Just when things were getting good, Bookham Inc. (Nasdaq: BKHM; London: BHM) stock took a serious plunge this morning as the company warned of a weak third quarter.

After falling as low as $6.42, down 26.5 percent, Bookham shares were trading down $2.07 (23.7%) at $6.67 midday.

The misery spread to Avanex Corp. (Nasdaq: AVNX), which fell 37 cents (13.2%) to $2.43 midday. The rest of the optical sector wasn't hit as hard: JDSU (Nasdaq: JDSU; Toronto: JDU) was down just 13 cents (3.6%) at $3.55.

Bookham announced that for its third quarter, which ended in March, earnings before interest, taxes, depreciation, and amortization (EBIDTA) will fall between negative $10 million and negative $12 million. The original forecast was for positive $1 million to $3 million. Ooops. (See Bookham Lowers Q3 Forecast.)

Gross margins will be down accordingly: 10 to 12 percent, Bookham now says, versus the 23 to 27 percent the company had predicted.

Today's buzzkill is a reminder that optical components remain a shaky sector, despite the runup that stocks enjoyed in March. Tidbits of good news, a return to profitability by Finisar Corp. (Nasdaq: FNSR), and the OFC/NFOEC tradeshow combined to send shares soaring for the likes of Avanex and Bookham. But analysts and executives alike have fretted that stocks rose a bit higher than warranted. (See Finisar Ignites Optics Explosion, Bookham Basks in 'Cramer Effect', Optical Stocks Climb Again, and OFC: Optics & IPOs.)

Bookham's problems include new obsolescence and scrap expenses associated with the Paignton, U.K., fab, which is being shut down as Bookham moves manufacturing to Shenzhen, China. The Paignton facility's lifeline got extended a bit last year when Nortel ponied up $50 million in orders for discontinued parts. (See Bookham Soars on Nortel News.)

What Bookham really wants to do is sell its newer devices built in China. But there's another problem: Third-quarter sales were unexpectedly rich in older, lower-margin parts, officials say. This caused Bookham's semiconductor fabs to go underutilized -- and an underutilized fab is a drain on profitability. The desire to keep fabs full has led many optics firms -- Bookham included -- to start moonlighting in markets beyond telecom. (See Bookham Ships More Jobs to China and Valley Wonk: Optical's Options.)

On the plus side, revenues for the third quarter, which ended in March, will be around $53 million -- within the $51 million to $54 million range the company had forecast.

Bookham will release third-quarter earnings on May 4.

— Craig Matsumoto, Senior Editor, Light Reading