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Bookham Transformation Complete

Light Reading
NFOEC News Analysis
Light Reading
7/30/2003

The makeover of Bookham Technology plc (Nasdaq: BKHM; London: BHM) is official, as executives today announced they're ending the company's ASOC product line to concentrate on the optical components businesses acquired from Marconi Corp. plc (OTC: MONIY) and Nortel Networks Corp. (NYSE/Toronto: NT).

The ASOC's end means the loss of 160 to 180 jobs and the closure of the Milton, U.K., fab, which is now up for sale. On a conference call this morning with analysts, CEO Georgio Anania didn't indicate whether Bookham will also sell the ASOC intellectual property.

The announcement was included in Bookham's earnings release today, which confirmed that optical components are the company's meal ticket. But Bookham still relies heavily on the exclusive-supply agreements signed with its acquisitions, particularly in the case of Nortel, which accounted for 62 percent of revenues.

For the first six months ended June 30, Bookham reported net losses of £18.1 million (US$30.1 million) under U.K. GAAP rules, or £0.09 per share (15 cents), on revenues of £21.0 million ($34.9 million), compared with year-ago losses of £16.2 million ($24.8 million) on revenues of £7.1 million ($11.8 million).

Bookham went public on the strength of the ASOC, a chip that contained waveguides made of silicon, allowing optical and electronic functions to be integrated (see Photonic Integrated Circuits). ASOC once stood for "active silicon optical circuit" but got changed into a non-acronym at some point.

It's been a long, hard road for ASOCs. Bookham first produced the devices in 1994 -- six years after the company's founding -- and never managed to find a commercial market. At the OFC conference in March, Bookham chief commercial officer Steve Turley acknowledged that the ASOC business had been scaled down in favor of products with more immediate prospects.

"A lot of the markets the ASOC was going to address -- I mean, the whole industry's gone down, but those have gone down more," Turley told Light Reading.

The old Bookham hasn't been vaporized. The company's original expertise in electronics was a key element of the Nortel and Marconi acquisitions, the idea being to create one firm that can do both the optical and electronic sides of a module. Nortel had wanted to do something similar but couldn't round up the funds, Turley said.

Theoretically, this could give Bookham a leg up on top competitor JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU), which outsources its electronics development.

Bookham is facing a dogfight with Avanex Corp. (Nasdaq: AVNX) for the No. 2 spot in optical components. JDSU is the unquestioned leader, and analysts see no reason for that position to change. Avanex is just getting into the game through the acquisitions of Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Corning Inc. (NYSE: GLW) units, a deal that was approved by Avanex shareholders last week (see Avanex Stockholders OK Acquisitions).

The probable fourth-place player is TriQuint Semiconductor Inc. (Nasdaq: TQNT), which acquired the Agere Systems (NYSE: AGR.A) optical components business early this year (see TriQuint Closes Agere Acquisition).

One concern is whether Bookham can expand its customer base in photonics. The Marconi and Nortel deals included exclusive supplier agreements that have fueled the first quarters of Bookham's optical drive. Nortel represented 62 percent of revenues for the second quarter, and Marconi represented 10 percent.

That leaves 28 percent of revenues coming from others, an increase from 20 percent in the first quarter. Included in that number is Huawei Technologies Co. Ltd., which accounted for 10 percent of second-quarter revenues. "We are beginning gradually to expand our customer base," Anania said.

Bookham is also pushing to provide modules and subsystems rather than just components, a strategy JDSU has pursued for the past few years. Some design wins from that business are emerging, although they're at too early a stage to generate any revenues yet, Anania said.

Finally, Bookham is looking to expand its horizons beyond telecom. The company debuted some industrial lasers at the recent Laser 2003 tradeshow in Munich, and it's reviving Marconi's program for monolithic microwave integrated circuits (MMICs), which can be used in wireless systems (see Bookham Opens MMIC Foundry).

Overall, the company's gross margin is still in the red, at negative 15 percent -- but an improvement from negative 24 percent the previous quarter.

— Craig Matsumoto, Senior Editor, Light Reading

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zettabit
zettabit
12/4/2012 | 11:42:09 PM
re: Bookham Transformation Complete
.... for Bookham should include looking for replacement customers for Marconi and Nortel.

Both only agreed to multi-year supply commitments so they could unload their money losing (and cash draining) components subsidiaries to the first loser that would come along and take them. Don't expect new contracts to be renewed at anywhere NEAR the original amounts.

Also, Nortel is an also-ran, and Marconi a never-ran, in the optical ong-haul space, which is what used to be HPOCS and Marconi Components primary area of business into their corporate parents.

Bookham is dying, and will run out if cash in 18 months, however it is a good sign to 'fess-up to the fact that ASON has always been a total DUD. I'm sure that Andrew Rickman cringes everytime he is reminded of that fact, but its a good thing he is not running the company anymore.
zettabit
zettabit
12/4/2012 | 11:42:08 PM
re: Bookham Transformation Complete
.... for Bookham should include looking for replacement customers for Marconi and Nortel.

Both only agreed to multi-year supply commitments so they could unload their money losing (and cash draining) components subsidiaries to the first loser that would come along and take them. Don't expect new contracts to be renewed at anywhere NEAR the original amounts.

Also, Nortel is an also-ran, and Marconi a never-ran, in the optical ong-haul space, which is what used to be HPOCS and Marconi Components primary area of business into their corporate parents.

Bookham is dying, and will run out if cash in 18 months, however it is a good sign to 'fess-up to the fact that ASON has always been a total DUD. I'm sure that Andrew Rickman cringes everytime he is reminded of that fact, but its a good thing he is not running the company anymore.
OptixCal
OptixCal
12/4/2012 | 11:42:06 PM
re: Bookham Transformation Complete
It seems the Bookham strategy, at least during their last round of buyouts, was one of consolidation of the optical components market; good plan if you don't blow it. Unfortunately they blew it. In their haste to gobble up the better assets of the optical components market (and the accompanying built-in purchase orders! from the parent company's) it appears that they've simply forgotten how to sell their new products! Their new toys, not having an ASOC focus, are, from the rumors floating around the industry, seemingly, unfamiliar products to a bunch of unaware Bookham sales people. It seems there's only one sales guy with any idea of what he's doing and who to sell the new toys to, and he's probably ex-Nortel. The "Harry Potter" magic that Bookham once had, seems to be dissapating like methane gas after a bean dinner. Come on you guys! You had the chance to become one of the premier optical component companies in the world based solely on the Marconi, Nortel, Cierra, etc., acquisitions, and you're letting it slip away? If I'm an investor I'm asking some pretty "stinky" questions. Afterall, you haven't been profitable since...ever?
verstand
verstand
12/4/2012 | 11:42:04 PM
re: Bookham Transformation Complete
The makeover of Bookham Technology plc (Nasdaq: BKHM - message board; London: BHM) is official, as executives today announced they're ending the company's ASOC product line to concentrate on the optical components businesses acquired from Marconi Corp. plc (OTC: MONIY - message board) and Nortel Networks Corp. (NYSE/Toronto: NT - message board).

_________________________________________________

"ASOC", no matter it is a look-alike of "ASIC" or Active-silicone, no matter it is silicon-on-silica or silica-on-silicon, no matter it is AWG or PLC, it is destined to play a minor nitch role in the great "integrated photonic pathway" field. It is never a "circuit", my VC friends! Light can be created and absorbed as forms of energy.

Some time ago, I advised the CEO of a company not to continue their SOI-based AWG program. Two to three years later, a Michigan (it was in Florida if I remember correctly) PLC company went out of business. Before that, it had to settle with a tech institute for using their name. Now, Bookham comes to term with the same technology.

I am not saying the technology is no good or of no value. It is simply over hyped by the people who are not technology savvy. Unfortunately, those people control the money, hold the "C" level jobs and believe their money can solve everything!
istouk
istouk
12/4/2012 | 11:42:04 PM
re: Bookham Transformation Complete
Then, do you know any other component technology that is not nitch or you probably meant niche?

I agree it was a bit hyped, but opportunities are endless, especially with SOI, if you combine it with other technologies available.
verstand
verstand
12/4/2012 | 11:42:03 PM
re: Bookham Transformation Complete
The makeover of Bookham Technology plc (Nasdaq: BKHM - message board; London: BHM) is official, as executives today announced they're ending the company's ASOC product line to concentrate on the optical components businesses acquired from Marconi Corp. plc (OTC: MONIY - message board) and Nortel Networks Corp. (NYSE/Toronto: NT - message board).

_________________________________________________

"ASOC", no matter it is a look-alike of "ASIC" or Active-silicon, no matter it is silicon-on-silica or silica-on-silicon, no matter it is AWG or PLC, it is destined to play a minor niche role in the great "integrated photonic pathway" field. It is never a "circuit", my VC friends! Light can be created and absorbed as forms of energy.

Some time ago, I advised the CEO of a company not to continue their SOI-based AWG program. Two to three years later, a Michigan (it was in Florida if I remember correctly) PLC company went out of business. Before that, it had to settle with a tech institute for using their name. Now, Bookham comes to term with the same technology.

I am not saying the technology is no good or of no value. It is simply over hyped by the people who are not technology savvy. Unfortunately, those people control the money, hold the "C" level jobs and believe their money can solve everything!
verstand
verstand
12/4/2012 | 11:42:03 PM
re: Bookham Transformation Complete
OOpse! It should be niche! I was at the end of the day and really tired!
Curious George
Curious George
12/4/2012 | 11:42:01 PM
re: Bookham Transformation Complete
"I agree it was a bit hyped, but opportunities are endless, especially with SOI, if you combine it with other technologies available."


What? A bit hyped and then you add the "opportunities are endless, especially SOI"? You are adding to the hype. How do you solve the interconnect problems as devices are typically pigtailed? Packaging of these devices is far from trivial. Bookham tried to get ETEK to help them and they failed as well.

In retrospect, Bookham's strategy is flawless - but probably not by design. Go public during the bubble on an over-hyped weak technology, get a pile of cash, buy some solid technology for pennies on the investment to produce that technology, dump the stuff that doesn't work and turn the crank on the new stuff. Sounds pretty good if they can hang in there while the market continues to stumble along.
BobbyMax
BobbyMax
12/4/2012 | 11:41:59 PM
re: Bookham Transformation Complete
Both JDSU and AVanex are experiencing huge losses and it is not clear if they have any plans to overcome their difficulties. Both companies are experiencing huge loses. Bookham can fill in the vaccuam caused by failures of JDSU and Avanex.
beachboy
beachboy
12/4/2012 | 11:41:50 PM
re: Bookham Transformation Complete
Troll on Booby. ASOC was always known as a DUD, even when the bubble was at its biggest. Hats off to Bookham for the lifesaving deals at the time. However, Marconi were a bunch of old has beens with no other customers and few products manufacturable. It's a shame that what was a nice Nortel components business has come to this. I agree that new components contracts from Nortel may go elsewhere. It's hard to see anyone but JDSU really picking up significant new business when the market rebounds.
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