Bookham eyes cost cuts despite market optimism
Despite a sequential drop in quarterly sales, Bookham says that it is witnessing strong demand for its new tunable laser products and plans to ramp them into volume production later this year.
Giorgio Anania, the chip manufacturer's CEO, said that the San Jose, CA, company was making a "big push" to introduce a variety of new products. Although sales of legacy products to its main customer, Nortel, are declining, Anania is confident about the prospects for tunable sources because of the efforts at service providers such as BT and Verizon, who are upgrading their communication networks.
"The market is moving to new technology, and market share is moving for the first time in years," said Anania in a conference call with investors to discuss Bookham's latest quarter.
As the company had warned (see related story), the quarter that ended on April 1 proved to be a miserable one for Bookham. Fast-declining sales to Nortel dragged overall revenue down to $53.4 million from $60.7 million in the prior quarter.
The company also saw profit margins decline significantly as it underestimated the negative impact that a shift in its product sales mix had on manufacturing volumes.
However, Anania reiterated his confidence in the wider market for optical telecommunication components: "According to our customer feedback, there is no reason for any slowdown in the market," said the CEO.
Anania even hinted that some product lines could become capacity-constrained, with sales of tunable lasers for the next two quarters already almost fully-booked.
He also indicated that there appeared to be a shortage of high-quality VCSEL chips in the market currently, something that Bookham may now feel equipped to address following its recent acquisition of the Swiss VCSEL specialist Avalon.
However, the financial pressure caused by the decline in its profit margins in the recent quarter has prompted a new round of cost-cutting measures. At a cash cost of $8 million, this effort should ultimately provide savings of between $5 million and $6 million per quarter by the end of this year.
Bookham CEO Giorgio Anania details his vision for the future of the optical telecommunication component market in the forthcoming May issue of Compound Semiconductor magazine.
