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Bookham Readies More Cuts

Yet another round of cost cutting is coming to Bookham Inc. (Nasdaq: BKHM; London: BHM) following a disappointing earnings report and forecast for the current quarter. (See Bookham Reports Q2.)

Bookham shares were down 26 cents (8.9%) to $2.65 in after-hours trading Thursday.

Glum earnings, sometimes infused with layoffs, have become almost routine for Bookham, as its previous three earnings reports were all downcast. (See Bookham Trims Again, Bookham Slips Again, and Bookham Bruised by Q1.)

But the newest cuts, aimed at saving $6 million to $7 million per quarter, are being made with the goal of reaching breakeven this year.

"We are being very, very clear internally that we are driving the entire company to achieve the adjusted EBIDTA [earnings before interest, depreciation, taxes, and amortization] breakeven before the end of the September 2007 quarter," CEO Georgio Anania told analysts on a conference call.

It's unclear how many of Bookham's 2,100 employees will be affected by the latest cuts.

"I'm legally unable to tell you," Anania said when asked on the call. That's because Bookham has only started its legal consultation with employee representatives in the U.K., he said.

What's triggering the latest cuts is an unexpected drop in revenues from Nortel Networks Ltd. , Bookham's largest customer. It seems inventories at Nortel built up unexpectedly, causing a temporary lull in orders from the company, Anania said, emphasizing "temporary." He expects Nortel to return to normal buying patterns after March.

Bookham now expects revenues in the March quarter to be between $44 million and $48 million. Analysts were looking for $56.2 million, according to Reuters Research .

It appears the latest round of cuts will include layoffs at Bookham's semiconductor fab in Caswell, U.K. "We need to make sure we can run it more affordably," Anania said.

Other cuts will come from the continued migration of non-semiconductor manufacturing to Shenzhen, China -- a process begun in 2004. With the Shenzhen site now fully operational, Anania said the company is comfortable with moving even more functions over there.

When will it all end? Soon, Anania thinks. Yesterday's press release quotes him saying: "I believe this will be the low point in calendar 2007 and that revenue will rebound over the remainder of the year."

For its second quarter, ended December 30, Bookham reported losses of $21.3 million, or 31 cents per share, on revenues of $56.3 million. In its first fiscal quarter, which closed at the end of September 2006, the company lost $22.9 million, or 38 cents per share, on revenues of $56.4 million.

For its second quarter a year ago, Bookham reported losses of $11.9 million, or 19 cents per share, on revenues of $60.7 million.

Pro forma net losses of 26 cents per share in the second quarter were worse than the analysts' estimate of 16 cents, according to Reuters.

— Craig Matsumoto, West Coast Editor, Light Reading

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DZED 12/5/2012 | 3:15:29 PM
re: Bookham Readies More Cuts Revenues down
Gross margin down (with all production now in China, geez..)
Losses up
Exec bonuses up (a cool $2m this quarter alone)
Exec and non-exec directors dumping the stock as fast as they can

But don't panic! In two quarters it'll be dandy!
Haven't we heard this 'two quarters' thing for the last 28 quarters?

And no chance of the Bonex merger, scuppered according to other posts in part because Avanex wouldn't swallow Anania's payoff.
The whole company goes down for Giorgios ego.

Pity the poor souls still working there.
Brightspark 12/5/2012 | 3:15:28 PM
re: Bookham Readies More Cuts Also - as I missed the conf. call with the analysis, and most probably most of the UK work force, did anyone question Annia why he himself was off-load his shares in his own company that was to turn the corner, bounce of the bottom, rise like a Phoenix from the ashes, in the next two quarters?
tapalroze 12/5/2012 | 3:15:28 PM
re: Bookham Readies More Cuts So apparently they're consolidating the Caswell chip fab by clearing out the old 2-inch InP line and squeezing the remaining workforce into fewer buildings. But not by outsourcing epitaxy or any other processing steps. Can't quite see how that's going to save much of the $6-7 mil per qtr, but then I guess that's why I'm not a chief [insert expletive] officer...

I'm getting the words "Titanic" and "deckchairs".

DZED, how on earth do the execs get bonuses for this? Share price has crashed, sales heading south, margins likewise....what are the bonuses based on, air miles? Carbon offset points?

Any idea what Giorgio Banana's pay-off demand was?
Pete Baldwin 12/5/2012 | 3:15:27 PM
re: Bookham Readies More Cuts Bookham is saying their EBIDTA breakeven point, after the latest restructuring, will be $55-57 million in revenues.

Assuming the March quarter really is an aberration, then they're right at the cusp of that level, right? Right?

Just playing devil's advocate here. Somehow, I don't think it's going to cheer anybody up...
tapalroze 12/5/2012 | 3:15:26 PM
re: Bookham Readies More Cuts Yeah, IF they do manage to knock $6-7 million off each quarter's cost line AND we don't take any restructuring charges/bonuses etc into account then - yup - they do get to some kind of break even.

And hats off to them if they do achieve that, but it seems unlikely to me that a few office reshuffles and switching some development stuff out of Ottawa will get them anywhere near before the current pile of cash runs out.

Another thing I don't get is this - why didn't they do this latest restructuring last year (or earlier)? Then we could have just been talking about an EBITDA breakeven (or close to) for Q2. Or am I missing something?
FunkyMunky 12/5/2012 | 3:15:26 PM
re: Bookham Readies More Cuts Assume that 130 people get made redundant.

At an average salary of $60K/year thats $7.8M in annual savings but ther is the redundancy costs to factor in. If these are 6 weeks salary (I don't know what the minimum is in the UK and US/Canada) that's $900K in one hit plus reorganisation costs.

Where does the additional $20M in savings come from?

What else needs to be factored in.
jmunn 12/5/2012 | 3:15:26 PM
re: Bookham Readies More Cuts Is this what happens when NT is your revenue engine? Who really deserves to wear the cement galoshes?
FunkyMunky 12/5/2012 | 3:15:26 PM
re: Bookham Readies More Cuts But you also have to allow for the costs of the restructuring in terms of redundancy payments and further reorganisation/movement of product and development to China. Its a race Bookham cannot win.

Also how are they going to lose enough people to close the gap on $20M of losses when they are not anticipating any uplift in sales?

The bows are just beginning to slip below the waves and the execs are taking the only lifeboats.

FunkyMunky 12/5/2012 | 3:15:26 PM
re: Bookham Readies More Cuts Given that the Execs have been offloading the stock at any opportunity in recent times surely there is a case for investigation as to what information they had available to them and when?

With the stock tanking by 20% today there has to be some element of concern in this area.

opticalinterest 12/5/2012 | 3:15:25 PM
re: Bookham Readies More Cuts Giorgio is going on vacation for three weeks starting on Monday. Right after such an awful performance.
Leading by example?
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