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.