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Bookham must wait for landmark profit

28 Jan 2008

A sharp increase in InP laser sales has helped slim Bookham’s losses, but positive cash flow remains elusive.

After failing to record a profit and running up more than a billion-dollar deficit across its trading history, Bookham is edging ever closer to earning a net income.

In the final quarter of calendar 2007 the company squeezed its overall loss to $5.2 million, down from $11 million in the previous three months and $21.3 million in the same period of 2006.

Sales were up 9 percent sequentially at $59 million. Revenues from 980 nm submarine pump lasers grew 24 percent, thanks in part to Bookham gaining a second customer for this product line. Sales from the company's wideband tunable products surged 66 percent from the previous quarter.

Despite seeing this level of orders repeated in the current quarter so far, Bookham predicted little growth or even a fall in its total sales, making a positive cash flow just beyond its grasp.

"Based on our current cost structure, we believe if we achieve $65 million in revenue that we should start generating cash from operations," said Steve Abely, Bookham's chief financial officer.

This would be a major achievement for the company, which warned investors in its previous quarterly report: "We have never been profitable. We have incurred losses and negative cash flows from operations since our inception. As of September 29, 2007, we had an accumulated deficit of $1,047.1 million."

In the December quarter, the San Jose, California, headquartered company increased sales to each of its three major customers, Nortel, Cisco and Huawei. Sales improved for both the company’s older, legacy, products and newer lines like the 980 nm diode and tunable lasers.

Abely and Alain Couder, Bookham's CEO since last August, pointed out how important the dual sales increase is. Although the company has great hopes for its new products, these typically have lower production yields than the older products. On the other hand, legacy products suffer from 10-15 percent price erosion each year and Bookham finds itself sandwiched between these pressures.

"I personally believe that we are going to see in the optical space the same thing we have seen in semiconductors," Couder said. "Moore's Law will apply. It’s a matter of being organized to reduce price and cost in the same way, where for the same price you have to give twice the performance every two years."

At the moment, Bookham is pushing back the price pressure on a number of fronts, for example submarine pump lasers. Its 10Gbit/s products will benefit from 20 percent annual market growth, according to Couder, and tunable lasers are replacing older fixed-wavelength examples to keep track with expanding bandwidth.

"While there appears to be a slowdown in the general economy, we continue to believe the medium and long-term trend in the telecom industry remains favorable to Bookham," Couder said.

"After five months with Bookham, I am enthusiastic about our prospects."

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