Bookham to buy Nortel divisions

07 Oct 2002

UK-based telecoms component manufacturer Bookham is to acquire Nortel's optical components division.

In a deal worth USD 111 million, Bookham Technology, UK, is to buy two of Nortel Networks' biggest optical components divisions.

According to Bookham, the acquisitions will make it the world's third-largest supplier of optical telecoms components.

The deal includes the following divisions: Nortel's optical transmitter and receiver business, which is located in Paignton, UK and Ottawa, Canada; and Nortel's optical amplifier business, which is based mainly in Zurich, Switzerland with some additional capacity at the Paignton plant.

Together, these two businesses have produced a loss of approximately USD 63 million in the first half of 2002.

Nortel will effectively underwrite the deal, having agreed to buy at least USD 120 million worth of optical components from Bookham over the next 18 months. Bookham's head of sales and marketing Steve Turley told Optics.org that considerable consolidation will be necessary to avoid product and service overlap.

This will most likely affect semiconductor manufacturing facilities, packaging operations and research and development programmes.

"The deal puts Bookham at number three globally [in terms of optical components for telecoms applications]," said Turley. With the global market estimated at around USD 3 billion, Bookham would need a 10% share of this total market to break even, according to Turley's figures. "We are not relying on sudden growth in the market, but the deal gives us a bigger market share to exploit when the market does rebound," he added.

Turley also said that Nortel's rivals, such as Lucent and Alcatel, would now be more likely to purchase equipment from Bookham than from their former competitor, promising to boost revenues further.

If the acquisition goes through as expected, Bookham's headcount will rise from its current 800 to approximately 2100 before any consolidation.

In return, Nortel will acquire a 30% share in Bookham - making it the biggest single shareholder. Despite this large stake, Nortel will have no board-level representation in the company.

Bookham president Girogio Anania admitted that the deal did not signal any imminent upturn in the telecoms sector: "Market conditions are depressed and are likely to remain so for the next several quarters," he said.

Author
Michael Hatcher is technology editor of Opto and Laser Europe magazine.