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Bookham Shows Signs of Recovery

Changes at Bookham Inc. (Nasdaq: BKHM; London: BHI.L) may finally be paying off, if the company's fourth-quarter earnings offer any sort of guidance, but the company will need more cash to see its plan through (see Bookham Reports Q4).

"We need to raise financing to complete the restructuring of our business," CFO Steve Abely told analysts on Bookham's earnings call late Monday.

Bookham's numbers are improving following the renegotiation of its sales agreement with (NYSE/Toronto: NT), its biggest customer, and the decision to move its test and assembly facilities to Shenzhen, China (see Bookham Soars on Nortel News).

But that might not be enough. "Despite these improvements, we believe it is prudent to raise additional financing," Abely said.

Abely said Bookham could raise $25 million during the "next three to four months" through the sale of assets, including some land. In addition, Bookham has filed a shelf registration statement, opening the door to raise another $35 million through stock sales during the next two years.

Bookham's balance sheet as of July 2 shows cash and equivalents of $25 million, compared with $117 million a year ago.

For its fourth quarter, which ended July 2, Bookham reported losses of $39 million, or $1.16 per share, on revenues of $61 million, according to generally accepted accounting principles (GAAP). Non-GAAP losses were $18 million, or 54 cents per share (see Bookham Reports Q4).

That's compared to GAAP losses of $129.6 million, or $3.86 per share, on revenues of $49.9 million in the previous quarter. For its June quarter a year ago, Bookham reported GAAP losses of $35.6 million, 12 cents per share, on revenues of $38.8 million; at the time, the company was still on a December fiscal year, making June its second quarter.

Those numbers were a shade better than analysts' forecasts of $58.2 million revenues and 54 cents per share of losses, according to Reuters Research. The company's share price closed at $3.25 on Monday. In morning trading today on the London Stock Exchange, Bookham's share price dipped by 3 pence, nearly 2 percent, to £1.77.

Bookham predicts its first-quarter 2006 revenues will be between $62 million and $65 million, indicating growth of about 2 to 7 percent. On average, analysts are expecting revenues of $62.5 million.

The increased revenues come from the new Nortel pact. Bookham had complained publicly that its hands were tied by persistently low components prices, and Nortel apparently responded with the new agreement in March that included higher prices and a commitment to buy $50 million in older products. The news nearly doubled Bookham's stock in one day (see Components Competition Is Killing).

That $50 million in orders will dry up within a year, but Bookham expects to complete the Shenzhen move by then, significantly lowering the company's costs. "We expect that [figure] to be more than compensated by the savings that are now beginning to happen with the move to Shenzhen," Bookham CEO Georgio Anania told analysts on the call.

In the meantime, Bookham is producing the older products at its test facility in Paignton, U.K., which is due to be replaced by the Shenzhen plant. Bookham will start winding down Paignton at the end of the year, with the biggest cuts occurring "between December and March," Abely said.

The Shenzhen move has been expensive and drained some of Bookham's cash through what Anania has called a "triple spending" effect (see Bookham Still Bleeding ). But the savings are beginning to surface, as Bookham's fourth-quarter gross margins were 19.2 percent, compared with 1.1 percent in the previous quarter.

Anania noted that Bookham is also trying to shift its business towards higher-margin products. In fact, the company is voluntarily discontinuing those older products involved in the Nortel deal, he said.

Because of its increased order commitment, Nortel grew as a Bookham customer during the fourth quarter, representing 50 percent of revenues compared with 39 percent in the previous quarter. But Bookham is starting to lessen its Nortel dependence -- (Nasdaq: CSCO) represented 13 percent of revenues during the fourth quarter, compared with 10 percent the previous quarter.

— Craig Matsumoto, Senior Editor, Light Reading

BlueWater66 12/5/2012 | 3:06:41 AM
re: Bookham Shows Signs of Recovery Is something happening with BKHM's New Focus group? There seems to be a lot of "unusual" communications related to them... with consultants, recruiters and investment bankers circling around (or at least mentioning New Focus far more than typical).
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