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Bookham diversifies with Avalon acquisition

21 Mar 2006

Bookham snaps up Avalon Photonics, a Swiss maker of vertical-cavity surface-emitting lasers, in a deal worth at least $5.5 million.

Optoelectronic chip manufacturer Bookham is to broaden its product portfolio with the acquisition of Avalon Photonics, a Zurich-based manufacturer of vertical-cavity surface-emitting lasers (VCSELs). The all-stock deal signed by the two companies is worth an initial $5.5 million, a figure that could rise by a further $2.5 million if the acquired business hits certain revenue and production milestones over the next two years.

Bookham says that the deal will help to further extend its applications base beyond the telecoms market. Avalon specializes in the manufacture of high-speed 850 nm VCSELs, arrays and subassemblies, and key target markets for Bookham include sensing - and in particular a new type of optical mouse - and short-reach datacom links.

"Further expansion of our addressed markets outside of telecom is a key element in increasing Bookham's profitability," Steve Turley, Bookham's chief commercial officer, told Optics.org. "It is all part of a strategy to deliver differentiated optoelectronics solutions into a range of markets."

Most of Avalon's manufacturing line will also be transferred to Bookham's existing Zurich facility, making more efficient use of the UK-based company's manufacturing infrastructure. "We can leverage the assets we have to deliver more revenue and more profitability from essentially the same manufacturing cost base," said Turley. "I expect the major [financial] benefits to come in 2007, but it is too early at this stage to quantify our financial plans publicly."

Bookham is no stranger to such technology transfer, having already moved a much larger indium-phosphide manufacturing line from Ottawa, Canada, to its UK facility in Caswell. In this case, Turley is confident that customers will be unaffected by the transfer, since Bookham plans to build up inventory at the chip level and ensure that processes are fully operational in its own facility before closing down Avalon wafer fab. The two facilities are only 3 km apart, which will ease the transfer process, although the exact timetable has yet to be finalized.

Avalon is a relatively small-scale VCSEL producer, but its technology has some proprietary features that allow single-spatial-mode operation. The company was originally set up at the height of the telecom boom as a spin-off of the Swiss Center for Electronics and Microtechnology, and now employs 15-20 people. "Avalon has a highly skilled team that will be a real asset to Bookham," said Turley. "We will continue to invest to further enhance this product capability."

In particular, Avalon has in the past developed some longer-wavelength VCSELs. Bookham will not focus on these more exotic devices initially, but has not ruled out the possibility of moving them into volume production at a later stage.

•  Bookham also announced that it had raised £13.8 m (about $24 m) from the sale of its UK manufacturing facility at Caswell to Scarborough Developments, a UK-based property investment company. As part of the transaction, Bookham has entered into a long-term lease of the Caswell site with the investment company. The deal is part of a strategy that is intended to clear Bookham's long-term debt.

Susan Curtis is Editor on Technology Tracking

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