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Optical/IP

Bookham Boosts Revenues in Q3

Bookham Inc.'s (Nasdaq: BKHM; London: BHM) third-quarter earnings report shows the company isn't out of the woods yet, but officials say their cost-cutting plans are starting to bear fruit.

For the quarter, which ended April 2, Bookham reported losses of $130 million, or $3.80 per share, on revenues of $49.9 million, compared with losses of $41.1 million, $1.23 per share, on revenues of $45.8 million in the previous quarter.

For the third quarter a year ago, Bookham reported losses of $31.5 million, $1.31 per share, on revenues of $41 million.

Bookham's revenues exceeded analyst expectations of $47.5 million, as tallied by Reuters Research. The immense losses included a $98 million writeoff of goodwill associated with past acquisitions; without that and a $3.8 million restructuring charge, Bookham's losses landed closer to $28 million.

Goodwill writeoffs come when an acquisition's value drops. In this case, Bookham wrote off all $30.9 million in goodwill from the acquisitions of Ignis Optics and Onetta, and $67.2 million of a total $87.2 million in goodwill from the purchase of laser manufacturer New Focus, officials said. (See Bookham Buys Some More, Bookham Buys Onetta, and Bookham Gets a New Focus.)

The good news is that Bookham's transfer of manufacturing to Shenzhen, China, is "on track," CEO Giorgio Anania told analysts on a conference call Wednesday.

Shenzhen shipped $3.1 million of Bookham's revenues in the third quarter, and officials expect that figure to increase to $10 million to $12 million in the fourth quarter.

The transfer is key not only because of China's lower labor costs, but because the transition is kicking Bookham in the pocket book. While China ramps up, Bookham's U.K. facilities have to continue churning out parts. This leads to duplication of effort and makes the losses even worse (see Bookham Still Bleeding ).

Bookham expects losses to continue but says they will dwindle. Earnings before income tax, depreciation, and amortization (EBITDA) could be as low as $2 million to $7 million for the first quarter, which ends in October, officials said. That's compared with an EBITDA of $17.9 million for the third quarter, not including the goodwill charge.

The improvement also comes from better gross margins, thanks to a renegotiated contract with top customer Nortel Networks Ltd. (NYSE/Toronto: NT), announced in March. News of the contract, which included a Nortel pledge to buy $50 million worth of discontinued products during the next four quarters, nearly doubled Bookham's stock in a day (see Bookham Soars on Nortel News).

Bookham is also loosening its dependence on Nortel, whose components group Bookham acquired in 2002 (see Bookham Buys Nortel's Components Biz and Nortel to Bookham: Timberrr!).

Cisco Systems Inc. (Nasdaq: CSCO) represented more than 10 percent of revenues for the first time. And while Nortel still represented 39 percent of revenues, that's down slightly from 44 percent in the prior quarter, while the absolute revenues from Nortel stayed roughly flat: $19 million in the third quarter versus $20 million in the previous quarter.

On a conference call with analysts, CEO Anania noted, as he did last quarter, that Bookham has had trouble shipping all its orders, due to the China transition. This does mean Bookham is getting business but isn't cause for cheer, Anania said: "Some people think it's a good problem to have, but our customers don't think so."

One possible glitch is that the Paignton, U.K., facility will have to stay open "six months longer than expected," a side effect of that $50 million in discontinued products being bought by Nortel. That means the cost savings of the China move will be delayed, but the Nortel business "will more than offset the added retained manufacturing costs," Anania said.

In fact, officials on the conference call revealed that the Nortel contract included another $50 million commitment, this time for newer products to be purchased during the next year.

— Craig Matsumoto, Senior Editor, Light Reading

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whyiswhy 12/5/2012 | 3:16:25 AM
re: Bookham Boosts Revenues in Q3 Thanks for the bailout, er handout, er corporate welfare check! As Bond says: Die another day!

Geo
DZED 12/5/2012 | 3:16:24 AM
re: Bookham Boosts Revenues in Q3 Interesting to see Bookham STILL can't build products fast enough. One quarter is unfortunate, two quarters is unforgivable.

Given we're only talking about a 10-15% variance (last quarter vs this quarter vs next quarters prediction) do we really believe this excuse a second time? A smidgen of overtime, which the Paignton boys would welcome, and the problem would be solved. With parallel production lines there simply isnt a problem.

If "transfer of manufacturing to Shenzhen, China, is "on track," " how come "Paignton, U.K., facility will have to stay open "six months longer than expected,"" this doesn' wash. In fact the transfer is running about a year behind schedule. The Paignton team has huge incentives to delay it, as soon as it happens they are on the dole, and no incentive to bring it forward. Liam Nagle waltzed off without completing this single key objective.

If its staying open as "a side effect of that $50 million in discontinued products being bought by Nortel" how come "absolute revenues from Nortel stayed roughly flat: $19 million in the third quarter versus $20 million in the previous quarter" ???? Is Nortel expecting a huge boom in orders? If Nortel has signed up to a total of $150m in the next year, compared to a typical $80m, is Nortel expecting to double its optical business? All the pointers are in the other direction.

If "the Nortel business "will more than offset the added retained manufacturing costs" (of keeping Paignton open) how so? Only $10m of the $50m, is coming out of China, the product built at Paignton is going out at a loss.

I wonder if Inania was managing to keep a straight face while chucking out this guff.

Anyone who has actually experienced Bookhams 'restructurings', and seen the shambles which is the transfer to Szhenzhen (only two employees electrocuted so far), would be fairly sceptical of the junk Bookham is throwing out.

My bet is Bookham is trying to dress the pig for another round of funding, or so the execs can flog off the reserved stock they recently handed themselves.
BlueWater66 12/5/2012 | 3:16:22 AM
re: Bookham Boosts Revenues in Q3 (i) Cash in the bank: $34M
[excluding a small amount of "restricted cash", whatever that it]

(ii) Burn from operations: approx $28M / qtr

(iii) Total cash balance change from last qtr: -$35M

Why would the article discuss anything other than the fact that they have $34M in cash and liquid assets remaining, and their net cash position dropped $35M over the last quarter. Ouch! Increasing their burn with parallel facilities in England and China is strategic, but they are facing short-term cash issues.

CORRECT? If anyone else reads the numbers differently, please let me know.
paolo.franzoi 12/5/2012 | 3:16:22 AM
re: Bookham Boosts Revenues in Q3
DF,as I know you read stuff about Bookham, a simple question.

Why did they (as I thought they were required) not file a cash flow statement?

seven
Balet 12/5/2012 | 3:16:21 AM
re: Bookham Boosts Revenues in Q3 We will soon have several hundred of high quality employees available for hire.

What will happen to New Focus? They had nice products and smart people there.
paolo.franzoi 12/5/2012 | 3:16:21 AM
re: Bookham Boosts Revenues in Q3
DF = deauxfaux a regular LightReading poster and Bookham basher. He/she is a person that understands filing rules. So, I am asking the question to whom I thought was an expert.

I could wait for their 10-Q, which if I recall correctly (are y'all up for calling it iirc yet?) needs to be in a few days at most.

seven


BlueWater66 12/5/2012 | 3:16:21 AM
re: Bookham Boosts Revenues in Q3 I assume it will be in their 10-Q. I don't know, but maybe they are not required to disclose all of their metrics in the press release/earnings calls?

Also: what does "DF" mean?
deauxfaux 12/5/2012 | 3:16:20 AM
re: Bookham Boosts Revenues in Q3 7

They can release anything they want in the press release, but they are req'd to provide it all in the 10Q.

once you eliminate a/r, a/p and inventory, things look bleak. The gaap view is scary
paolo.franzoi 12/5/2012 | 3:16:20 AM
re: Bookham Boosts Revenues in Q3
I was not asking Bluewater anything or you. I was asking DF to save me reading filing rules.

seven
Balet 12/5/2012 | 3:16:20 AM
re: Bookham Boosts Revenues in Q3 Dear Brookseven,

If I were you I would call BlueWater69 may be BG, but not DF. It might be insulting:)
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