Bookham forced to calm investors as shares dive on slowdown worries

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The Independent Online

After a day of crisis meetings, Bookham Technology, the fibre optics group, yesterday succeeded in arresting the rapid fall in its share price with a statement addressing investors' concerns over slowing demand for its products.

After a day of crisis meetings, Bookham Technology, the fibre optics group, yesterday succeeded in arresting the rapid fall in its share price with a statement addressing investors' concerns over slowing demand for its products.

Bookham shares had fallen 323p to 1,503p, tumbling for a fifth consecutive session, when the group issued a statement to the Stock Exchange in the last 20 minutes of trading. The company, which makes switches and amplifiers for fibre optic data networks, said it knew of no reason for the fall in its share price. The shares recovered slightly to close at 1,560p, a fall of 15 per cent.

Bookham's share price got into difficulties on Wednesday during an analysts' conference about its third-quarter results. Analysts said Bookham failed to adequately explain why stock levels had risen sharply. Group inventories stood at £5.3m at 30 September, against just £757,000 at the end of 1999. The group said: "The current inventory levels are increasing entirely in line with the demand for [the group's] products, reflected in unit shipments. This growth rate is at a similar level to previous quarter and in line with the company's growth plans."

Unlike other highly-rated technology firms listed in London, such as ARM Holdings and ARC International, the microchip designers, Bookham is a manufacturer as well as an intellectual property firm. It has invested heavily this year in expanding production facilities. Last month, it placed shares to raise fresh funds just six months after raising £200m in its April flotation.

The sharp rise in stocks surprised investors, who questioned why a company faced with such strong demand for its devices had stocks at all. Navdeep Sheera, an analyst at Schroder Salomon Smith Barney, said: "The stock was trading at a premium to its peer group. The rating assumed it would execute [its business plan] faultlessly. Obviously it hasn't."

Bookham came to the market in an institutional offering priced at 1,000p per share in April. The shares hit a high of 5,202p in August as investors bet on Bookham enjoying strong demand from companies such as Nortel Networks, which constructs fibre optic data networks for telecoms companies looking to replace traditional copper wire networks. Nortel disappointed investors last month when it posted quarterly growth of 90 per cent in its optical equipment division, against expectations of 120 per cent.

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