Shrinking Nortel Sales Hammer Bookham

Putting the blame on declining purchases from Nortel, optical equipment maker Bookham Inc. said it has no choice but adopt an “aggressive overhead reduction plan” that will see it eliminate employees, consolidating its U.K. semiconductor business and move more R&D to China. Bookham said Nortel will only account for 5% to 10% of sales in the third-quarter ended March 30 compared with 26% in the second-quarter.

“Given these recent developments, we are immediately undertaking an aggressive overhead cost reduction plan, which when fully implemented is designed to save an additional $6 million to $7 million per quarter in the September 2007 quarter, said Bookham CEO Dr. Giorgio Anania. “By taking these additional actions, we believe our adjusted EBITDA quarterly breakeven level can be achieved at a quarterly revenue level of approximately $55 million to $57 million.

The Bookham-Nortel relationship was spawned in 2002 when Bookham bought some of Nortel’s optical components business for $112-million in stock, which gave Nortel about 30% of the business. The deal also included a supply agreement that required Nortel to purchase at least $120-million of Bookham products over the first 18 months.

In after-hours trading yesterday, Bookham shares fell about 9%, or 26 cents, $2.65.

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2 Responses to “Shrinking Nortel Sales Hammer Bookham”

  1. Realist Says:

    “Nortel about 30% of the business. The deal also included a supply agreement that required Nortel to purchase at least $120-million of Bookham products over the first 18 months.”

    Makes me wonder about the endless Flextronics amendments in one of their recent 8-K’s. Whether they promised Flex a certain amount of business and that this was the reason for the amendments and why Nortel was so mum on not disclosing the details to the media.

  2. aqwer Says:

    You have to wonder what Bookham did wrong? They were Nortel’s big supplier, but are losing out now. Are they too high priced? Poor delivery performance? Poor quality? Nortel’s optical business seems to be growing again. You cannot lose a customer this quickly unless you are really screwing up.

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