SecProbe.io

CORRESP
1
filename1.htm

corresp

July 22, 2005

VIA EDGAR

Gary Todd

Reviewing Accountant

Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street N.W.

Washington, DC 20549-0306

    RE:

    Bookham, Inc.

    Form 10-K/A for the transition
period ended July 3, 2004 and subsequent Exchange Act filings

    File No. 000-30684

Dear Mr. Todd:

           Set forth below is our response to your letter dated June 16, 2005 (the “Comment Letter”),
regarding the Form 10-K/A for the transition period ended July 3, 2004 and subsequent Exchange Act
filings of Bookham, Inc. (the “Company” or “we”).

Form 8-K dated October 26, 2004

Form 8-K dated February 1, 2005

Form 8-K dated May 4, 2005

    1.

    We refer to the response to prior comment 14. We have continuing concerns about presentation
of non-GAAP information in the form of an income statement. In that regard, we believe such
presentations are normally inappropriate extensions of guidance from Article 11 to Regulation
S-X. As previously indicated non-GAAP data provided in the form of an income statement
presents numerous non-GAAP subtotals and balances. We believe that each individual measure is
a non-GAAP item requiring separate justification under Item 10(e)(1)(i) to Regulation S-K.
The most recent earnings release furnished under Form 8-K provides combined justification
statements under the introductory paragraphs to the section titled “Non-GAAP Financial
Measures,” and provides disclosure about your rationale for certain adjustments. However,
statements provided in support of non-GAAP data under Item 10(e) should separately and

distinctly address each non-GAAP measure. That is, for instance, adjusted operating expenses,
adjusted operating loss, adjusted pre-tax income, adjusted net income, adjusted per share
amounts and any other adjusted items. As well, EBITDA and adjusted EBITDA should be
separately addressed. Those disclosures should address each of the following for each
measure:

    •

    The substantive reasons why management believes the non-GAAP measure provides
useful information to investors;

    •

    The specific manner in which management uses the non-GAAP measure to conduct or
evaluate its business;

    •

    The economic substance behind management’s decision to use the measure; and

    •

    The material limitations associated with the use of the non-GAAP measure as compared
to the use of the most directly comparable GAAP measure, including the manner in which
management compensates for these limitations when using the non-GAAP measure;

Please expand to fully comply with the requirements of the Item. Alternatively, delete
the non-GAAP income statement from all future filings. In that event, you may make
disclosure about individual non-GAAP measures you use in managing and evaluating your
business if all of the required disclosures are provided in relevant future filings. Using
your most recent earnings release, show us how you intend to apply this comment.

Response: The Company acknowledges the Staff’s comment and will comply in future
filings.

* * * *

           If you have any questions or would like further information concerning the Company’s responses
to the Comment Letter, please do not hesitate to contact me at (408) 919-6059. Thank you for your
time and consideration.

    Sincerely,

    /s/ Stephen Abely

    Stephen Abely

    Vice President and Chief Financial Officer

Exhibit 99.1

Bookham Announces Third Quarter

Fiscal 2005 Financial Results and Updates Outlook

SAN JOSE, Calif., – May 4, 2005 – Bookham, Inc. (Nasdaq: BKHM), a leading provider of optical
components, modules and subsystems, today announced financial results for the third quarter of
fiscal year 2005, ended April 2, 2005.

Net revenue in the third quarter of fiscal year 2005 was $49.9 million, a sequential increase of 9
percent compared with net revenue of $45.8 million in the second quarter of fiscal year 2005.

Under generally accepted accounting principles (GAAP), gross margin in the third quarter was 1.1
percent, an approximately 8.9 percentage point improvement compared with a gross margin of negative
7.8 percent in the second quarter. The sequential improvement in gross margin was primarily the
result of a shift to newer, more profitable product lines, product cost reductions, and continued
reductions in manufacturing overhead cost. In addition, gross margin was positively impacted by
higher pricing associated with the terms of the amended supply agreement the Company entered into
with Nortel during the third quarter.

Operating expenses in the third quarter were $129.7 million. Third quarter operating expenses

compare with operating expenses of $37.1 million in the second quarter. Net loss in the third
quarter was $129.6 million, or a loss per share of $3.86. Third quarter net loss includes charges
of $98.1 million for a goodwill write-down relating to the Company’s acquisitions and $3.8 million
attributable to restructuring charges. Third quarter net loss compares with a net loss of $41.1
million, or a loss per share of $1.23 in the second quarter. Second quarter net loss included a
restructuring charge of $7.9 million attributable to previously announced restructurings. The
goodwill impairment calculation is the company’s best estimate and may be subject to further
adjustments as the company finalizes its valuation assessment. The company expects to complete its
assessment by fiscal year end July 2, 2005.

The Company provides certain
supplemental non-GAAP financial measures, such as non-GAAP net loss
and Adjusted EBITDA to provide readers the
benefit of viewing the Company’s performance using the same financial metrics that the management
team uses. We believe including these particular non-GAAP measures enhance the comparability and
transparency of our results for the period. A reconciliation table of
GAAP to non-GAAP measures is
included in the financial tables section of this release.

Third quarter non-GAAP net loss was $27.7 million, or $0.82 per share. This compares with a
non-GAAP net loss of $33.0 million, or $0.99 per share in the second quarter. The
Company calculates non-GAAP net loss as net loss excluding
restructuring costs, redomicile costs and
impairment charges. Please see additional information in the section “Non-GAAP
Financial Measures” below.

Adjusted EBITDA was a loss of $17.9
million in the third quarter compared with a Adjusted EBITDA loss of $24.4 million in the second
quarter, representing a decrease of 27%. The Company calculates
Adjusted EBITDA as net income/loss,
excluding the impact of net interest expense, income taxes,
depreciation and amortization, restructuring costs,
redomicile costs impairments. Please see additional information in the section “Non-GAAP Financial
Measures” below.

Cash, cash equivalents, short-term investments and restricted cash at the end of the third quarter
was $42.1 million compared with $77.8 million at the end of the second quarter.

Third Quarter Highlights

Bookham announced a number of key events during the third quarter. These included:

    •

    Continued to diversify its customer base. Nortel accounted for 39% of revenue, down from 44% in the
second quarter of fiscal 2005. Sales to customers other than Nortel increased 19% sequentially.
Revenue from Cisco also increased significantly and represented approximately 10% of revenue in the
third quarter.

    •

    Signed an amended supply agreement with Nortel that provides for order commitments of approximately
$100 million for product purchases and last time buys over the next four quarters through March 2006.
The Company expects that this will contribute to improving Bookham’s financial performance and
manufacturing visibility, facilitating Bookham’s efforts to optimize production and manufacturing for
all customers.

    •

    Ongoing migration of assembly and test to Shenzhen, China. The transfer of manufacturing to Shenzhen,
a major component of the company’s cost reduction program, remained on schedule. Net revenue from
Shenzhen was $3.1 million in the third quarter, and is expected to be in the range of $10 million to
$12 million in the fourth quarter of fiscal 2005.

    •

    Appointed Dr. Peter Bordui as Chairman of the Board and promoted Jim Haynes to Chief Operating Officer.

“In the third quarter, we are pleased to have achieved strong revenue growth and positive
gross margins. Revenues from new customers were particularly strong and Cisco became a 10% customer
for the first time. Demand for our new products, particularly products addressing the metropolitan
market, continued to accelerate,” said Dr. Giorgio Anania, president and chief executive officer of
Bookham, Inc. “Looking forward, the amended supply agreement we signed with Nortel provides order
commitments that will contribute to continued revenue growth and gross margin improvement, as well
as improved visibility. I believe that the Nortel agreement, the continued broadening of our
customer base and our own cost reduction efforts, including those associated with the ongoing
transfer of manufacturing to Shenzhen, will combine to help our performance for the remainder of
the calendar year.”

Outlook and Guidance

“We are very encouraged about our growth prospects and expected financial performance for the next
two quarters,” said Dr. Anania. “Demand for our products is expected to remain strong with
production at full capacity for certain product lines. In addition, we expect to qualify more
customers and products in our Shenzhen facility during the fourth quarter, and we remain on track
to have the qualification process for most of our products completed by the first quarter of fiscal
2006.

The following forecasts are based on current expectations. These statements are forward-looking,
and actual results may differ materially. Please see the Safe Harbor statement in this release for
a description of certain important risk factors that could cause actual results todiffer, and refer
to Bookham’s annual and quarterly reports on file with the Securities and Exchange Commission (SEC)
for a more complete description of the risks.

Furthermore, our outlook excludes items that may be required by GAAP due to their uncertain nature,
such as restructuring and related costs, acquisition or disposal related costs, and reductions of
goodwill and other long-lived assets for which the likelihood and amounts are not determinable at
this time.

For the fourth quarter of fiscal 2005, ending July 2, 2005, the Company expects revenue will be in
the range of approximately $57 million to $60 million, which is an increase of approximately 15
percent to 20 percent over the third quarter of fiscal 2005. In addition, the Company expects
revenue to continue growing into the first quarter of fiscal 2006,
ending Oct. 1, 2005, and will be approximately $60 million to $65 million.

The Company believes its ongoing cost reduction efforts, along with increased revenue, due in part
to the amended Nortel agreement, will result in further gross margin improvement. Fourth quarter
gross margin is expected to be approximately 14 percent to 18 percent. Gross margin in the first
quarter of fiscal 2006 is expected to approximately 18 percent to 23 percent.

Fourth quarter Adjusted EBITDA, excluding the impact of expected restructuring charges, will be in the range
of negative $8 million to negative $12 million. The Company
expects Adjusted EBITDA will improve further in
the first quarter of fiscal 2006 and will be in the range of negative $2 million to negative $7
million.

Conference Call

Bookham is scheduled to hold a conference call to discuss its third quarter fiscal 2005 financial
results today at 5:00 p.m. ET/2:00 p.m. PT. To access the call, U.S. participants dial (201)
689-8359. U.K. and European participants dial +44 (0) 207 107 0611. A live webcast of the call will
also be available via the Investors section of the Company’s website at www.bookham.com.

A telephone replay of the call will be available until May 11, 2005. To access the replay, U.S.
callers dial 201-612-7415 (account #: 3055; conference ID#: 148871). U.K. and European callers dial
+44 (0) 207 108 6233 (conference code: 4306).

Upcoming Investor Conference

Bookham management will be presenting at the CIBC World Markets Communications and Technology
Conference in New York on Tuesday, May 10, 2005 at 9:10 a.m. ET. Those wishing to listen to
management’s presentation can hear a live and/or an archived web cast of these events at
www.bookham.com.

About Bookham

Bookham, Inc. (Nasdaq: BKHM) is a global leader in the design, manufacture and marketing of optical
components, modules and subsystems. The Company’s optical components, modules and subsystems are
used in various applications and industries, including telecommunications, data communications,
aerospace, industrial and military. Since 2002, the Company has acquired the optical components
businesses from Nortel Networks and Marconi, as well as Ignis Optics, Inc., the business of Cierra
Photonics Inc., New Focus, Inc., and Onetta, Inc. The Company has manufacturing facilities in the
UK, US, Canada, China and Switzerland; and offices in the US, UK, France, Italy, and China; and
employs approximately 2,000 people worldwide.

Bookham is a registered trademark of Bookham Technology plc.

Safe Harbor Statement

Any statements in this announcement about the future expectations, plans or prospects of Bookham,
including statements containing the words “believe”, “plan”, “anticipate”, “expect”, “estimate”,
“will” and similar expressions, constitute forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. There are a number of important factors that
could cause actual results or events to differ materially from those indicated by such
forward-looking statements, including factors described in Bookham’s 10-K and quarterly report on
Form 10-Q for the quarter ended January 1, 2005. These include continued demand for optical
components, transfer of test and assembly operations to China, no further degradation in the $/£
exchange rate and the continued ability of the Company to maintain requisite financial resources.
The forward-looking statements included in this announcement represent Bookham’s view as of the
date of this release. Bookham anticipates that subsequent events and developments may cause
Bookham’s views to change. However, Bookham disclaims any intention or obligation to update any
forward-looking statements as a result of developments occurring after the date of this document.
Those forward-looking statements should not be relied upon as representing Bookham’s views as of
any date subsequent to the date of this announcement.

Non-GAAP Financial Measures

The Company provides non-GAAP
net loss and Adjusted EBITDA as supplemental financial information
regarding the Company’s operational performance.

Non-GAAP Net Loss

Non-GAAP Net loss is
calculated as net loss excluding the impact of impairment charges,
restructuring costs, and certain other one-time charges. The Company evaluates its performance using, among other things, non-GAAP net loss in evaluating
the Company’s historical and prospective operating financial performance, as well as its operating performance relative
to its competitors. Specifically, management uses this non-GAAP measure to further
understand the Company’s “core operating performance”. The Company believes its “core operating
performance” represents the Company’s on-going performance in the ordinary course of its
operations. Accordingly, management excludes from “core
operating performance” those items, such as impairment charges, restructuring programs and costs relating to specific major projects which are
non-recurring, the Company’s redomicile from the UK to the US, for instance. Management
does not believe these items are reflective of the compa