LONDON -- Since going public in April,
gave investors their first insight into its efforts to become "the optical
," 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 ($3.75 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
, 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,
. 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
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.