Bookham sells test site; admits accounting flaw

22 Sep 2006

In a deal that includes a lease back option, the fiber-optic component maker expects to net $9.5 million from the sale of its Paignton, UK, assembly and test facility.

InP-based fiber-optic component and module supplier Bookham has agreed to sell its test and assembly facility in Paignton, UK, to an undisclosed buyer for £5 million ($9.5 million).

The deal, which includes an option to lease back a portion of the site from the new owner, is expected to be completed in mid-November. Bookham will be able to lease back space for a two-year term that it can terminate at three months notice.

The sale generates more much-needed cash for the San Jose, CA, chip manufacturer, which has also been bolstered through a recent share issue that generated $31.4 million.

The operations carried out at Bookham's Paignton facility focused on test and assembly, and the company has long been in the process of shifting this part of the business to its Shenzhen, China, site to minimize costs.

Cash-flow warning

Bookham has also just issued its latest annual report, covering the year that ended July 1, 2006.

In its report, the company warned that if for any reason it failed to meet current cash-flow forecasts, or if it was unable to draw sufficient funds via its new loan with Wells Fargo, then it would need to raise between $10 million and $20 million to ensure operation as a going concern until July 2007.

The report also contained details of what management described as a "material weakness" relating to its financial reporting.

"As of July 1, 2006, our system of internal control over financial reporting was not effective based on the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)," concluded Bookham's CEO Giorgio Anania and CFO Steve Abely.

Bookham's accounting firm Ernst and Young agreed with that assessment, saying that the material weakness had resulted in adjustments to the company's gain or loss on foreign exchange and other income accounts.

In its audit, Ernst and Young also mentioned Bookham's potential need to raise yet more funds to remain a going concern.

• Bookham will be showcasing its tunable laser technology, now fully qualified and said to be in full volume production in Shenzhen, at next week's European Conference on Optical Communication (ECOC) held in Cannes, France.

Together with an InP-based Mach-Zehnder modulator, the tunable laser is designed for both long-haul and metro applications and covers the 1528-1563 nm wavelength range known as the C-band window.