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Pulling the Trigger

Craig Matsumoto
1/28/2009

9:30 AM -- My gut reaction to the Bookham Inc. (Nasdaq: BKHM; London: BHM) and Avanex Corp. (Nasdaq: AVNX) merger announced yesterday is that they had to try this. (See Bookham, Avanex Tie the Knot.) It's the only way either company can keep pace against JDSU (Nasdaq: JDSU; Toronto: JDU), the beefed-up Finisar Corp. (Nasdaq: FNSR), and the StrataLight-fortified Opnext Inc. (Nasdaq: OPXT).

Yes, there are questions about whether the combined company can claw its way back to profitability (their four-quarter prediction feels way too optimistic) and what the cash flow will look like. But staying apart seemed like certain death, considering the companies would be outsized by three competitors in a market that agrees optical-component consolidation has to happen. Bookham and Avanex might as well take their shot.

When asked, on yesterday's conference call, how long Bookham and Avanex courted each other, Bookham CEO Alain Couder said it was "months," but he prefaced that by giving the impression that no stone is being left unturned. "I've only been 18 months in this industry, and everybody is talking to everybody in this industry. CEOs are having lunch with CEOs and other things. We talk to each other all the time."

It wouldn't be surprising if the idea germinated in May, the instant Finisar announced its acquisition of Optium. Heck, everybody else was thinking it. It might not be a dream pairing, but for desperate times, it's an obvious one.

— Craig Matsumoto, West Coast Editor, Light Reading

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