Bookham Transformation Complete
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