The Lightwave Blog

Posted by Stephen Hardy

Paul Bonenfant, communications components analyst at Morgan Keegan & Co., reports that Avanex filed an 8-K after the market closed last night revealing that the compensation committee of the board of directors had approved "change in control agreements" for the CEO (which, as of November 18, is now officially Giovanni Barbarossa, who also serves as company president and member of the board), senior vice presidents of sales and operations, and other VPs (including the interim CFO). The agreements are meant to provide incentives for these executives to remain with the company upon change of control -- in other words, if it's sold or merged.

This led Bonenfant to wonder if the much discussed hook up with Bookham is on again. He points out that while the combination looks good on paper, it would hold execution risks for Bookham and likely would delay its move toward profitability (as if the current economic situation hadn't done that already).

On top of Bonenfant's concerns, I recall that Bookham chief Alain Couder has repeatedly told me that if he gets involved in M&A;, it will be to move into new markets. "My experience in merging two companies with similar product lines in the same market is catastrophic," he told me once. And while the overlap between Avanex's and Bookham's activities isn't 100%, there would be a lot of redundancy in amplifiers and transceivers, as well as in the markets served. (Couder also discussed his M&A; philosophy during a video interview at OFC/NFOEC.)

So if the Bookham/Avanex marriage hasn't happened yet, it may be because Bookham is looking for something else in a partner.

Labels: Avanex, Bookham, mergers and acquisitions

Posted by Stephen Hardy

Last week's announcement that Ciena will design in a tunable pluggable transceiver from Bookham that doesn't conform to current multisource agreements (MSAs) -- and apparently expects to have a second source deliver similar modules -- raises the question of whether there is going to be a demand for a new MSA. Such an form factor would serve as an interim step down in size between, say, an X2 and an XFP-E.

Why would the industry need such an MSA? Clearly, Ciena wanted to deliver the benefits of tunable pluggables now and couldn't find a supplier capable of meeting its requirements in an XFP-E or smaller form factor. If Ciena is willing to go with a custom size, will its competitors do the same to avoid falling behind?

Yves LeMaitre, VP of telecom sales at Bookham, says there currently aren't MSA discussions focused on his company's device. "At the same time, you are absolutely right about the need for an MSA in the coming two years," he wrote in an email when I posed the question to him. "The value of a tunable-pluggable solution is evident and we believe that the adoption rate will be extremely high amongst optical systems manufacturers."

Unless someone comes up with a tunable X2, XFP, or XFP-E soon, the pressure for a new MSA will rise. The fact that there will be at least two companies making "Ciena-sized" modules might move such an MSA into the development fast lane.

Labels: Bookham, Ciena, transceivers, tunable