of "buy what you can hoping the grass is greener on the other side" needs a lot of good fortune. Hope they are lucky.

-desikar

Sibylle 12/4/2012 | 11:24:05 PM
re: Bookham Gets a New Focus
The buy under price is 190 mil.
NuFocus has a market cap of around 280 mil.
It has around 190 mil in CASH !! So Bookham is getting the business for free !

What am I missing ? Whats going on here ? WHO's IN CHARGE ?
desikar 12/4/2012 | 11:24:04 PM
re: Bookham Gets a New Focus That explains the deal.Thanks for the post, gzkom.
Tactics trumps strategy, yet again!
-desikar
whyiswhy 12/4/2012 | 11:24:04 PM
re: Bookham Gets a New Focus Oops, meant to say BKHM. Though AVNX deals are the same: cash!

-Why
whyiswhy 12/4/2012 | 11:24:04 PM
re: Bookham Gets a New Focus Look, all the AVNX deals have one thing in common: cash. The physical and IP assets are worthless and they know it. They are of course not so stupid to say as much. These companies (NuFo, GLW and Alcatel) will be stripped and shrunk to the bone free up as much cash as possible, that's all.

BODs at the target companies wanted out, taking part of AVNX was at least some upside to what otherwise was straight down.

My respect for AVNX has gone up, from the short term business perspective. Congrats for knowing how to toss greedy fools for their dimes: die another day as Bond would say.

Long term they are doomed of course.

-Why
gzkom 12/4/2012 | 11:24:03 PM
re: Bookham Gets a New Focus Dear Lightreading?

A kind of Censership?
desikar 12/4/2012 | 11:24:03 PM
re: Bookham Gets a New Focus LR,
What happened to gzkom's post? Did it get purged because it quoted Optical Keyhole's interview with Steve Turley?
desikar
Soup 12/4/2012 | 11:24:02 PM
re: Bookham Gets a New Focus Yeah, they do that sort of thing now and then (happened to me before, too).

Free speech does not protect you here (it's LR's board, afterall).

Soup.

desikar 12/4/2012 | 11:23:48 PM
re: Bookham Gets a New Focus Well, that's the only thing that can be concluded by LR's erasure of gzkom's posting (and reposting) of Optical Keyhole's interview with Steve Turley of Bookham. That interview shed some important light on Bookham's thinking behind the acquisition, which turns out to be primarily a grab for cash. Pauline had already pointed out the strategic flaws in the acquisition and the two articles together completed the full picture.

I am not posting a link to the article, and it would be interesting to see if the idiosyncrats at LR will pull this one, too :)

desikar
chips 12/4/2012 | 11:23:40 PM
re: Bookham Gets a New Focus I share your concerns. The jury is still out on whether Bookham has successfully managed the integration of its previous acquisitions - glowing press releases not withstanding. Nu-Focus and the market dynamics they face will be a larger challenge for Bookham to adapt to.

Good luck lads.
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