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Technology Stocks : Bookham Technology -- Ignore unavailable to you. Want to Upgrade?

To: OWN STOCK who wrote (237)	10/7/2002 10:16:07 AM
From: tech101	Read Replies (1) \| Respond to of 376

Bookham Buys Nortel's Components Biz OCTOBER 07, 2002 Bookham Technology plc (Nasdaq: BKHM - message board; London: BHM) and Nortel Networks Corp. (NYSE/Toronto: NT - message board) today announced a deal under which Bookham will acquire the remainder of Nortel's high performance optical components division -- a move that makes it number three in optical components, after Agere Systems (NYSE: AGR - message board) and JDS Uniphase Corp. (Nasdaq: JDSU - message board; Toronto: JDU) (see Bookham Buys Nortel Components ). Light Reading predicted the purchase three weeks ago (see Nortel Close to Components Sale ). Bookham refers to the proposed arrangement as a "combination" with Nortel's optical transmitter and receiver and optical amplifier businesses. This is because of the size of the deal relative to the size of Bookham. Based on the midmarket closing price of Bookham's ordinary shares last week, the total consideration of the "combination" is valued at $111.6 million (£71.2 million), according to a statement issued by the company. Bookham's market capitalization is approximately $89.8 million, according to StockPoint. As a result, Bookham's share's have been suspended from trading today. The combination is regarded as a reverse merger and is therefore subject to shareholder approval. It's also interesting to note that Nortel will receive 61 million new ordinary shares in Bookham, giving it 29.78 per cent of the issued share capital, making it the company's largest single shareholder. However, Nortel has agreed to abstain from using its voting rights, except in special (undefined) circumstances, so that Bookham may continue to carry out its business independently. In addition to the $44 million in new shares, Nortel also gets warrants for a further 9 million shares and loan notes worth up to $50 million, plus a smallish amount of cash -- $10 million -- in respect of restructuring costs. The question on everyone's lips is whether Bookham can make this purchase work. Large, ailing components businesses like Nortel's may be relatively cheap to buy but could be very expensive to own. A key part of the deal, from Bookham's point of view, is a supply contract with Nortel worth a minimum of $120 million over the next 18 months. In addition, Nortel has agreed to purchase a fixed percentage of its components requirements over a three-year period following completion of the deal. Although the deal is much bigger, Bookham appears to be trying to repeat the successful formula of its purchase last year of Marconi plc's (Nasdaq/London: MONI - message board) components division, which also included a supply agreeement (see Bookham Gets a Bargain ). The formula proved successful in as much as Bookham is projecting a threefold increase in third-quarter revenues, compared to a year ago, in results to be announced later this month. But in the short term at least, the combination is likely to have a negative effect on Bookham's finances. Although it isn't taking on any debt obligations associated with the two loss-making Nortel divisions, Bookham will be taking on around 1,300 more employees. Nortel's transmitter and receiver business, based in Ottawa and Paignton, U.K., employs about 940 people, while the optical amplifier business, based mainly in Paignton and Zurich, Switzerland, employs a further 380 people. The majority of these staff will be transferred to Bookham, the company says, although there will be some consolidation and redundancies. If the sale goes through, Nortel will have rid itself of virtually all of its components activity, as it intended. The other major components division, Coretek, was closed down two weeks ago (see Coretek Is Closed ). With Nortel out of optical components, attention will now turn to Agere, which is also aiming to quit the market and focus on electronic components (see Lights Out for Agere's Opto Biz and Agere's Exit From Opto: Sad but Sensible ). When and if Agere finds a buyer or shuts down its optical business, Bookham could end up as the World No. 2 in optical components. Gulp. This story will be updated as more information becomes available. — Pauline Rigby, Senior Editor, Light Reading www.lightreading.com

To: OWN STOCK who wrote (237)	10/8/2002 9:38:44 AM
From: Mahatmabenfoo	Read Replies (1) \| Respond to of 376

Own_stock, thanks for an interesting post! "The concept of a few big players is a knee jerk reaction by all financial analysts. It is true (1or2) in most industries, so they assume it will happen in optics too" so why shouldn't it be true for optics? Optical stuff requires big capital investment, and it will require more as more components get integrated on a single slab of silicon (or whatever). For the electrical version, chips are so complex & expensive now even the likes of Intel designs them with partners (such as HP). And it's not just capital needs that favor consolidation -- it's standards too -- the fewer, the better, and often that means few companies proposing standards. Seems like consolidation makes at least as much sense here as it does in other consolidated industries. "Now the speculation is BKHM is going to buy NT optics components group... that would take earnings to about negative $1.80/share, and ultimate bankruptcy for BKHM. Stupidity reigns supreme". I wonder. Don't you think optics will inevitably be important, even vital, to computers as well as phones? And that phone use will restart in years, not decades? The resurgence may not happen soon enough for BKHM, but ya gotta admit the company has something between irrational optimism and guts. It takes both to start any hi-tech company. Sooner or later (if only un-seeable decades from now) all data processing is likely to be driven optically both as to wires, chips and storage media --- something fantasized since at least the days of the movie 2001 (Hal's optical memory). Buying BKHM may not be smart investing, but it's a great way to feel part of that fantasized future. - Charles