Bookham, Avanex Form Oclaro
It's official: Bookham Inc. (Nasdaq: BKHM; London: BHM) and Avanex Corp. (Nasdaq: AVNX) have combined, and the new company is called (drum roll) Oclaro.
Oclaro was born today after shareholders from both sides agreed on the merger. Oclaro is getting its first public showing as Bookham announces third-quarter earnings today.
Light Reading did not have a copy of the Oclaro logo at press time, but we're told it's a nice shade of night-sky blue.
A new name and new look were vital because the companies wanted to paint this merger as a fresh start. "Both companies, as you know, have long histories, and good periods and not-so-good periods," Yves LeMaitre, Oclaro's vice president of sales and marketing, tells Light Reading.
That's one way to put it. In 2005, Avanex and Bookham reached a low point of nearly running out of cash, pulling out all the financial stops to stay afloat. (See Bookham, Avanex Shore Up.)
Bookham and Avanex don't overlap much in products, meaning the deal won't address the oversupply that's weighted down optical components. (See Optical Components: Still Too Crowded and Bookham, Avanex Defend Their Deal.)
But the companies say the merger gives them the leverage to compete against JDSU (Nasdaq: JDSU; Toronto: JDU), and against the beefed-up Finisar Corp. (Nasdaq: FNSR) and Opnext Inc. (Nasdaq: OPXT). (See Finisar & Optium Challenge JDSU, Opnext Steps Up With StrataLight, and Opnext Changes CEOs, Starts Cutting.)
"If the people side is well dealt with, which is typically the No. 1 reason why mergers don't succeed, it really gives us a different position in the marketplace," LeMaitre says.
Many details of the merger are already known, including the companies' estimate that they'll eventually cut costs by $28 million per year by merging. Bookham's executive team will be running Oclaro; most of the Avanex executive team has already signed resignation agreements. (See The Bookham Team.)
Layoffs are probably the biggest question on employees' minds. A few cuts are inevitable, but Bookham officials say a mass layoff isn't in the works.
"This is not going to be one of those bloodbath mergers," LeMaitre says. "Both of the companies have gone through a fair amount of their restructuring already, so it's not a merger where you have to cut 50 percent of your staff and some product lines because they overlap."
Oclaro also won't be shutting down any R&D or manufacturing sites, officials note. The company will continue using Fabrinet Co. Ltd. (NYSE:FN) as a contract manufacturer, as Avanex did, but it will also keep operating Bookham's manufacturing facilities.
That might sound like a complex juggling act, but Bookham had intended to start using contract manufacturers anyway. "In a sense, the hybrid model was already part of Bookham. When we fill up Shenzhen, the plans were not to build a parallel Shenzhen," says Jerry Turin, the Bookham CFO who's doing the same job with Oclaro.
Avanex saw a drop in its cash during the December quarter, to $37.1 million from $49.6 million in the previous quarter, but officials insist that's not a sign of trouble to come.
"With the combined cash reserves of both companies, you've got a strong balance sheet. You've got no debt from either company, and Bookham brings a line of credit to the table," Turin says.
— Craig Matsumoto, West Coast Editor, Light Reading