Street.com on BKHM.
<<LONDON -- Since going public in April, Bookham
Technology (BKHM:Nasdaq ADR - news - boards) gave
investors their first insight into its efforts to become "the
optical Intel (INTC:Nasdaq - news - boards)," when it
released impressive first-quarter sales figures on
Tuesday.
The U.K. firm involved in the technology of photonics
(the use of photons, particularly in telecommunications)
reported revenue up 22% from the previous quarter to 2.5
million pounds ($37.5 million), which is a 563% jump on
the same quarter last year. This rise was largely due to
an 80% increase in product shipment.
As expected, the company's net loss widened to 5.6
million pounds before National Insurance. (Bookham
incurred the equivalent of U.S. social security taxes on
the exercise of stock options not approved by the U.K.
tax authorities). This is an increase from 4.5 million
pounds in the previous quarter and 3.3 million pounds in
the first quarter last year.
The results were well-received and the shares closed up
338 pence, or 9.4%, to 39.13 pounds. On the Nasdaq,
the ADR shares were trading up 5 1/8, or 9.4%, to 59
1/2.
The shares are now some 280% above last month's
initial public offering price of 10 pounds, and reflect the
excitement the company and its proprietary technology
are generating among investors and analysts.
Bookham, which was founded in 1988, has devised a
revolutionary approach to manufacturing optical
components -- which generate, detect, route and control
light signals in fiber-optic telecommunications networks
-- based on silicon chips. This process, known as
ASOC, replaces the conventional labor-intensive
approach to manufacturing optical components with
standard high-volume semiconductor production
methods.
Such technology is needed, because the amount of
voice, data and video over the networks is increasing
exponentially, creating greater demand for fiber-optic
networks and the bandwidth on them. The consulting
group Ryan Hankin Kent forecasts that the compound
annual growth rate for fiber-optic components will be
41% through to 2004, when it should reach $30.9 billion
compared with the $5.5 billion it was worth in 1999.
However, the conventional method of manufacturing
optical integrated circuits is slow and this has led to a
shortage in these components. Bookham may solve this
in one fell swoop with its high-volume, highly scaleable
and potentially low-cost production method and design.
"We hope to capture a large proportion of that market,"
Bookham's senior vice president of sales and marketing
Giorgio Anania said following the results today.
Analysts are optimistic that the company will do just
that. Although Bookham is not expected to break even
until 2001 at the earliest, and CFO Stephen Cockrell
declined to "provide any guidance as to when the
company would make a profit," 12-month price targets
for stock are as high as 75.
Christopher Crespi, analyst at Banc of America
Securities, initiated coverage of Bookham with a buy
rating and a price target of 65, which is approximately
65 times his estimated 2001 revenue of $99 million.
Banc of America has a banking relationship with
Bookham.
Key to all this is Bookham's ability to increase
production rapidly to meet the insatiable demand for
these components, and generate sales volumes that
would allow the company to lower manufacturing costs.
Bookham also needs to beat back the competition and
widen its customer base. Bookham's customers already
include the three largest players in the overall market,
Nortel Networks (NT:NYSE - news - boards), Lucent
Technologies (LU:NYSE - news - boards) and E-Tek
Dynamics (ETEK:Nasdaq - news - boards). However,
according to the first-quarter figures, Canadian giant
Nortel accounted for 54% of Bookham's business, which
is up from the 30% in the previous quarter.
Bookham points out that Nortel and Lucent represent
more than 60% of the world market, so the fact that
those two companies make up 63% of its business is
merely a reflection of that.
Interestingly, Nortel and Lucent are also two of
Bookham's major competitors, as they provide their own
product in the captive market. In the merchant market,
Cockrell says that JDS Uniphase (JDSU:Nasdaq -
news - boards) is Bookham's nearest competitor, but
notes that Bookham is the only company with a silicon
product.
Certainly, the technology that Bookham has developed
places it at the forefront of a high-growth market. And
should it eventually be crowned the "optical Intel" that
would especially cheer Intel itself. Why? Because
Bookham's institutional backers include none other than
the king of chips.>>
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