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Bookham's revenues improve, but share price falls

04 Aug 2006

Fourth-quarter results fall short of analysts' expectations, but new products and high-power lasers show strong growth.

Bookham's share price slid to a year-long low yesterday as its fourth quarter results fell short of analysts' estimates. But the optical component manufacturer's financial performance did improve: revenues for the quarter reached $55 m, compared with $53.4 m in the third quarter, while net losses improved from $48 m in the third quarter to $27 m in the last three months.

Figures for the full fiscal year were also up on 2005. Sales reached $231.6 m, up from £200.3 m in 2005, and net losses improved to $87.5 m in 2006 from $248.0 m in the previous year. Bookham CFO Steve Abely said in a conference call that Bookham intends to get "back to operating cash-flow break-even over the net few quarters".

Investors were clearly disappointed by the results, even though the fourth-quarter figures fall within the guidance provided by Bookham three months ago. The company's share price fell to a year-long low of $2.29 on Thursday, and only recovered to $2.42 by the close of trading. Bookham's share price has been dropping steadily since it reached a peak of $10.86 in March.

Bookham CEO Georgio Anania was keen to point out the positives. "The optical components market continues to strengthen," he said in the conference call. "We see a lot of demand for new products - particularly wideband tunable lasers, but also new amplifiers, high-power 980 nm pumps, and various actives and subsystems."

Anania also noted that Bookham had become less reliant on revenues from Nortel. While Nortel accounted for some 56% of all component sales in the company's second quarter, that share is expected to fall to 25% by the second half of 2005 - in line with expectations. According to Anania, the revenue shortfall has been more than offset by new business, particularly from Huawei, which accounted for 10% of Bookham's fourth-quarter sales, and Cisco, which was "just short" of the 10% mark.

Bookham's fourth-quarter results also reveal continuing growth in non-telecom business. "Our non-telecom revenue, primarily our New Focus and high-power laser businesses, accounted for 19% of total revenue [about $10.2 m], up from 17% last quarter." Anania expects revenues from the industrial sector, particular its high-power laser diode business, to continue to show double-digit growth in the fourth quarter.

Finally, Bookham's lengthy cost-reduction strategy looks as though it will start to pay off by the end of 2006. Various manufacturing and assembly processes are being transferred to the company's facility in Shenzhen, China, while the site in Paignton, UK, will be wound down. Anania expects to see cost savings of $4 m per quarter by the end of 2006, with further savings of $1.5-2.5 m by the March 2007 quarter. Eventually, Anania expects that half of Bookham's entire workforce will be based in China.

• Bookham also announced that it has secured a $25 m credit line with Wells Fargo Foothill. This will come as welcome news, since the company's cash reserves have reduced from $67 m in the third quarter to $43 m at the end of Bookham's fiscal year.

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