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Bookham signs $50 million Nortel deal

Bookham's latest supply deal with Nortel includes a $50 million contract for soon-to-be-discontinued components produced at its Paignton, UK, facility.

Optical component manufacturer Bookham has struck a new deal with its number-one customer, Nortel Networks, that includes the shipment of $50 million worth of products from a product line that will soon be discontinued.

Nortel's twelve-month order will extend the lifetime of Bookham's Paignton site in the UK, where these products are to be made. The contract cannot be fulfilled with current inventory, and so additional component manufacture will take place at the facility. The agreement will also see Bookham sell components at slightly higher prices than under the previous Nortel deal.

Bookham added that it is in the final stages of signing another agreement with Nortel covering a supply of products made at its Shenzhen, China, location. Details of this order will not be finalized until 14 April, however.

"As a results of this agreement, Bookham anticipates that revenue, gross margin and operating cash burn will improve significantly beginning in the fourth quarter of fiscal 2005, ending July 2, 2005," said the company in a statement.

Investors reacted positively to the deal, and Bookham s share price nearly doubled on March 30, closing at $3.19.

Nortel has been Bookham's most important customer for several years, and in the most recent quarter, ending on 1 January 2005, the Canada-based company accounted for $17.9 million of sales, or 44% of Bookham's total revenue.

Bookham and Nortel have also altered the loan agreement that was signed when Bookham bought Nortel's optical components division back in 2002 (see related story). The company says that it has provided Nortel with additional guarantees relating to the continuity of supply of its products.

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