e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K7ws2jePOq7nxi998S3BtIfNZIXLUcFVUVtnaoM3Xb4X3AIFQKnoQ7t9VLtHCdVj OA2+cIxWjIRNsUGH39OyvQ== 0000950134-08-008462.txt : 20080506 0000950134-08-008462.hdr.sgml : 20080506 20080505202152 ACCESSION NUMBER: 0000950134-08-008462 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20080329 FILED AS OF DATE: 20080506 DATE AS OF CHANGE: 20080505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOOKHAM, INC. CENTRAL INDEX KEY: 0001110647 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 201303994 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30684 FILM NUMBER: 08804371 BUSINESS ADDRESS: STREET 1: 2584 JUNCTION AVENUE CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: (408) 919-1500 MAIL ADDRESS: STREET 1: 2584 JUNCTION AVENUE CITY: SAN JOSE STATE: CA ZIP: 95134 FORMER COMPANY: FORMER CONFORMED NAME: BOOKHAM TECHNOLOGY PLC DATE OF NAME CHANGE: 20000330 10-Q 1 f40403e10vq.htm FORM 10-Q e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-30684

BOOKHAM, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		20-1303994
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)


2584 Junction Avenue
San Jose, California		95134
(Address of Principal Executive Offices)		(Zip Code)

408-383-1400
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



o Large accelerated filer	þ Accelerated filer	o Non-accelerated filer (Do not check if a smaller reporting company)	o Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 2, 2008, there were 100,739,778 shares of common stock outstanding.

BOOKHAM, INC.
TABLE OF CONTENTS


PART I — Financial Information (Unaudited)

Item 1. Financial Statements			3
Condensed Consolidated Balance Sheets as of March 29, 2008 and June 30, 2007			3
Condensed Consolidated Statements of Operations for the three and nine months ended March 29, 2008 and March 31, 2007			4
Condensed Consolidated Statements of Cash Flows for the nine months ended March 29, 2008 and March 31, 2007			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3. Quantitative and Qualitative Disclosures About Market Risk			22
Item 4. Controls and Procedures			23

PART II — Other Information

Item 1. Legal Proceedings			23
Item 1A. Risk Factors			25
Item 4. Submission of Matters to a Vote of Security Holders			35
Item 6. Exhibits			35
Signatures			36

EXHIBIT 10.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BOOKHAM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
(Unaudited)


	March 29, 2008			June 30, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	39,363		$	36,631
Short term investments		14,066			—
Restricted cash		1,320			6,079
Accounts receivable, net		45,620			33,685
Inventories		58,615			52,114
Prepaid expenses and other current assets		4,288			9,121

Total current assets		163,272			137,630

Goodwill		7,881			7,881
Other intangible assets, net		8,179			11,766
Property and equipment, net		34,133			33,707
Non-current deferred tax asset		—			13,248
Other non-current assets		338			294

Total assets	$	213,803		$	204,526

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	20,453		$	21,101
Bank loan payable		2,000			3,812
Accrued expenses and other liabilities		20,289			22,704
Current deferred tax liability		—			13,248

Total current liabilities		42,742			60,865

Other long-term liabilities		1,411			1,908
Deferred gain on sale-leaseback		19,985			20,786

Total liabilities		64,138			83,559


Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock:
$.01 par value per share; 175,000,000 shares authorized; 100,739,778 and 83,275,394 shares issued and outstanding at March 29, 2008 and June 30, 2007, respectively		1,007			832
Additional paid-in capital		1,160,491			1,114,391
Accumulated other comprehensive income		45,847			42,444
Accumulated deficit		(1,057,680	)		(1,036,700	)

Total stockholders’ equity		149,665			120,967

Total liabilities and stockholders’ equity	$	213,803		$	204,526

The accompanying notes form an integral part of these condensed consolidated financial statements.

BOOKHAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)


	Three Months Ended						Nine Months Ended
	March 29, 2008			March 31, 2007			March 29, 2008			March 31, 2007
Revenues	$	59,703		$	41,845		$	172,941		$	125,415
Revenues from related party		—			3,144			—			32,293

Net revenues		59,703			44,989			172,941			157,708
Costs of revenues		46,320			40,707			133,787			135,760

Gross profit		13,383			4,282			39,154			21,948

Operating expenses:
Research and development		7,570			10,853			24,430			33,871
Selling, general and administrative		11,765			12,043			36,130			36,983
Amortization of intangible assets		667			2,170			4,017			6,928
Restructuring and severance charges		672			4,273			2,451			8,475
Legal settlements		—			—			—			490
Impairment of other long-lived assets		—			—			—			1,901
(Gain)/loss on sale of property and equipment and other long-lived assets		(596	)		6			(2,312	)		(824	)

Total operating expenses		20,078			29,345			64,716			87,824


Operating loss		(6,695	)		(25,063	)		(25,562	)		(65,876	)
Other income/(expense):
Interest income		414			277			1,160			699
Interest expense		(97	)		(164	)		(484	)		(270	)
Gain/(loss) on foreign exchange		995			664			3,315			(3,031	)

Total other income/(expense)		1,312			777			3,991			(2,602	)

Loss before income taxes		(5,383	)		(24,286	)		(21,571	)		(68,478	)
Income tax (benefit)/provision		17			37			(30	)		83

Net loss	$	(5,400	)	$	(24,323	)	$	(21,541	)	$	(68,561	)


Net loss per share:
Net loss per share (basic and diluted)	$	(0.05	)	$	(0.35	)	$	(0.24	)	$	(1.03	)

Weighted average shares of common stock outstanding (basic and diluted)		99,316			70,077			90,955			66,297

The accompanying notes form an integral part of these condensed consolidated financial statements.

BOOKHAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


	Nine Months Ended
	March 29, 2008			March 31, 2007
Cash flows used in operating activities:
Net loss	$	(21,541	)	$	(68,561	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		13,249			17,797
Stock-based compensation		5,643			5,145
Impairment of long-lived assets		—			1,901
Gain on sale of property, equipment and other long-lived assets		(2,312	)		(836	)
Amortization of deferred gain on sale leaseback		(801	)		(868	)
Changes in current assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(11,229	)		4,769
Inventories		(1,407	)		5,934
Prepaid expenses and other current assets		5,241			4,400
Accounts payable		(1,663	)		(3,828	)
Accrued expenses and other liabilities		(3,736	)		(11,762	)

Net cash used in operating activities		(18,556	)		(45,909	)

Cash flows provided by investing activities:
Purchases of property and equipment		(7,459	)		(5,861	)
Proceeds from sale of property, equipment and other long-lived assets		2,713			3,174
Purchases of available for sale securities and investments		(14,066	)		—
Proceeds from sale of land held for resale		—			9,402
Transfer (to)/from restricted cash		4,875			(624	)

Cash flows provided/(used) by investing activities		(13,937	)		6,091

Cash flows provided by financing activities:
Amount paid to repurchase shares from former officer		(2	)		—
Proceeds from issuance of common stock, net		40,787			55,423
Repayment bank loan payable		(1,812	)		—
Repayment of other loans		(28	)		(39	)

Net cash provided by financing activities		38,945			55,384

Effect of exchange rate on cash		(3,720	)		2,150
Net increase in cash and cash equivalents		2,732			17,716
Cash and cash equivalents at beginning of period		36,631			37,750

Cash and cash equivalents at end of period	$	39,363		$	55,466


Supplemental disclosures of cash flow information:
Cash paid for interest	$	120		$	1

Cash paid for income taxes	$	51		$	78

The accompanying notes form an integral part of these condensed consolidated financial statements.

BOOKHAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Nature of Business

Bookham Technology plc was incorporated under the laws of England and Wales on September 22, 1988. On September 10, 2004, pursuant to a scheme of arrangement under the laws of the United Kingdom, Bookham Technology plc became a wholly-owned subsidiary of Bookham, Inc., a Delaware corporation. Bookham, Inc. designs, manufactures and markets optical components, modules and subsystems principally for use in high-performance fiber optics communications networks. Bookham, Inc. also manufactures high-speed electronic components for the industrial, research, semiconductor capital equipment, military and biotechnology industries. References herein to the “Company” mean Bookham, Inc. and its subsidiaries’ consolidated business activities since September 10, 2004 and Bookham Technology plc’s consolidated business activities prior to September 10, 2004.

Note 2. Basis of Preparation

The accompanying unaudited condensed consolidated financial statements as of March 29, 2008 and for the three and nine months ended March 29, 2008 and March 31, 2007 have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) for interim financial statements and with the instructions to Form 10-Q and Regulation S-X, and include the accounts of Bookham, Inc. and all of its subsidiaries. Certain information and footnote disclosures required to be included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements contained herein reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company’s condensed consolidated financial position at March 29, 2008 and the condensed consolidated operating results for the three and nine months ended March 29, 2008 and March 31, 2007 and cash flows for the nine months ended March 29, 2008 and March 31, 2007. The consolidated results of operations for the three and nine months ended March 29, 2008 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending June 28, 2008.

The condensed consolidated balance sheet as of June 30, 2007 has been derived from the audited consolidated financial statements as of that date.

The unaudited condensed consolidated financial statements included in this report should be read in conjunction with the Company’s audited financial statements and accompanying notes for the year ended June 30, 2007 included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007.

The preparation of the Company’s financial statements in conformity with US GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements. These estimates, judgments and assumptions can be subjective and complex, and consequently actual results could differ materially from the results based on these estimates, judgments and assumptions. Descriptions of these estimates, judgments and assumptions are included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies”.

Note 3. Stockholders’ Equity and Stock-Based Compensation Expense

On November 13, 2007, the Company completed a public offering of 16,000,000 shares of its common stock at a price to the public of $2.75 per share that generated $40.8 million of cash, net of underwriting discounts and offering expenses.

The Company accounts for stock-based compensation under Statement of Financial Accounting Standards (“SFAS”) No. 123R “Share-Based Payments”, which requires companies to recognize in their statement of operations all share-based payments, including grants of stock options, based on the grant date fair value of such share-based awards. The application of SFAS No. 123R requires the Company’s management to make judgments in the determination of inputs into the Black-Scholes option pricing model which the Company uses to determine the grant date fair value of stock options it grants. Inherent in this model are assumptions related to expected stock price volatility, option life, risk free interest rate and dividend yield. While the risk free interest rate and dividend yield are less subjective assumptions, typically based on factual data derived from public sources, the expected stock-price volatility and option life assumptions require a greater level of judgment which make them critical accounting estimates.

The Company has not issued and does not anticipate issuing dividends to stockholders and accordingly uses a 0% dividend yield assumption for all Black-Scholes option pricing calculations. The Company uses an expected stock-price volatility assumption that is primarily based on historical realized volatility of the underlying common stock during a period of time. With regard to the weighted average option life assumption, the Company evaluates the exercise behavior of past grants as a basis to predict future activity.

The assumptions used to value option grants during the three and nine months ended March 29, 2008 and March 31, 2007 are as follows:

Three Months Ended

Nine Months Ended

March 29, 2008

March 31, 2007

March 29, 2008

March 31, 2007

Expected life

4.5 years

Risk-free interest rate

2.32% to 3.18%

4.51% to 4.85%

2.32% to 4.89%

4.51% to 5.12%

Volatility

73%

83%

73% to 79%

83% to 85%

Dividend yield

0.00%

The amounts included in costs of revenues and operating expenses for stock-based compensation expense for the three and nine months ended March 29, 2008 and March 31, 2007 were as follows:


	Three Months Ended				Nine Months Ended
	March 29, 2008		March 31, 2007		March 29, 2008		March 31, 2007
	(In thousands)				(In thousands)
Costs of revenues	$	380	$	478	$	1,703	$	1,660
Research and development		243		260		1,337		1,168
Selling, general and administrative		611		557		2,603		2,317

Total	$	1,234	$	1,295	$	5,643	$	5,145

Note 4. Comprehensive Loss

For the three and nine months ended March 29, 2008 and March 31, 2007, the Company’s comprehensive loss was comprised of its net loss, the change in the unrealized gain/(loss) on currency instruments designated as hedges, the change in unrealized gain/loss on short-term investments and foreign currency translation adjustments. The components of comprehensive loss were as follows:


	Three Months Ended						Nine Months Ended
	March 29, 2008			March 31, 2007			March 29, 2008			March 31, 2007
	(In thousands)
Net loss	$	(5,400	)	$	(24,323	)	$	(21,541	)	$	(68,561	)
Other comprehensive income/(loss):
Unrealized gain/(loss) on currency instruments designated as hedges		(74	)		(197	)		(296	)		(148	)
Unrealized gain/loss on short-term investments		14			—			14			—
Foreign currency translation adjustments		3,123			(41	)		3,685			6,446

Comprehensive loss	$	(2,337	)	$	(24,561	)	$	(18,138	)	$	(62,263	)

Note 5. Earnings per Share

SFAS No. 128, “Earnings per Share”, requires dual presentation of basic and diluted earnings per share on the face of the statement of operations. Basic earnings per share is computed using only the weighted average number of shares of common stock outstanding for the applicable period, while diluted earnings per share is computed assuming the exercise or conversion of all potentially dilutive securities, such as options, convertible debt and warrants, during such period.
Because the Company incurred a net loss for each of the three and nine month periods ended March 29, 2008 and March 31, 2007, the effect of potentially dilutive securities totaling 18,894,017 and 17,736,926 shares, respectively, has been excluded from the calculation of diluted net loss per share because their inclusion would have been anti-dilutive.

Note 6. Inventories

Inventories consist of the following:


	March 29, 2008		June 30, 2007
	(In thousands)
Raw materials	$	21,933	$	20,238
Work in process		21,095		18,489
Finished goods		15,587		13,387

Total	$	58,615	$	52,114

Note 7. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:


	March 29, 2008		June 30, 2007
	(In thousands)
Trade creditor accruals	$	4,717	$	4,324
Compensation and benefits related accruals		5,938		5,212
Warranty accrual		2,717		2,569
Other accruals		5,291		7,886
Current portion of restructuring accrual		1,626		2,713

Total	$	20,289	$	22,704

Note 8. Credit Agreement

On August 2, 2006, the Company and its wholly-owned subsidiaries Bookham Technology plc, New Focus, Inc. and Bookham (US) Inc. (the “Borrowers”) entered into a Credit Agreement with Wells Fargo Foothill, Inc. and other lenders regarding a three-year $25.0 million senior secured revolving credit facility. Advances are available under the Credit Agreement based on 80% of “qualified accounts receivable,” as defined in the Credit Agreement, at the time an advance is requested.

The obligations of the Borrowers under the Credit Agreement are guaranteed by the Company, Onetta, Inc., Focused Research, Inc., Globe Y. Technology, Inc., Ignis Optics, Inc., Bookham (Canada) Inc., Bookham Nominees Limited and Bookham International Ltd., each a wholly-owned subsidiary of the Company (together, the “Guarantors” and together with the Borrowers, the “Obligors”), and are secured by the assets of the Obligors pursuant to a security agreement (the “Security Agreement”), including a pledge of the capital stock holdings of the Obligors in certain of their direct subsidiaries. Any new direct subsidiary of the Obligors is required to execute a security agreement in substantially the same form as the Security Agreement and become a party to the Security Agreement. Pursuant to the terms of the Credit Agreement, borrowings made under the Credit Agreement bear interest at a rate based on either the London Interbank Offered Rate (LIBOR) plus 2.75% or the prime rate plus 1.25%. In the absence of an event of default, any amounts outstanding under the Credit Agreement may be repaid and borrowed again any time until maturity on August 2, 2009. A termination of the commitment line by the Borrowers any time prior to August 2, 2008 will subject the Borrowers to a prepayment premium of 1.0% of the maximum revolver amount.

The obligations of the Borrowers under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes payment defaults, defaults in the performance of affirmative and negative covenants, the material inaccuracy of representations or warranties, a cross-default related to other indebtedness in an aggregate amount of $1.0 million or more, bankruptcy and insolvency related defaults, defaults relating to such matters as ERISA, judgments, and a change of control default. The Credit Agreement contains negative covenants applicable to the Company, the Borrowers and their subsidiaries, including financial covenants requiring the Borrowers to maintain a minimum level of EBITDA (if the Borrowers have not maintained specified levels of liquidity), as well as restrictions on liens, capital expenditures, investments, indebtedness, fundamental changes, dispositions of property, making certain restricted payments (including restrictions on dividends and stock repurchases), entering into new lines of business, and transactions with affiliates. As of March 29, 2008, the Company had $2.0 million in outstanding borrowings under the Credit Agreement, was in compliance with all covenants and had $5.2 million in outstanding letters of credit with vendors and landlords secured by the Credit Agreement.

Note 9. Commitments and Contingencies

Guarantees

The Company or its subsidiaries have entered into the following financial guarantees:

	•		In connection with the sale by New Focus, Inc. of its passive component line to Finisar, Inc., New Focus agreed to indemnify Finisar for claims related to the intellectual property sold to Finisar. This obligation expires in May 2009 and has no limitation on maximum liability. In connection with the sale by New Focus of its tunable laser technology to Intel Corporation, New Focus agreed to indemnify Intel against losses for certain intellectual property claims. This obligation expires in May 2008 and has a maximum limitation on liability of $7.0 million. The Company does not currently expect to pay out any amounts in respect of these obligations; therefore, no accrual has been made in the accompanying financial statements.

	•		The Company indemnifies its directors and certain employees as permitted by law, and has entered into indemnification agreements with each of its directors and senior officers. The Company has not recorded a liability associated with these obligations as the Company historically has not incurred any costs associated with such obligations. Costs associated with such obligations may, in certain circumstances, be mitigated, in whole or in part, by insurance coverage that the Company maintains.

•

The Company is also bound by indemnification obligations under various contracts that it enters into in the normal course of business, such as guarantees or letters of credit issued by its commercial banks in favor of several of its suppliers and indemnification obligations in favor of customers in respect of liabilities they may incur as a result of any infringement of a third party’s intellectual property rights by the Company’s products. The Company has not historically paid out any amounts related to these obligations and currently does not expect to do so in the future; therefore, no accrual has been made for these obligations in the accompanying financial statements.

Provision for warranties

The Company accrues for the estimated costs to provide warranty services at the time revenue is recognized. The Company’s estimate of costs to service its warranty obligations is based on historical experience and expectation of future conditions. To the extent the Company experiences increased warranty claim activity or increased costs associated with servicing those claims, the Company’s warranty costs will increase, resulting in a decrease to gross profit and an increase to net loss.


	Nine Months Ended
	March 29, 2008			March 31, 2007
	(In thousands)
Warranty provision at beginning of period	$	2,569		$	3,429
Warranties issued		1,768			1,316
Warranties utilized		(1,151	)		(1,614	)
Warranties expired, and other changes in liability		(551	)		(461	)
Foreign currency translation		82			251

Warranty provision at end of period	$	2,717		$	2,921

Litigation

On June 26, 2001, a putative securities class action captioned Lanter v. New Focus, Inc. et al., Civil Action No. 01-CV-5822, was filed against New Focus, Inc. and several of its officers and directors, or the Individual Defendants, in the United States District Court for the Southern District of New York. Also named as defendants were Credit Suisse First Boston Corporation, Chase Securities, Inc., U.S. Bancorp Piper Jaffray, Inc. and CIBC World Markets Corp., or the Underwriter Defendants, the underwriters in New Focus’s initial public offering. Three subsequent lawsuits were filed containing substantially similar allegations. These complaints have been consolidated. On April 19, 2002, plaintiffs filed an Amended Class Action Complaint, described below, naming as defendants the Individual Defendants and the Underwriter Defendants.

On November 7, 2001, a Class Action Complaint was filed against Bookham Technology plc and others in the United States District Court for the Southern District of New York. On April 19, 2002, plaintiffs filed an Amended Class Action Complaint, described below. The Amended Class Action Complaint names as defendants Bookham Technology plc, Goldman, Sachs & Co. and FleetBoston Robertson Stephens, Inc., two of the underwriters of Bookham Technology plc’s initial public offering in April 2000, and Andrew G. Rickman, Stephen J. Cockrell and David Simpson, each of whom was an officer and/or director at the time of Bookham Technology plc initial public offering.

The Amended Class Action Complaint asserts claims under certain provisions of the securities laws of the United States. It alleges, among other things, that the prospectuses for Bookham Technology plc’s and New Focus’s initial public offerings were materially false and misleading in describing the compensation to be earned by the underwriters in connection with the offerings, and in not disclosing certain alleged arrangements among the underwriters and initial purchasers of ordinary shares, in the case of Bookham Technology plc, or common stock, in the case of New Focus, from the underwriters. The Amended Class Action Complaint seeks unspecified damages (or, in the alternative, rescission for those class members who no longer hold shares of common stock of the Company or New Focus), costs, attorneys’ fees, experts’ fees, interest and other expenses. In October 2002, the Individual Defendants were dismissed, without prejudice, from the action subject to their execution of tolling agreements. In July 2002, all defendants filed Motions to Dismiss the Amended Class Action Complaint. The motion was denied as to Bookham Technology plc and New Focus in February 2003. Special committees of the board of directors authorized the companies to negotiate a settlement of pending claims substantially consistent with a memorandum of understanding negotiated among class plaintiffs, all issuer defendants and their insurers.

The plaintiffs and most of the issuer defendants and their insurers entered into a stipulation of settlement for the claims against the issuer defendants, including Bookham Technology plc. This stipulation of settlement was subject to, among other things, certification of the underlying class of plaintiffs. Under the stipulation of settlement, the plaintiffs would dismiss and release all claims against participating defendants in exchange for a payment guaranty by the insurance companies collectively responsible for insuring the
issuers in the related cases, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On February 15, 2005, the District Court issued an Opinion and Order preliminarily approving the settlement provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. The parties agreed to the modification narrowing the scope of the bar order, and on August 31, 2005, the District Court issued an order preliminarily approving the settlement.

On December 5, 2006, following an appeal from the underwriter defendants, the United States Court of Appeals for the Second Circuit overturned the District Court’s certification of the class of plaintiffs who are pursuing the claims that would be settled in the settlement against the underwriter defendants. Plaintiffs filed a Petition for Rehearing and Rehearing En Banc with the Second Circuit on January 5, 2007 in response to the Second Circuit’s decision and have informed the District Court that they would like to be heard as to whether the settlement may still be approved even if the decision of the Court of Appeals is not reversed. The District Court indicated that it would defer consideration of final approval of the settlement pending plaintiffs’ request for further appellate review. On April 6, 2007, the Second Circuit denied plaintiffs’ petition for rehearing, but clarified that the plaintiffs may seek to certify a more limited class in the District Court. In light of the overturned class certification on June 25, 2007, the District Court signed an Order terminating the settlement. The Company believes that both Bookham Technology plc and New Focus have meritorious defenses to the claims made in the Amended Class Action Complaint and therefore believes that such claims will not have a material effect on its financial position, results of operations or cash flows.

On November 12, 2007, Xi’an Raysung Photonics Inc. filed a civil suit against the Company, and its wholly-owned subsidiary, Bookham Technology (Shenzhen) Co., Ltd., in the Xi’an Intermediate People’s Court in Shanxi Province of the People’s Republic of China. The complaint filed by Xi’an Raysung Photonics Inc. alleges that the Company and Bookham Technology (Shenzhen) Co., Ltd. breached an agreement between the parties pursuant to which Xi’an Raysung Photonics Inc. had supplied certain sample components and was to supply certain components to the Company and Bookham Technology (Shenzhen) Co., Ltd. Xi’an Raysung Photonics Inc. has increased its request that the court award damages of 20,000,000 Chinese Yuan (approximately $2.9 million based on an exchange rate of $1.00 to 7.0075 Chinese Yuan as in effect on April 22, 2008) and require that the Company and Bookham Technology (Shenzhen) Co., Ltd. pay its legal fees in connection with the suit. The Company and Bookham Technology (Shenzhen) Co., Ltd. believes they have meritorious defenses to the claims made by Xi’an Raysung Photonics Inc. and therefore believes that such claims will not have a material effect on its financial position, results of operations or cash flows.

On April 18, 2008, the Company reached a settlement in a lawsuit filed by the Company against a real estate developer in the United Kingdom arising out of the Company’s purchase, and subsequent sale in 2005, of a parcel of land in the United Kingdom. Under the terms of the settlement, the Company is scheduled to receive £2.1 million ($4.2 million based on an exchange rate of $1.9776 to £1 as of the date of the settlement) on or before May 8, 2008. In its fiscal quarter ending June 28, 2008, the Company expects to record a gain of approximately $3.8 million which is the £2.1 million settlement amount net of estimated remaining legal fees incurred in connection with this lawsuit and settlement.

Note 10. Restructuring and Severance

The following table summarizes the activity related to the Company’s restructuring liability for the three months ended March 29, 2008:


	Accrued
	restructuring costs			Amounts charged										Accrued
	at December 29,			to restructuring				Amounts paid or						restructuring costs
(In thousands)	2007			costs and other		Amounts reversed		written-off			Adjustments			at March 29, 2008
Lease cancellations and commitments	$	2,488		$	605	$	—	$	(716	)	$	—		$	2,377
Asset impairment		—			—		—		—			—			—
Termination payments to employees and related costs		671			67		—		(322	)		(10	)		406

Total accrued restructuring		3,159		$	672	$	—	$	(1,038	)	$	(10	)		2,783

Less non-current accrued restructuring charges		(1,293	)												(1,157	)

Accrued restructuring charges included within accrued expenses and other liabilities	$	1,866												$	1,626

The following table summarizes the activity related to the Company’s restructuring liability for the nine months ended March 29, 2008:


	Accrued			Amounts charged										Accrued
	restructuring costs			to restructuring					Amounts paid or					restructuring costs
(In thousands)	at June 30, 2007			costs and other		Amounts reversed			written-off			Adjustments		at March 29, 2008
Lease cancellations and commitments	$	3,845		$	1,141	$	(20	)	$	(2,601	)	$	12	$	2,377
Asset impairment		—			35		—			(35	)		—		—
Termination payments to employees and related costs		546			1,331		(36	)		(1,472	)		37		406

Total accrued restructuring		4,391		$	2,507	$	(56	)	$	(4,108	)	$	49		2,783

Less non-current accrued restructuring charges		(1,678	)												(1,157	)

Accrued restructuring charges included within accrued expenses and other liabilities	$	2,713												$	1,626

On January 31, 2007, the Company adopted an overhead cost reduction plan which included workforce reductions, facility and site consolidation of its Caswell, U.K. semiconductor operations within existing U.K. facilities and the transfer of certain research and development activities to its Shenzhen, China facility. As of March 29, 2008, this cost reduction plan, which had been expected to cost $8.0 million to $9.0 million, was substantially complete. As of March 29, 2008, the Company incurred expenses of $7.7 million with respect to the cost reduction plan, of which $7.1 million was paid in cash through March 29, 2008. Any remaining expense associated with this plan, which the Company expects to be less than $0.1 million, is expected to be incurred and along with any other unpaid

amounts, to be paid by the end of the fiscal quarter ending December 27, 2008. The restructuring and severance expense for nine months ended March 29, 2008 includes $0.2 million associated with the consolidation of certain administrative functions at the Company’s San Jose, California facility.

In connection with earlier restructuring plans, and the assumption of restructuring accruals upon the March 2004 acquisition of New Focus, Inc., in the fiscal quarter ended March 29, 2008, the Company continued to make scheduled payments drawing down the related lease cancellations and commitments. The Company accrued $0.3 million in the three months ended March 29, 2008 and $0.5 million in the nine months ended March 29, 2008 in expenses for revised estimates related to these cancellations and commitments.

For all periods presented, separation payments under the restructuring and cost reduction efforts were accrued and charged to restructuring in the period in which both the benefit amounts were determined and the amounts had been communicated to the affected employees.

Note 11. Accounting for Uncertainty in Income Taxes

Effective July 1, 2007, the Company adopted Financial Accounting Standards Interpretation, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN No. 48”). FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken, or expected to be taken, in a company’s income tax return; and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 utilizes a two-step approach for evaluating uncertain tax positions accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes”. Step one, “Recognition,” requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two, “Measurement,” is based on the largest amount of benefit, which is more likely than not to be realized on ultimate settlement. In accordance with FIN No. 48, the Company recognized the cumulative effect of adopting FIN No. 48 as a change in accounting principle recorded as an adjustment to the opening balance of accumulated deficit on July 1, 2007, the adoption date. As a result of the implementation of FIN No. 48, the Company recognized a decrease in the liability for unrecognized tax benefits related to tax positions taken in prior periods and therefore the Company made a corresponding adjustment of $562,000 to its opening balance of accumulated deficit at July 1, 2007.

The Company’s total amount of unrecognized tax benefits as of July 1, 2007, the adoption date, was approximately $3.6 million. There was not a material change to this amount from the quarter ended September 29, 2007 to the quarter ended March 29, 2008. Also, the Company had no unrecognized tax benefits that, if recognized, would affect its effective tax rate for the quarter ended September 29, 2007 or March 29, 2008.

Upon adoption of FIN No. 48, the Company did not change its policy of including interest and penalties related to unrecognized tax benefits within the Company’s income tax (benefit)/provision. As of March 29, 2008, the Company did not have any accrual for payment of interest and penalties related to unrecognized tax benefits.

The Company files U.S. federal, U.S. state, and foreign tax returns and has determined its major tax jurisdictions are the United States, the United Kingdom, and China. Tax returns filed in certain jurisdictions remain open to examination by the appropriate governmental agencies; U.S. federal and China for tax years 2004-2007, various U.S. states for tax years 2003-2007, and the United Kingdom for tax years 2005-2007. The Company is not currently under audit in any major tax jurisdiction.

Note 12. Segments of an Enterprise and Related Information

The Company is currently organized and operates as two operating segments: (i) optics and (ii) research and industrial. The optics segment designs, develops, manufactures, markets and sells optical solutions for telecommunications and industrial applications. The research and industrial segment, comprised of our New Focus business, designs, develops, manufactures, markets and sells photonic solutions. The Company evaluates the performance of its segments and allocates resources based on consolidated revenues and overall performance.

Segment information for the three and nine months ended March 29, 2008 and March 31, 2007 is as follows:


	For the Three Months Ended						For the Nine Months Ended
	March 29,			March 31,			March 29,			March 31,
	2008			2007			2008			2007
	(In thousands)						(In thousands)
Revenues:
Optics	$	50,978		$	36,735		$	148,483		$	134,673
Research and industrial		8,725			8,254			24,458			23,035

Consolidated revenues	$	59,703		$	44,989		$	172,941		$	157,708


Net loss:
Optics	$	(5,786	)	$	(24,553	)	$	(22,111	)	$	(67,898	)
Research and industrial		386			230			570			(663	)

Consolidated net loss	$	(5,400	)	$	(24,323	)	$	(21,541	)	$	(68,561	)

Note 13. Significant Related Party Transactions and Significant Customer Revenues

As of March 31, 2007, Nortel Networks Corporation owned 3,999,999 shares of the Company’s common stock. For the three and nine months ended March 31, 2007, the Company had revenues from Nortel Networks of $14.5 million and $29.1 million, respectively, which are disclosed as related party revenues for those periods. The Company believes Nortel Networks sold its shares of the Company’s common stock prior to the start of the nine month period ended March 29, 2008 and as a result no longer considers Nortel Networks to be a related party.

Significant customers of the Company included Nortel Networks with revenues of $7.9 million, $25.0 million, $3.1 million and $32.3 million, Cisco Systems with revenues of $2.8 million, $15.5 million, $5.0 million and $21.4 million, and Huawei with $8.0 million, $16.9 million, $4.1 million and $14.1 million in the three month and nine month periods ended March 29, 2008 and March 31, 2007, respectively.

Note 14. Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board, or the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities— Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 gives companies the option of applying at specified election dates fair value accounting to certain financial instruments and other items that are not currently required to be measured at fair value. If a company chooses to record eligible items at fair value, the company must report unrealized gains and losses on those items in earnings at each subsequent reporting date. SFAS 159 also prescribes presentation and disclosure requirements for assets and liabilities that are measured at fair value pursuant to this standard and pursuant to the guidance in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS 159 is effective for years beginning after November 15, 2007. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 159 on its consolidated results of operations and financial condition.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. It also requires requests for expanded information about the extent to which a company measures assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the effect that the adoption of SFAS 157 will have on its consolidated results of operations and financial condition.

In June 2007, the FASB also ratified Emerging Issues Task Force 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities” (“EITF 07-3”). EITF 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. EITF 07-3 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. The Company does not expect the adoption of EITF 07-3 to have a material effect on its consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. The Company does not believe the adoption of SFAS 141R will have a material impact on its consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS No. 160”). SFAS 160 changes the accounting and reporting for minority interests, which are to be re-characterized as non-controlling interests and classified as a component of equity on the balance sheet and statement of shareholders’ equity. This consolidation method will significantly change the accounting for transactions with minority interest holders. The Company is required to adopt SFAS No. 160 at the beginning of the first quarter of fiscal 2010, which begins on June 27, 2009. The Company is currently evaluating the effect, if any, that the adoption of SFAS No. 160 will have on its consolidated results of operations and financial condition.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS 161 requires enhanced disclosures for derivative instruments, including those used in hedging activities. It is effective for fiscal years and interim periods beginning after November 15, 2008, and will be applicable to the Company in the first quarter of fiscal 2010. The Company is currently evaluating the effect, if any, that the adoption of SFAS No. 161 may have on its consolidated results of operations and financial condition.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements about our plans, objectives, expectations and intentions. You can identify these statements by words such as “expect,” “anticipate,” intend,” “scheduled,” “designed,” “plan,” “believe,” seek,” “estimate,” “may,” “will,” “continue,” “proposed” and similar words. You should read these forward-looking statements carefully. They discuss our future expectations, contain projections of our future results of operations or our financial condition or state other forward-looking information, and may involve known and unknown risks over which we have limited or no control. You should not place undue reliance on forward-looking statements and actual results may differ materially from those contained in forward-looking statements. We cannot guarantee any future results, levels of activity, performance or achievements. Moreover, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements, except as required by law. The factors discussed in the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this Quarterly Report on Form 10-Q identify important factors that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

Overview

We design, manufacture and market optical components, modules and subsystems that generate, detect, amplify, combine and separate light signals principally for use in high-performance fiber optics communications networks. Due to its advantages of higher capacity and transmission speed, optical transmission has become the predominant technology for large-scale communications networks. We are one of the largest vertically-integrated vendors of optical components used for fiber optic telecommunications network applications. Our customers include leading equipment systems vendors, including ADVA, Alcatel-Lucent, Ciena, Cisco, Huawei, Nortel Networks and Tyco. We also leverage our optical component technologies and expertise in manufacturing optical subsystems to address opportunities in other markets, including industrial, research, semiconductor capital equipment, military and biotechnology, where we believe the use of our technologies is expanding.

Our products typically have a long sales cycle. The period of time between our initial contact with a customer and the receipt of a purchase order is frequently a year or more. In addition, many customers perform, and require us to perform, extensive process and product evaluation and testing of components before entering into purchase arrangements.

We operate in two business segments: (i) optics and (ii) research and industrial. The optics segment relates to the design, development, manufacture, marketing and sale of optical solutions for telecommunications and industrial applications. The research and industrial segment, comprised of our New Focus division, relates to the design, development, manufacture, marketing and sale of photonics solutions.

Critical Accounting Policies

We believe that several accounting policies we have implemented are important to understanding our historical and future performance. We refer to such policies as “critical” because they generally require us to make estimates, judgments and assumptions about matters that are uncertain at the time we make such estimates, judgments and assumptions and different estimates, judgments and assumptions—which also would have been reasonable at the time—could have been used, and would have resulted in materially different financial results.

The critical accounting policies we identified in our Annual Report on Form 10-K for the year ended June 30, 2007 related to revenue recognition and sales returns, inventory valuation, accounting for acquisitions and goodwill, impairment of goodwill and other intangible assets and accounting for share-based payments. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies discussed in our Annual Report on Form 10-K for the year ended June 30, 2007.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board, or FASB, issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities— Including an Amendment of FASB Statement No. 115”, or SFAS 159. SFAS 159 gives companies the option of applying at specified election dates fair value accounting to certain financial instruments and other items that are not currently required to be measured at fair value. If a company chooses to record eligible items at fair value, the company must report unrealized gains and losses on those items in earnings at each subsequent reporting date. SFAS 159 also prescribes presentation and disclosure requirements for assets and liabilities that are measured at fair value pursuant to this standard and pursuant to the guidance in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, of the adoption of SFAS 159 on our consolidated results of operations or financial condition.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, or SFAS 157. SFAS 157 provides guidance for using fair value to measure assets and liabilities. It also requires requests for expanded information about the extent to which a company measures assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the effect that the adoption of SFAS 157 will have on its consolidated financial position and results of operations.

In June 2007, the FASB also ratified Emerging Issues Task Force 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities”, or EITF 07-3. EITF 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. EITF 07-3 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. We do not expect the adoption of EITF 07-3 to have a material effect on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”, or SFAS 141R. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the potential impact, if any, of the adoption of SFAS 141R on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”, or SFAS 160. SFAS 160 changes the accounting and reporting for minority interests, which are to be re-characterized as non-controlling interests and classified as a component of equity on the balance sheet and statement of shareholders’ equity. This consolidation method will significantly change the accounting for transactions with minority interest holders. We are required to adopt SFAS 160 at the beginning of the first quarter of fiscal 2010, which begins on June 27, 2009. We are currently evaluating the effect, if any, that the adoption of SFAS 160 will have on our consolidated results of operations and financial condition.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (or SFAS No. 161). SFAS No. 161 requires enhanced disclosures for derivative instruments, including those used in hedging activities. It is effective for fiscal years and interim periods beginning after November 15, 2008, and will be applicable to us in the first quarter of fiscal 2010. We are assessing the potential impact that the adoption of SFAS 161 may have on our consolidated results of operations and financial condition.

Results of Operations

Revenues


	For Three Months Ended							For Nine Months Ended
					%							%
$ Millions	March 29, 2008		March 31, 2007		Change			March 29, 2008		March 31, 2007		Change
Net revenues	$	59.7	$	45.0		33	%	$	172.9	$	157.7		10	%

Revenues in the three month period ended March 29, 2008 increased by $14.7 million, or 33%, compared to revenues in the three month period ended March 31, 2007. Revenues from customers other than Nortel Networks increased by $10.0 million, or 24%, in the three months ended March 29, 2008, as compared to the corresponding period in the prior year, largely due to increased sales, primarily related to higher sales volumes, of our 980nm laser pumps, tunable laser products, high power lasers, industrial and thin film filters, and increased product revenues in our New Focus division. Revenues from Nortel Networks increased by $4.8 million to $7.9 million in the three months ended March 29, 2008 compared to the three months ended March 31, 2007, primarily as a result of recovery of revenues after decreases at the end of the three months ended March 31, 2007 associated with the expiration of the third addendum to the supply agreement with Nortel Networks.

Revenues in the nine month period ended March 29, 2008 increased by $15.2 million, or 10%, compared to revenues in the nine months ended March 31, 2007. Revenues from customers other than Nortel Networks increased by $22.5 million, or 18%, in the nine months ended March 29, 2008, as compared to the corresponding period in the prior year, largely due to increased sales, primarily related to higher sales volumes, of our 980nm laser pumps, tunable products, high power lasers, industrial and thin-film filters and increased product sales volumes in our New Focus division. Revenues from Nortel Networks decreased by $7.3 million to $25.0 million in the nine months ended March 29, 2008 compared to the nine months ended March 31, 2007, primarily as a result of the expiration of certain purchase commitments associated with the third addendum to a supply agreement with Nortel Networks during the three months ended March 31, 2007.

Cost of Revenues


	For Three Months Ended							For Nine Months Ended
					%							%
$ Millions	March 29, 2008		March 31, 2007		Change			March 29, 2008		March 31, 2007		Change
Cost of revenues	$	46.3	$	40.7		14	%	$	133.8	$	135.8		(1	%)

Our cost of revenues consists of the costs associated with manufacturing our products, and includes the costs to purchase raw materials, manufacturing-related labor costs and related overhead, including stock-based compensation expense. Cost of revenues also includes costs associated with under-utilized production facilities and resources. Charges for inventory obsolescence, the cost of product returns and warranty costs are also included in cost of revenues. Costs and expenses of the manufacturing resources which relate to the development of new products are included in research and development expense.

Our cost of revenues for the three month period ended March 29, 2008 increased by $5.6 million or 14% compared to cost of revenues in the three month period ended March 30, 2007 due to the direct costs associated with the higher product volumes that resulted in our 33% higher revenues over the same period. Our cost of revenues for the nine month period ended March 29, 2008 decreased by $2.0 million compared to the nine month period ended March 30, 2007 due to the direct costs associated with the higher product volumes that resulted in our 10% higher revenues over the same period, offset by reductions in our manufacturing overhead costs as a result of our restructuring and cost reduction plans, including the closure of the manufacturing operations of our Paignton, U.K. facility subsequent to the transfer of assembly and test and related activities to our Shenzhen, China facility and the consolidation of our Caswell U.K. fabrication operations. We believe that we have further specific cost reduction programs in place, primarily related to materials procurement as well as the transfer of most of our photonic tools and solutions manufacturing operations from San Jose to Shenzhen, which we expect, in total, may lead to a quarterly savings rate of $3 million to $4 million by the end of our fiscal quarter ending December 27, 2008. We expect to incur a total of approximately $1 million of additional manufacturing overhead costs associated with this transfer of photonic tools and solutions manufacturing operations to Shenzhen, to be recorded in cost of revenues, spread over the next two to three fiscal quarters. Our cost of revenues for the three and nine month periods ended March 29, 2008 included $0.4 and $1.7 million of stock-based compensation charges, respectively, compared to $0.5 million and $1.7 million in the three and nine month periods ended March 31, 2007, respectively.

Gross Profit


	Three Months Ended						Nine Months Ended
$ Millions	March 29, 2008			March 31, 2007			March 29, 2008			March 31, 2007
Gross profit	$	13.4		$	4.3		$	39.2		$	21.9

Gross margin rate		22	%		10	%		23	%		14	%

Gross profit is calculated as net revenues less cost of revenues. The gross margin rate is gross profit reflected as a percentage of revenues.

Our gross profit rate increased to 22% and 23% in the three and nine month periods ended March 29, 2008, respectively, compared to 10% and 14% in the nine month periods ended March 31, 2007, respectively. The increases in gross profit and gross margin rate during both periods were primarily due to higher revenues and decreases in our manufacturing cost base as a result of our restructuring and cost reduction plans, including the closure of the manufacturing operations of our Paignton, U.K. facility subsequent to the transfer of assembly and test and related activities to our Shenzhen, China facility and the consolidation of our Caswell, U.K. fabrication operations. We believe we have further specific cost reduction programs in place, primarily related to materials procurement as well as the transfer of most of our photonic tools and solutions manufacturing operations from San Jose to Shenzhen, which we expect may lead, in total, to a quarterly savings rate of $3 million to $4 million by the end of our fiscal quarter ending December 27, 2008. We expect to incur a total of approximately $1 million of additional manufacturing overhead costs, spread over the next two to three fiscal quarters, associated with this transfer of photonic tools and solutions manufacturing operations to Shenzhen. These potential savings, net of costs of the transfer, we expect will have a positive impact on our gross margin percentage in future quarters.

Research and Development Expenses


	Three Months Ended									Nine Months Ended
							%									%
$ Millions	March 29, 2008			March 31, 2007			Change			March 29, 2008			March 31, 2007			Change
Research and development expenses	$	7.6		$	10.9			(30	%)	$	24.4		$	33.9			(28	%)

As a percentage of net revenues		13	%		24	%					14	%		21	%

Research and development expenses consist primarily of salaries and related costs of employees engaged in research and design activities, including stock-based compensation charges related to those employees, costs of design tools and computer hardware, costs related to prototyping, and facilities costs for certain research and development focused sites.

Research and development expenses decreased to $7.6 million in the three month period ended March 29, 2008 compared to $10.9 million in the three month period ended March 31, 2007, and to $24.4 million in the nine month period ended March 29, 2008 compared to $33.9 million in the nine month period ended March 31, 2007. The decreases over both periods were primarily due to staff reductions and a decrease in related costs as a result of our restructurings and cost reduction plans. Research and development expenses included stock-based compensation charges of $0.2 million and $1.3 million in the three and nine month periods ended March 29, 2008, respectively, compared to $0.3 million and $1.2 million in the three and nine month periods ended March 31, 2007, respectively.

Selling, General and Administrative Expenses


	Three Months Ended									Nine Months Ended
							%									%
$ Millions	March 29, 2008			March 31, 2007			Change			March 29, 2008			March 31, 2007			Change
Selling, general and administrative expenses	$	11.8		$	12.0			(2	%)	$	36.1		$	37.0			(2	%)

As a percentage of net revenues		20	%		27	%					21	%		23	%

Selling, general and administrative expenses consist primarily of personnel-related expenses, including stock-based compensation charges, related to employees engaged in sales, general and administrative functions, legal and professional fees, facilities expenses, insurance expenses and certain information systems costs.

Selling, general and administrative expenses for the three months ended March 29, 2008 were $11.8 million, a $0.2 million decrease from $12.0 million in the three month period ended March 31, 2007, and for the nine months ended March 29, 2008 were $36.1 million, a $0.9 million decrease from $37.0 million in the nine months ended March 30, 2007. The decrease in selling, general and administrative expenses in the three months ended March 29, 2008 compared to the same period in the prior year was primarily related to decreases in professional fees, which included $0.1 million in legal expenses related to a lawsuit we filed against a real estate developer in the United Kingdom arising out of our purchase and subsequent sale in 2005 of a parcel of land in the United Kingdom. The decrease in selling, general and administrative expenses in the nine months ended March 29, 2008 compared to the same period in the prior year was primarily the result of a decrease in professional fees, including $0.9 million in legal expenses related to a lawsuit we filed against a real estate developer in the United Kingdom arising out of our purchase and subsequent sale in 2005 of a parcel of land in the United Kingdom, and information systems cost savings in connection with our cost reduction plans, partly offset by a $0.3 million increase in stock compensation for the nine month periods ended March 29, 2008 compared to the nine months ended March 30, 2007 associated with the achievement of performance based vesting awards in the nine months ended March 29, 2008. On April 18, 2008, a settlement was reached in the lawsuit we filed against the real estate developer in the United Kingdom referred to above. Under the terms of the settlement, we are scheduled to receive £2.1 million ($4.2 million based on an exchange rate of $1.9776 to £1 as of the date of the settlement) on or before May 8, 2008. We expect to record a gain of $3.8 million in the quarter ending June 28, 2008, which corresponds to the £2.1 million settlement, net of estimated remaining legal fees incurred in connection therewith. Stock-based compensation expenses were $0.6 million and $2.6 million in the three and nine month periods ended March 29, 2008, respectively, and were $0.6 million and $2.3 million in the three and nine month periods ended March 31, 2007, respectively.

Amortization of Intangible Assets


	Three Months Ended						Nine Months Ended
$ Millions	March 29, 2008			March 31, 2007			March 29, 2008			March 31, 2007
Amortization of intangible assets	$	0.7		$	2.2		$	4.0		$	6.9

As a percentage of net revenues		1	%		5	%		2	%		4	%

In previous years, we acquired six optical components companies and businesses and one photonics and microwave company. Our last such acquisition was in March 2006. Each of these business combinations added to the balance of our purchased intangible assets, and the related amortization of these intangible assets was recorded as an expense in each of the three and nine month periods ended March 29, 2008 and March 31, 2007. Subsequent to the three month period ended March 31, 2007, the purchased intangible assets from certain of these business acquisitions became fully amortized, which reduced our expense for amortization of purchased intangible assets in the three and nine month periods ended March 29, 2008 to $0.7 million and $4.0 million, respectively, as compared to $2.2 million and $6.9 million during the three and nine month periods ended March 31, 2007, respectively.

Restructuring and Severance Charges


	Three Months Ended				Nine Months Ended
$ Millions	March 29, 2008		March 31, 2007		March 29, 2008		March 31, 2007
Lease cancellation and commitments	$	0.6	$	0.1	$	1.2	$	0.8
Termination payments to employees and related costs		0.1		4.2		1.3		7.7

Total	$	0.7	$	4.3	$	2.5	$	8.5

On January 31, 2007, we adopted an overhead cost reduction plan which included workforce reductions, facility and site consolidation of our Caswell, U.K. semiconductor operations within existing U.K. facilities and the transfer of certain research and development activities to our Shenzhen, China facility. We began implementing the overhead cost reduction plan in the quarter ended March 31, 2007. As of March 29, 2008, we incurred expenses of $7.7 million with respect to this cost reduction plan, of which $7.1 million had been paid through March 29, 2008, the substantial portion being personnel severance and retention related expenses. This overhead and cost reduction plan is now substantially complete. As a result of the completion of this plan, we have saved approximately $8 million per fiscal quarter in expenses when compared to the quarter ended December 30, 2006. Any remaining expenses, which we expect to be less than $0.1 million, are expected to be incurred and paid by the end of our fiscal quarter ending December 27, 2008. In the three and nine month periods ended March 29, 2008, a substantial portion of our restructuring and severance charges for termination payments to employees and related costs were associated with this overhead cost reduction plan and related costs associated with consolidation of certain administrative functions at our San Jose facility. We continue to seek further costs reduction, in particular, subsequent to March 29, 2008 we initiated plans to transfer most of the manufacturing activities of our photonics products and solution business from our San Jose, California site to our Shenzhen, China facility, as described above under — “Cost of Revenues”. Restructuring and severance charges related to this move are expected to total $1.0 million over the next two to three quarters, and once complete the cost savings are expected to amount to approximately $0.75 million per quarter compared to our fiscal quarter ended March 29, 2008. The substantial portion of these charges is expected to be for personnel related severance and retention costs.

In May, September and December 2004, we also announced restructuring plans, including the transfer of our assembly and test operations from Paignton, U.K. to Shenzhen, China, along with reductions in research and development and selling, general and administrative expenses. These cost reduction efforts were expanded in November 2005 to include the transfer of our chip-on-carrier assembly from Paignton to Shenzhen. The transfer of these operations was completed in the quarter ended March 31, 2007. In May 2006, we announced further cost reduction plans, which included transitioning all remaining manufacturing support and supply chain management, along with pilot line production and production planning, from Paignton to Shenzhen, and these plans were also substantially completed in the quarter ended June 30, 2007. In total, as of March 29, 2008, we have spent $32.8 million on these restructuring programs. In the three and nine month periods ended March 31, 2007, the substantial portion of our restructuring and severance charges for termination payments to employees and related costs were associated with these programs.

In connection with these restructuring plans, earlier restructuring plans, and the assumption of restructuring accruals upon the March 2004 acquisition of New Focus, we continue to make scheduled payments drawing down the related lease cancellations and commitments. In the three month and nine month periods ended March 29, 2008, and the three month and nine month periods ended March 31, 2007, we recorded $0.6 million, $1.2 million, $0.1 million and $0.8 million, respectively, in expenses for revised estimates related to these cancellations and commitments.

Legal Settlements


	Three Months Ended				Nine Months Ended
$ Millions	March 29, 2008		March 31, 2007		March 29, 2008		March 31, 2007
Legal settlements	$	—	$	—	$	—	$	0.5

In the nine months ended March 31, 2007, we recorded $0.5 million for additional legal fees and other professional costs related to a settlement of the litigation with Howard Yue, the former sole shareholder of Globe Y. Technology, Inc. (a company acquired by New Focus, Inc. in February 2001). This settlement had been reached in the fiscal year ended July 1, 2006, and net charges of $5.0 million were recorded in our statement of operations in that period. On April 18, 2008, a settlement was reached in the lawsuit we filed against the real estate developer in the United Kingdom arising out of our purchase and sale of a parcel of land in the United Kingdom. Under the terms of the settlement, we are scheduled to receive £2.1 million ($4.2 million based on an exchange rate of $1.9776 to £1 as of the date of the settlement) on or before May 8, 2008. We expect to record a gain of $3.8 million in the quarter ending June 28, 2008, which corresponds to £2.1 million settlement, net of estimated remaining legal fees incurred in connection therewith. $0.9 million of related legal expenses incurred prior to March 29, 2008 have been previously recorded as selling, general and administrative expense.

Impairment of Other Long-Lived Assets


	Three Months Ended				Nine Months Ended
$ Millions	March 29, 2008		March 31, 2007		March 29, 2008		March 31, 2007
Impairment of long-lived assets	$	—	$	—	$	—	$	1.9

During the nine month period ended March 31, 2007, we designated the assets underlying our Paignton, U.K. manufacturing site as held for sale. We recorded an impairment charge of $1.9 million as a result of this designation. During the quarter ended March 31, 2007, Bookham Technology plc, our wholly-owned subsidiary, sold the site to a third party.

Other Income/(Expense), Net


	Three Months Ended				Nine Months Ended
$ Millions	March 29, 2008		March 31, 2007		March 29, 2008		March 31, 2007
Other income/(expense), net	$	1.3	$	0.8	$	4.0	$	(2.6	)

Other income/(expense), net consists of interest expense, interest income and foreign currency gains and losses primarily related to the re-measurement of short term balances between our international subsidiaries, the re-measurement of United States dollar denominated cash and accounts receivable of foreign subsidiaries with local functional currencies and realized gains or losses on forward contracts designated as hedges. The increases in other income/(expense), net, in the three months ended March 29, 2008 compared to the three months ended March 31, 2007, and in the nine months ended March 29, 2008 compared to the nine months ended March 31, 2007, are primarily related to an increase in non-cash gains, or decreases in non-cash losses on the re-measurement of short term balances between our international subsidiaries primarily generated by changes in currency exchange rates between the United States dollar and the United Kingdom pound sterling, as well as increased interest income from investment funds generated from the November 17, 2007 public offering of our common stock which raised $40.8 million of net proceeds.

Income Tax Provision/(Benefit)

Three Months Ended

Nine Months Ended

$ Millions

March 29, 2008

March 31, 2007

March 29, 2008

March 31, 2007

Income tax provision/(benefit)

—

We have incurred substantial losses to date and expect to incur additional losses in the future, and accordingly our income tax provision is negligible in each period presented. Based upon the weight of available evidence, which includes our historical operating performance and the recorded cumulative net losses in all prior periods, we provided a full valuation allowance against our net deferred tax assets at March 29, 2008 and at March 31, 2007.

Liquidity, Capital Resources and Contractual Obligations

Liquidity and Capital Resources
Operating activities


	Nine Months Ended
	March 29, 2008			March 31, 2007
$ Millions	(Unaudited)			(Unaudited)
Net loss	$	(21.5	)	$	(68.6	)
Non-cash accounting items:
Depreciation and amortization		13.2			17.8
Stock-based compensation		5.6			5.1
Impairment of long-lived assets		—			1.9
Gain on sale of property and equipment		(2.3	)		(0.8	)
Amortization of deferred gain on sale leaseback		(0.8	)		(0.9	)

Total non-cash accounting charges		15.7			23.1
Changes in operating assets and liabilities, net		(12.8	)		(0.4	)

Net cash used in operating activities	$	(18.6	)	$	(45.9	)

Net cash used in operating activities for the nine month period ended March 29, 2008 was $18.6 million, primarily resulting from our net loss of $21.5 million, offset by non-cash accounting charges of $15.7 million, primarily consisting of $13.2 million of expense related to depreciation and amortization of certain assets, $5.6 million of expense related to stock based compensation and a $2.3 million gain on sale of property, equipment. A net change in our operating assets and liabilities of $12.8 million due to increases in accounts receivable, inventories, and decreases in prepaid expenses and other current assets, accrued expenses and other liabilities and accounts payable also contributed to the use of cash. In particular our accounts receivable increased by $12.0 million as of March 29, 2008 compared to June 30, 2007 as a result of increased revenues and timing of shipments in the three months ended March 29, 2008

weighted more heavily towards the end of the fiscal quarter with corresponding payment due dates and expected collections in the following quarter.

Net cash used in operating activities for the nine month period ended March 31, 2007 was $45.9 million, primarily resulting from the net loss of $68.6 million, offset by non-cash accounting charges of $23.1 million, primarily consisting of $5.1 million of expense related to stock based compensation, $1.9 million of expense related to impairment of long-lived assets and $17.8 million of expense related to depreciation and amortization of certain assets. The remaining $0.4 million was due to the net change in our operating assets and liabilities, which arose primarily from cash generated from reductions in accounts receivable, inventories at our Paignton, UK site as operations have moved to Shenzhen, China, and in prepaid expenses and other current assets, partially offset by decreases in accounts payable and accrued expenses and other liabilities, including the payment of professional fees and accrued restructuring costs.

Investing activities

Net cash used in investing activities in the nine month period ended March 29, 2008 was $13.9 million, primarily consisting of $7.5 million used in capital expenditures and $14.1 million of cash and cash equivalents transferred to short term investments only partly offset by $4.9 million from the release of restricted cash which had been security on an unoccupied leased facility and $2.7 million in net proceeds from the sale of property, equipment and other long-lived assets.

Investing activities generated cash of $6.1 million in the nine month period ended March 31, 2007, primarily consisting of $9.4 million in net proceeds from sale of land held for re-sale and $3.2 million in net proceeds from sale of property, equipment and other long-lived assets, offset by $5.9 million of cash used in capital expenditures and $0.6 million of cash transferred to restricted cash. During the quarter ended December 30, 2006, Bookham Technology plc, our wholly-owned subsidiary, sold our Paignton U.K. manufacturing site to a third party for proceeds of £4.8 million (approximately $9.4 million based on an exchange rate of $1.96 to £1.00 in effect on the date of the sale), net of selling costs. In connection with this transaction, we recorded a loss of $0.1 million which is included in loss on sale of property and equipment and other long-lived assets.

Financing activities

Net cash provided in financing activities in the nine month period ended March 29, 2008 was $38.9 million, consisting primarily of $40.8 million in proceeds, net of expenses and commissions, from an underwritten public offering of 16 million shares of our common stock at a price to the public of $2.75 a share, partly offset by the repayment of $1.8 million drawn under our senior secured $25 million credit facility.

On March 22, 2007, we entered into a definitive agreement for a private placement, pursuant to which we issued, on March 22, 2007, 13,640,224 shares of common stock and warrants to purchase up to 4,092,066 shares of common stock with accredited investors for net proceeds of approximately $26.9 million. The warrants have a five year term, expiring March 22, 2012, and are exercisable beginning on September 23, 2007 at an exercise price of $2.80 per share, subject to adjustment based on weighted average antidilution formula if we effect certain issuances in the future for consideration per share that is less than the then current exercise price.

On August 31, 2006, we entered into an agreement for a private placement of common stock and warrants pursuant to which we issued and sold 8,696,000 shares of common stock and warrants to purchase up to 2,174,000 shares of common stock, which sale closed on September 1, 2006, and issued and sold an additional 2,892,667 shares of common stock and warrants to purchase up to an additional 724,667 shares of common stock in a second closing on September 19, 2006. In both cases such shares of common stock and warrants were issued and sold to certain accredited investors. Our net proceeds from this private placement, including the second closing, were a total of $28.7 million. The warrants are exercisable during the period beginning on March 2, 2007 through September 1, 2011, at an exercise price of $4.00 a share.

Sources of Cash

In the past five years, we have funded our operations from several sources, including public and private offerings of equity, issuance of debt and convertible debentures, sales of assets, our senior secured $25 million credit facility and net cash obtained in connection with acquisitions. On November 13, 2007, we completed a public offering of 16,000,000 shares of common stock that generated $40.8 million of cash, net of commissions and expenses. As of March 29, 2008, we held $54.7 million in cash and cash equivalents, restricted cash and short term investments. Based on these balances, and amounts expected to be available under our senior secured $25 million credit facility, under which advances are available based on a percentage of accounts receivable at the time the advance is requested, we believe we have sufficient financial resources in order to operate as a going concern through at least the quarter ending March 28, 2009. We may need to raise additional funds by any one or a combination of the following: issuing equity, debt or convertible debt or selling certain non-core businesses. In the event we choose to raise additional funds, there can be no guarantee of our ability to raise those additional funds on terms acceptable to us, or at all.

Credit Facility

On August 2, 2006, we, with Bookham Technology plc, New Focus and Bookham (US) Inc., each a wholly-owned subsidiary, which we collectively refer to as the Borrowers, entered into a credit agreement, or the Credit Agreement, with Wells Fargo Foothill, Inc. and other lenders regarding a three-year $25 million senior secured revolving credit facility. Advances are available under the Credit Agreement based on a percentage of qualified accounts receivable, as defined in the Credit Agreement, at the time the advance is requested.

The obligations of the Borrowers under the Credit Agreement are guaranteed by us, Onetta, Focused Research, Inc., Globe Y. Technology, Inc., Ignis Optics, Inc., Bookham (Canada) Inc., Bookham Nominees Limited and Bookham International Ltd., each also a wholly-owned subsidiary (which we refer to collectively as the Guarantors and together with the Borrowers, as the Obligors), and are secured , by the assets of the Obligors pursuant to a security agreement, or the Security Agreement, including a pledge of the capital stock holdings of the Obligors in some of their direct subsidiaries. Any new direct subsidiary of the Obligors is required to execute a security agreement in substantially the same form and join in the Security Agreement.

Pursuant to the terms of the Credit Agreement, borrowings made under the Credit Agreement bear interest at a rate based on either the London Interbank Offered Rate (LIBOR) plus 2.75 percentage points or the prime rate plus 1.25 percentage points. In the absence of an event of default, any amounts outstanding under the Credit Agreement may be repaid and re-borrowed any time until maturity, which is August 2, 2009. A termination of the commitment line any time prior to August 2, 2008 will subject the Borrowers to a prepayment premium of 1.0% of the maximum revolver amount.

The obligations of the Borrowers under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes customary events of default, including payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, a cross-default related to indebtedness in an aggregate amount of $1 million or more, bankruptcy and insolvency related defaults, defaults relating to such matters as ERISA and judgments, and a change of control default. The Credit Agreement contains negative covenants applicable to the Borrowers and their subsidiaries, including financial covenants requiring the Borrowers to maintain a minimum level of EBITDA (if the Borrowers have not maintained “minimum liquidity” defined as $30 million of qualified cash and excess availability, each as also defined in the Credit Agreement), as well as restrictions on liens, capital expenditures, investments, indebtedness, fundamental changes to the Borrower’s business, dispositions of property, making certain restricted payments (including restrictions on dividends and stock repurchases), entering into new lines of business, and transactions with affiliates. As of March 29, 2008, we have $2.0 million in outstanding borrowings and there were $5.2 million in outstanding letters of credits with vendors and landlords secured under this Credit Agreement and we were in compliance with all covenants under the Credit Agreement.

In connection with the Credit Agreement, we agreed to pay a monthly servicing fee of $3,000 and an unused line fee equal to 0.375% per annum, payable monthly on the unused amount of revolving credit commitments. To the extent there are letters of credit outstanding under the Credit Agreement, we are obligated to pay the administrative agent a letter of credit fee at a rate equal to 2.75% per annum.

Future Cash Requirements

As of March 29, 2008, we held $54.7 million in cash and cash equivalents, restricted cash and short term investments. Based on these balances, and amounts expected to be available under the Credit Agreement, which are based on a percentage of “qualified accounts receivable” at the time the advance is requested, we believe we have sufficient financial resources in order to operate as a going concern through at least the quarter ended March 28, 2009. In the future we may need to raise additional funds by any one or a combination of the following: issuing equity, debt or convertible debt or selling certain non core businesses. In the event we choose to raise additional finds, there can be no guarantee of our ability to raise those additional funds on terms acceptable to us, or at all.

From time to time, we have engaged in discussions with third parties concerning potential acquisitions of product lines, technologies and businesses. We continue to consider potential acquisition candidates. Any of these transactions could involve the issuance of a significant number of new equity securities, debt, and/or cash consideration. We may also be required to raise additional funds to complete any such acquisition, through either the issuance of equity securities or borrowings. If we raise additional funds or acquire businesses or technologies through the issuance of equity securities, our existing stockholders may experience significant dilution.

Risk Management—Foreign Currency Risk

more significantly than experienced to date, our exposure would increase. We enter into foreign currency forward exchange contracts in an effort to mitigate our exposure to such fluctuations between the U.S. dollar and the U.K. pound sterling, and we may be required to convert currencies to meet our obligations. Under certain circumstances, foreign currency forward exchange contracts can have an adverse effect on our financial condition. As of March 29, 2008, we held 15 foreign currency forward exchange contracts with a nominal value of $12.5 million, which included put and call options which expire, or expired, at various dates from April 2008 to December 2008. During the nine month period ended March 29, 2008, we recorded a net gain of $0.3 million in our statement of operations in connection with foreign exchange contracts that expired during that period. As of March 29, 2008, we recorded an unrealized loss of $0.1 million to other comprehensive income in connection with marking these contracts to fair value.

Contractual Obligations

During the quarter ended March 29, 2008, there have been no material changes to the contractual obligations disclosed as of June 30, 2007 in our Annual Report on Form 10-K filed with the SEC on August 31, 2007.

Off-Balance Sheet Arrangements

In connection with the sale by New Focus, Inc. of its passive component line to Finisar, Inc., prior to our acquisition of New Focus, New Focus agreed to indemnify Finisar for claims related to the intellectual property sold to Finisar. This indemnification obligation expires in May 2009 and has no maximum liability. In connection with the sale by New Focus of its tunable laser technology to Intel Corporation prior to our acquisition of New Focus, New Focus indemnified Intel against losses for certain intellectual property claims. This indemnification obligation expires in May 2008 and has a maximum liability of $7.0 million. We do not expect to payout any amounts in respect of these obligations, therefore no accrual has been made.

We indemnify each of our directors and certain employees as permitted by law, and have entered into indemnification agreements with our directors and senior officers. We have not recorded a liability associated with these indemnification arrangements as we historically have not incurred any costs associated with such obligations and do not expect to in the future. Costs associated with such obligations may be mitigated, in whole or in part, by insurance coverage that we maintain.

We also have indemnification clauses in various contracts that we enter into in the normal course of business, such as guarantees or letters of credit issued by our commercial banks in favor of several of our suppliers or indemnification clauses in favor of customers in respect of liabilities they may incur as a result of purchasing our products should such products infringe the intellectual property rights of a third party. We have not historically paid out any amounts related to these obligations and do not expect to in the future; therefore, no accrual has been made for these obligations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We finance our operations through a mixture of the issuance of equity securities, operating leases, working capital and by drawing on a three year $25 million senior secured revolving credit facility under a credit agreement we entered into on August 3, 2006. Our only exposure to interest rate fluctuations is on our cash deposits and for amounts borrowed under the credit agreement. During the quarter ended December 29, 2007, we paid off $4.3 million of borrowings outstanding under our senior secured $25 million credit agreement with Wells Fargo Foothill, Inc. and then borrowed $2.0 million drawn under the credit agreement which remained outstanding as of March 29, 2008. We monitor our interest rate risk on cash balances primarily through cash flow forecasting. Cash that is surplus to immediate requirements is invested in short-term deposits with banks accessible with one day’s notice and invested in overnight money market accounts. We believe our interest rate risk is immaterial.

Foreign currency

We are exposed to fluctuations in foreign currency exchange rates. As our business has become multinational in scope, we have become increasingly subject to fluctuations based upon changes in the exchange rates between the currencies in which we collect revenues and pay expenses. Despite our change in domicile from the United Kingdom to the United States in 2004, and our movement of certain functions, including assembly and test operations, from the United Kingdom to China, in the future we expect that a majority of our revenues will continue to be denominated in U.S. dollars, while a significant portion of our expenses will continue to be denominated in U.K. pounds sterling. Fluctuations in the exchange rate between the U.S. dollar and the U.K. pound sterling and, to a lesser extent, other currencies in which we collect revenues and pay expenses, could affect our operating results. This includes the Chinese Yuan and the Swiss franc in which we pay expenses in connection with operating our facilities in Shenzhen, China, and Zurich, Switzerland, respectively. To the extent the exchange rate between the U.S. dollar and the Chinese Yuan were to fluctuate more significantly than experienced to date, our exposure would increase. We enter into foreign currency forward exchange contracts in an effort to mitigate our exposure to such fluctuations between the U.S. dollar and the U.K. pound sterling, and we may be required to convert currencies to meet our obligations. Under certain circumstances, foreign currency forward exchange contracts can have an adverse effect on our financial condition. As of March 29, 2008, we held 15 foreign currency forward exchange contracts with a nominal value of $12.5 million, which included put and call options which expire, or expired, at various dates from April 2008 to December 2008. During the nine month period ended March 29, 2008, we recorded an unrealized loss of $0.3 million to other comprehensive income in connection with marking these contracts to fair value. It is estimated that a 10% fluctuation in the dollar

between March 29, 2008 and the maturity dates of these put and call options would lead to a profit of $1.3 million (U.S. dollar weakening), or loss of $1.1 million (U.S. dollar strengthening) on our outstanding foreign currency forward exchange contracts, should they be held to maturity.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 29, 2008. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures, as of March 29, 2008, our Chief Executive Office and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d - 15(f) under the Exchange Act) occurred during the quarter ended March 29, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

The Amended Class Action Complaint asserts claims under certain provisions of the securities laws of the United States. It alleges, among other things, that the prospectuses for Bookham Technology plc’s and New Focus’s initial public offerings were materially false and misleading in describing the compensation to be earned by the underwriters in connection with the offerings, and in not disclosing certain alleged arrangements among the underwriters and initial purchasers of ordinary shares, in the case of Bookham Technology plc, or common stock, in the case of New Focus, from the underwriters. The Amended Class Action Complaint seeks unspecified damages (or, in the alternative, rescission for those class members who no longer hold our or New Focus common stock), costs, attorneys’ fees, experts’ fees, interest and other expenses. In October 2002, the Individual Defendants were dismissed, without prejudice, from the action subject to their execution of tolling agreements. In July 2002, all defendants filed Motions to Dismiss the Amended Class Action Complaint. The motion was denied as to Bookham Technology plc and New Focus in February 2003. Special committees of the board of directors authorized the companies to negotiate a settlement of pending claims substantially consistent with a memorandum of understanding negotiated among class plaintiffs, all issuer defendants and their insurers.

The plaintiffs and most of the issuer defendants and their insurers entered into a stipulation of settlement for the claims against the issuer defendants, including Bookham Technology plc. This stipulation of settlement was subject to, among other things, certification of the underlying class of plaintiffs. Under the stipulation of settlement, the plaintiffs would dismiss and release all claims against participating defendants in exchange for a payment guaranty by the insurance companies collectively responsible for insuring the issuers in the related cases, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On February 15, 2005, the District Court issued an Opinion and Order preliminarily approving the settlement provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. The parties agreed to the modification narrowing the scope of the bar order, and on August 31, 2005, the District Court issued an order preliminarily approving the settlement.

On December 5, 2006, following an appeal from the underwriter defendants the United States Court of Appeals for the Second Circuit overturned the District Court’s certification of the class of plaintiffs who are pursuing the claims that would be settled in the settlement against the underwriter defendants. Plaintiffs filed a Petition for Rehearing and Rehearing En Banc with the Second Circuit on January 5, 2007 in response to the Second Circuit’s decision and have informed the District Court that they would like to be heard as to whether the settlement may still be approved even if the decision of the Court of Appeals is not reversed. The District Court indicated that it would defer consideration of final approval of the settlement pending plaintiffs’ request for further appellate review. On April 6, 2007, the Second Circuit denied plaintiffs’ petition for rehearing, but clarified that the plaintiffs may seek to certify a more limited class in the District Court. In light of the overturned class certification on June 25, 2007, the District Court signed an Order terminating the settlement. The Company believes that both Bookham Technology plc and New Focus have meritorious defenses to the claims made in the Amended Class Action Complaint and therefore believes that such claims will not have a material effect on its financial position, results of operations or cash flows.

On November 12, 2007, Xi’an Raysung Photonics Inc. filed a civil suit against Bookham Inc., and our wholly-owned subsidiary, Bookham Technology (Shenzhen) Co., Ltd., in the Xi’an Intermediate People’s Court in Shanxi Province of the People’s Republic of China. The complaint filed by Xi’an Raysung Photonics Inc. alleges that Bookham Inc. and Bookham Technology (Shenzhen) Co., Ltd. breached an agreement between the parties pursuant to which Xi’an Raysung Photonics Inc. had supplied certain sample components and was to supply certain components to Bookham Inc. and Bookham Technology (Shenzhen) Co., Ltd. Xi’an Raysung Photonics Inc. has increased its request that the court award damages of 20,000,000 Chinese Yuan (approximately $2.9 million based on an exchange rate of $1.00 to 7.0075 Chinese Yuan as in effect on April 22, 2008) and require that Bookham, Inc. and Bookham Technology (Shenzhen) Co., Ltd. pay its legal fees in connection with the suit. Bookham, Inc. and Bookham Technology (Shenzhen) Co., Ltd. believes they have meritorious defenses to the claims made by Xi’an Raysung Photonics Inc. and therefore believes that such claims will not have a material effect on its financial position, results of operations or cash flows.

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below in addition to the other information included or incorporated by reference in this Quarterly Report on Form 10-Q. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall.

Risks Related to Our Business

We have a history of large operating losses and we may not be able to achieve profitability in the future.

We have never been profitable. We have incurred losses and negative cash flows from operations since our inception. As of March 29, 2008, we had an accumulated deficit of $1,058 million.

Our net loss for the nine month period ended March 29, 2008 was $21.5 million. Our net loss for the year ended June 30, 2007 was $82.2 million. For the year ended July 1, 2006, our net loss was $87.5 million, which included an $18.8 million loss on conversion of convertible debt and early extinguishment of debt, and an aggregate of $11.2 million of restructuring charges, partially offset by an $11.7 million tax gain. For the year ended July 2, 2005, our net loss was $248 million, which included goodwill and intangibles impairment charges of $114.2 million and restructuring charges of $20.9 million. We may not be able to achieve profitability in any future period and if we are unable to do so, we may need additional financing to execute on our current or future business strategies, which may not be available on commercially acceptable terms or at all.

We may not be able to maintain positive gross margins.

Even though we generated positive gross margins in each of the past thirteen fiscal quarters, we have a history of negative gross margins. We may not be able to maintain positive gross margins due to, among other things, new product transitions, changing product mix or semiconductor facility under-utilization. Additionally, we must continue to reduce our costs and improve our product mix to offset price erosion on certain product categories. In particular, over the last two quarters we have introduced a family of tunable products that account for an increasing percentage of our overall product revenues. We anticipate that we will be capacity constrained in our delivery of these products for at least the next quarter due to component supply and production limitations. In addition, we have not yet achieved targeted margins on these products as we introduce them into large-scale production. Although we have plans in place both to address production constraints and improve margins in our tunable products, any failure to do so will adversely affect our financial results, including our goal to achieve cash flow positive operations.

Our success will depend on our ability to anticipate and respond to evolving technologies and customer requirements.

The market for telecommunications equipment is characterized by substantial capital investment and diverse and evolving technologies. For example, the market for optical components is currently characterized by a trend toward the adoption of pluggable components and tunable transmitters that do not require the customized interconnections of traditional fixed wavelength gold box devices and the increased integration of components on subsystems. Our ability to anticipate and respond to these and other changes in technology, industry standards, customer requirements and product offerings and to develop and introduce new and enhanced products will be significant factors in our ability to succeed. We expect that new technologies will continue to emerge as competition in the telecommunications industry increases and the need for higher and more cost efficient bandwidth expands. The introduction of new products embodying new technologies or the emergence of new industry standards could render our existing products or products in development uncompetitive from a pricing standpoint, obsolete or unmarketable.

The market for optical components continues to be characterized by excess capacity and intense price competition which has had, and will continue to have, a material adverse effect on our results of operations.

Even though the market for optical components has been gradually recovering from the industry-wide slump experienced at the beginning of the decade, particularly in the metro market segment, there continues to be excess capacity for many optical components companies, intense price competition among optical component manufacturers and continued consolidation in the industry. As a result of this excess capacity, and other industry factors, pricing pressure remains intense. The continued uncertainties in the telecommunications industry and the global economy make it difficult for us to anticipate revenue levels and therefore to make appropriate estimates and plans relating to cost management. Continued uncertain demand for optical components has had, and will continue to have, a material adverse effect on our results of operations.

We depend on a limited number of customers for a significant percentage of our revenues.

Historically, we have generated most of our revenues from a limited number of customers. For example, in the nine months ended March 29, 2008 and the fiscal year ended June 30, 2007, our three largest customers accounted for 33% and 41% of our revenues,

respectively. Revenues from any of our major customers may decline or fluctuate significantly in the future. We may not be able to offset any decline in revenues from our existing major customers with revenues from new customers or other existing customers.

Historically, Nortel Networks has been our largest customer. Sales to Nortel Networks accounted for 14%, 20% and 48% of our revenues for the nine month period ended March 29, 2008 and the years ended June 30, 2007 and July 1, 2006, respectively. Through December 2006, sales of our products to Nortel Networks were made pursuant to the terms of a supply agreement. Certain minimum purchase obligations and favorable pricing provisions within that supply agreement expired in December 2006 as a result of which Nortel Networks is no longer obligated to buy any of our products. Revenues from Nortel Networks decreased to $3.1 million in the quarter ended March 31, 2007 from $14.5 million in the quarter ended December, 30, 2006. Even though revenues from Nortel Networks increased from $3.1 million in the quarter ended March 31, 2007 to $7.6 million in the quarter ended June 30, 2007, and have since been $8.3 million, $8.8 million and $7.9 million in the quarters ended September 29, 2007, December 29, 2007 and March 29, 2008, respectively, as with other major customers, revenues from Nortel may decline or fluctuate significantly in the future. Our inability to replace these revenues will have an adverse impact on our business and results of operations.

We and our customers depend upon a limited number of major telecommunications carriers.

Our dependence on a limited number of customers is due to the fact that the optical telecommunications systems industry is dominated by a small number of large companies. These customers in turn depend primarily on a limited number of major telecommunications carrier customers to purchase their products that incorporate our optical components. Many major telecommunication systems companies and telecommunication carriers are experiencing losses from operations. The further consolidation of the industry, coupled with declining revenues from our major customers, may have a material adverse impact on our business.

We typically do not enter into long-term contracts with our customers and our customers may decrease, cancel or delay their buying levels at any time with little or no advance notice to us.

Our customers typically purchase our products pursuant to individual purchase orders. While our customers generally provide us with their expected forecasts for our products several months in advance, in most cases they are not contractually committed to buy any quantity of products beyond those in purchase orders previously submitted to us. Our customers may decrease, cancel or delay purchase orders already in place. If any of our major customers decrease, stop or delay purchasing our products for any reason, our business and results of operations would be harmed. Cancellation or delays of such orders may cause us to fail to achieve our short- and long-term financial and operating goals and result in excess and obsolete inventory.

As a result of our global operations, our business is subject to currency fluctuations that have adversely affected our results of operations in recent quarters and may continue to do so in the future.

Our financial results have been materially impacted by foreign currency fluctuations and our future financial results may also be materially impacted by foreign currency fluctuations. At certain times in our history, declines in the value of the U.S. dollar versus the U.K. pound sterling have had a major negative effect on our profit margins and our cash flow. Despite our change in domicile from the United Kingdom to the United States in 2004 and the transfer of our assembly and test operations from Paignton, U.K. to Shenzhen, China, a significant portion of our expenses are still denominated in U.K. pounds sterling and substantially all of our revenues are denominated in U.S. dollars. Fluctuations in the exchange rate between these two currencies and, to a lesser extent, other currencies in which we collect revenues and pay expenses will continue to have a material effect on our operating results. For example, from September 30, 2007 to March 29, 2008 the Swiss Franc has appreciated 18.0% relative to the U.S. dollar, and could continue to appreciate in the future. Additional exposure could also result should the exchange rate between the U.S. dollar and the Chinese Yuan vary more significantly than it has to date.

We engage in currency transactions in an effort to cover some of our exposure to such currency fluctuations, and we may be required to convert currencies to meet our obligations. Under certain circumstances, these transactions could have an adverse effect on our financial condition.

We are increasing manufacturing operations in China, which exposes us to risks inherent in doing business in China.

We are taking advantage of the comparatively low costs of operating in China. We have recently transferred substantially all of our assembly and test operations, chip-on-carrier operations and manufacturing and supply chain management operations to our facility in Shenzhen, China, and have also transferred certain iterative research and development related activities from the U.K. to Shenzhen, China. We are also planning to transfer certain manufacturing operations of our San Jose, California based photonics business to our Shenzhen facility. To be successful in China we will need to:

	•		qualify our manufacturing lines and the products we produce in Shenzhen, as required by our customers;

	•		attract qualified personnel to operate our Shenzhen facility; and

	•		retain employees at our Shenzhen facility.

There can be no assurance we will be able to do any of these.

Operations in China are subject to greater political, legal and economic risks than our operations in other countries. In order to operate the facility, we must obtain and retain required legal authorization and train and hire a workforce. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations such as those related to taxation, import and export tariffs, environmental regulations, land use rights, intellectual property and other matters. In addition, we may not obtain or retain the requisite legal permits to continue to operate in China and costs or operational limitations may be imposed in connection with obtaining and complying with such permits. Employee turnover in China is high due to the intensely competitive and fluid market for skilled labor.

We have been advised that power may be rationed in the location of our Shenzhen facility, and were power rationing to be implemented, it could have an adverse impact on our ability to complete manufacturing commitments on a timely basis or, alternatively, could require significant investment in generating capacity to sustain uninterrupted operations at the facility, which we may not be able to do successfully.

We intend to export the majority of the products manufactured at our Shenzhen facility. Under current regulations, upon application and approval by the relevant governmental authorities, we will not be subject to certain Chinese taxes and will be exempt from certain duties on imported materials that are used in the manufacturing process and subsequently exported from China as finished products. However, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation and duties in China or may be required to pay export fees in the future. In the event that we become subject to new forms of taxation or export fees in China, our business and results of operations could be materially adversely affected. We may also be required to expend greater amounts than we currently anticipate in connection with increasing production at the Shenzhen facility. Any one of the factors cited above, or a combination of them, could result in unanticipated costs, which could materially and adversely affect our business.

Fluctuations in operating results could adversely affect the market price of our common stock.

Our revenues and operating results are likely to fluctuate significantly in the future. The timing of order placement, size of orders and satisfaction of contractual customer acceptance criteria, as well as order or shipment delays or deferrals, with respect to our products, may cause material fluctuations in revenues. Our lengthy sales cycle, which may extend to more than one year, may cause our revenues and operating results to vary from period to period and it may be difficult to predict the timing and amount of any variation. Delays or deferrals in purchasing decisions may increase as we develop new or enhanced products for new markets, including data communications, industrial, research, semiconductor capital equipment, military and biotechnology markets. Our current and anticipated future dependence on a small number of customers increases the revenue impact of each such customer’s decision to delay or defer purchases from us. Our expense levels in the future will be based, in large part, on our expectations regarding future revenue sources and, as a result, operating results for any quarterly period in which material orders fail to occur, or are delayed or deferred could vary significantly.

Because of these and other factors, quarter-to-quarter comparisons of our results of operations may not be an indication of future performance. In future periods, results of operations may differ from the estimates of public market analysts and investors. Such a discrepancy could cause the market price of our common stock to decline.

We may incur additional significant restructuring charges that will adversely affect our results of operations.

Over the past nine years, we have enacted a series of restructuring plans and cost reduction plans designed to reduce our manufacturing overhead and our operating expenses. In 2001, we reduced manufacturing overhead and our operating expenses in response to the initial decline in demand in the optical components industry. In connection with our acquisitions of Nortel Networks’ optical components business in November 2002 and New Focus in March 2004, we enacted restructuring plans related to the consolidation of our operations, which we expanded in September 2004 to include the transfer of our main corporate functions, including consolidated accounting, financial reporting, tax and treasury, from Abingdon, U.K. to our U.S headquarters in San Jose, California.

In May, September and December 2004, we announced restructuring plans, including the transfer of our assembly and test operations from Paignton, U.K. to Shenzhen, China, along with reductions in research and development and selling, general and administrative expenses. These cost reduction efforts were expanded in November 2005 to include the transfer of our chip-on-carrier assembly from Paignton to Shenzhen. The transfer of these operations was completed in the quarter ended March 31, 2007. In May 2006, we announced further cost reduction plans, which included transitioning all remaining manufacturing support and supply chain management, along with pilot line production and production planning, from Paignton to Shenzhen. This was substantially completed in the quarter ended June 30, 2007. We have spent an aggregate of $32.8 million on these restructuring programs.

and development activities to our Shenzhen facility. As of March 29, 2008, we had incurred expenses of $7.7 million with respect to this cost reduction plan, the substantial portion being personnel severance and retention related expenses. This plan is now substantially complete. As a result of the completion of this plan, we have saved approximately $8 million per fiscal quarter in expenses when compared to the quarter ended December 30, 2006. Any remaining expenses, which we expect to be less than $0.1 million, are expected to be incurred and paid by the end of our fiscal quarter ending December 27, 2008.

We plan on taking further advantage of the relatively lower costs in our Shenzhen facility by transferring most of the manufacturing operations of our San Jose, California based photonics and solution business to Shenzhen over the next two to three quarters, with related charges expected to be approximately $1.0 million, with anticipated cost savings of approximately $0.75 million a quarter upon completion, compared to the quarter ended March 29, 2008. The substantial portion of these charges is expected to be for personnel related severance and retention costs.

We may incur charges in excess of amounts currently estimated for these restructuring and cost reduction plans. We may incur additional charges in the future in connection with future restructurings and cost reduction plans. These charges, along with any other charges, have adversely affected, and will continue to adversely affect, our results of operations for the periods in which such charges have been, or will be, incurred.

Our results of operations may suffer if we do not effectively manage our inventory, and we may incur inventory-related charges.

We need to manage our inventory of component parts and finished goods effectively to meet changing customer requirements. Accurately forecasting customers’ product needs is difficult. Some of our products and supplies have in the past, and may in the future, become obsolete while in inventory due to rapidly changing customer specifications or a decrease in customer demand. If we are not able to manage our inventory effectively, we may need to write down the value of some of our existing inventory or write off unsaleable or obsolete inventory, which would adversely affect our results of operations. We have from time to time incurred significant inventory-related charges. For example, during the year ended July 1, 2006, we incurred significant costs for inventory production variances associated with unanticipated shifts in the mix of our customers’ product orders. Any such charges we incur in future periods could significantly adversely affect our results of operations.

Bookham Technology plc may not be able to utilize tax losses and other tax attributes against the receivables that arise as a result of its transaction with Deutsche Bank.

On August 10, 2005, Bookham Technology plc purchased all of the issued share capital of City Leasing (Creekside) Limited, a subsidiary of Deutsche Bank. Creekside was entitled to receivables of £73.8 million (approximately $135.8 million, based on an exchange rate of £1.00 to $1.8403, the noon buying rate on September 2, 2005 for cable transfers in foreign currencies as certified by the Federal Reserve Bank of New York) from Deutsche Bank in connection with certain aircraft subleases and these payments have been applied over a two-year term to obligations of £73.1 million (approximately $134.5 million based on an exchange rate of £1.00 to $1.8403) owed to Deutsche Bank. As a result of the completion of these transactions, Bookham Technology plc has had available through Creekside cash of approximately £6.63 million (approximately $12.2 million based on an exchange rate of £1.00 to $1.8403). We expect Bookham Technology plc to utilize certain expected tax losses and other tax attributes to reduce the taxes that might otherwise be due by Creekside as the receivables are paid. In the event that Bookham Technology plc is not able to utilize these tax losses and other tax attributes when U.K. tax returns are filed for the relevant periods (or these tax losses and other tax attributes do not arise), Creekside may have to pay taxes, reducing the cash available from Creekside. In the event there is a future change in applicable U.K. tax law, Creekside and in turn Bookham Technology plc would be responsible for any resulting tax liabilities, which amounts could be material to our financial condition or operating results.

Our products are complex and may take longer to develop than anticipated and we may not recognize revenues from new products until after long field testing and customer acceptance periods.

Many of our new products must be tailored to customer specifications. As a result, we are constantly developing new products and using new technologies in those products. For example, while we currently manufacture and sell discrete gold box technology, we expect that many of our sales of gold box technology will soon be replaced by pluggable modules. New products or modification to existing products often take many quarters to develop because of their complexity and because customer specifications sometimes change during the development cycle. We often incur substantial costs associated with the research and development and sales and marketing activities in connection with products that may be purchased long after we have incurred the costs associated with designing, creating and selling such products. In addition, due to the rapid technological changes in our market, a customer may cancel or modify a design project before we begin large-scale manufacture of the product and receive revenue from the customer. It is unlikely that we would be able to recover the expenses for cancelled or unutilized design projects. It is difficult to predict with any certainty, particularly in the present economic climate, the frequency with which customers will cancel or modify their projects, or the effect that any cancellation or modification would have on our results of operations.

If our customers do not qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.

Most of our customers do not purchase products, other than limited numbers of evaluation units, prior to qualification of the manufacturing line for volume production. Our existing manufacturing lines, as well as each new manufacturing line, must pass through varying levels of qualification with our customers. Our manufacturing lines have passed our qualification standards, as well as our technical standards. However, our customers also require that we pass their specific qualification standards and that we, and any subcontractors that we may use, be registered under international quality standards. In addition, we have in the past, and may in the future, encounter quality control issues as a result of relocating our manufacturing lines or introducing new products to fill production. We may be unable to obtain customer qualification of our manufacturing lines or we may experience delays in obtaining customer qualification of our manufacturing lines. Such delays or failure to obtain qualifications would harm our operating results and customer relationships.

Delays, disruptions or quality control problems in manufacturing could result in delays in product shipments to customers and could adversely affect our business.

We may experience delays, disruptions or quality control problems in our manufacturing operations or the manufacturing operations of our subcontractors. As a result, we could incur additional costs that would adversely affect gross margins, and product shipments to our customers could be delayed beyond the shipment schedules requested by our customers, which would negatively affect our revenues, competitive position and reputation. Furthermore, even if we are able to deliver products to our customers on a timely basis, we may be unable to recognize revenues at the time of delivery based on our revenue recognition policies.

We may experience low manufacturing yields.

Manufacturing yields depend on a number of factors, including the volume of production due to customer demand and the nature and extent of changes in specifications required by customers for which we perform design-in work. Higher volumes due to demand for a fixed, rather than continually changing, design generally results in higher manufacturing yields, whereas lower volume production generally results in lower yields. In addition, lower yields may result, and have in the past resulted, from commercial shipments of products prior to full manufacturing qualification to the applicable specifications. Changes in manufacturing processes required as a result of changes in product specifications, changing customer needs and the introduction of new product lines have historically caused, and may in the future cause, significantly reduced manufacturing yields, resulting in low or negative margins on those products. Moreover, an increase in the rejection rate of products during the quality control process, before, during or after manufacture, results in lower yields and margins. Finally, manufacturing yields and margins can also be lower if we receive or inadvertently use defective or contaminated materials from our suppliers.

We depend on a limited number of suppliers who could disrupt our business if they stopped, decreased or delayed shipments.

We depend on a limited number of suppliers of raw materials and equipment used to manufacture our products. Some of these suppliers are sole sources. We typically have not entered into long-term agreements with our suppliers and, therefore, these suppliers generally may stop supplying materials and equipment at any time. The reliance on a sole supplier or limited number of suppliers could result in delivery problems, reduced control over product pricing and quality, and an inability to identify and qualify another supplier in a timely manner. Any supply deficiencies relating to the quality or quantities of materials or equipment we use to manufacture our products could adversely affect our ability to fulfill customer orders and our results of operations.

Our intellectual property rights may not be adequately protected.

Our future success will depend, in large part, upon our intellectual property rights, including patents, design rights, trade secrets, trademarks, know-how and continuing technological innovation. We maintain an active program of identifying technology appropriate for patent protection. Our practice is to require employees and consultants to execute non-disclosure and proprietary rights agreements upon commencement of employment or consulting arrangements. These agreements acknowledge our exclusive ownership of all intellectual property developed by the individuals during their work for us and require that all proprietary information disclosed will remain confidential. Although such agreements may be binding, they may not be enforceable in full or in part in all jurisdictions and any breach of a confidentiality obligation could have a very serious effect on our business and the remedy for such breach may be limited.

Our intellectual property portfolio is an important corporate asset. The steps we have taken and may take in the future to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products. We cannot assure investors that our competitors will not successfully challenge the validity of our patents or design products that avoid infringement of our proprietary rights with respect to our technology. There can be no assurance that other companies are not investigating or developing other similar technologies, that any patents will be issued from any application pending or filed by us or that, if patents are issued, the claims allowed will be sufficiently broad to deter or prohibit others from marketing similar products. In addition, we cannot assure investors that any patents issued to us will not be challenged, invalidated or circumvented, or that the rights under those patents will provide a competitive advantage to us. Further, the laws of certain regions in which our products are or may be developed, manufactured or sold, including Asia-Pacific, Southeast Asia and Latin America, may not protect our products and intellectual property rights to the same extent as the laws of the United States, the U.K. and continental European countries. This is especially relevant now that we have transferred all of our assembly and test operations and chip-on-carrier operations from our

facilities in the U.K. to Shenzhen, China and as our competitors establish manufacturing operations in China to take advantage of comparatively low manufacturing costs.

Our products may infringe the intellectual property rights of others which could result in expensive litigation or require us to obtain a license to use the technology from third parties, or we may be prohibited from selling certain products in the future.

Companies in the industry in which we operate frequently receive claims of patent infringement or infringement of other intellectual property rights. We have, from time to time, received such claims, including from competitors and from companies that have substantially more resources than us. One such claim was received from JDS UniphaseCorp, or JDSU, and in response, on March 3, 2008, we filed a complaint in the United States District Court for the Northern District of California, asking for, among other things, a declaratory judgment of non-infringement and invalidity related to the patent which JDSU raised in its claim to us. Third parties may in the future assert claims against us concerning our existing products or with respect to future products under development. We have entered into and may in the future enter into indemnification obligations in favor of some customers that could be triggered upon an allegation or finding that we are infringing other parties’ proprietary rights. If we do infringe a third party’s rights, we may need to negotiate with holders of those rights relevant to our business. We have from time to time received notices from third parties alleging infringement of their intellectual property and where appropriate have entered into license agreements with those third parties with respect to that intellectual property. We may not in all cases be able to resolve allegations of infringement through licensing arrangements, settlement, alternative designs or otherwise. We may take legal action to determine the validity and scope of the third-party rights or to defend against any allegations of infringement. In the course of pursuing any of these means or defending against any lawsuits filed against us, we could incur significant costs and diversion of our resources. Due to the competitive nature of our industry, it is unlikely that we could increase our prices to cover such costs. In addition, such claims could result in significant penalties or injunctions that could prevent us from selling some of our products in certain markets or result in settlements that require payment of significant royalties that could adversely affect our ability to price our products profitably.

If we fail to obtain the right to use the intellectual property rights of others necessary to operate our business, our ability to succeed will be adversely affected.

Certain companies in the telecommunications and optical components markets in which we sell our products have experienced frequent litigation regarding patent and other intellectual property rights. Numerous patents in these industries are held by others, including academic institutions and our competitors. Optical component suppliers may seek to gain a competitive advantage or other third parties may seek an economic return on their intellectual property portfolios by making infringement claims against us. In the future, we may need to obtain license rights to patents or other intellectual property held by others to the extent necessary for our business. Unless we are able to obtain such licenses on commercially reasonable terms, patents or other intellectual property held by others could inhibit or prohibit our production and sale of existing products and our development of new products for our markets. Licenses granting us the right to use third-party technology may not be available on commercially reasonable terms, if at all. Generally, a license, if granted, would include payments of up-front fees, ongoing royalties or both. These payments or other terms could have a significant adverse impact on our operating results. Our larger competitors may be able to obtain licenses or cross-license their technology on better terms than we can, which could put us at a competitive disadvantage.

The markets in which we operate are highly competitive, which could result in lost sales and lower revenues.

The market for fiber optic components and modules is highly competitive and such competition could result in our existing customers moving their orders to competitors. We are aware of a number of companies that have developed or are developing optical component products, including tunable lasers, pluggables and thin film filter products, among others, that compete directly with our current and proposed product offerings. Certain of our competitors may be able to more quickly and effectively:

	•		respond to new technologies or technical standards;

	•		react to changing customer requirements and expectations;

	•		devote needed resources to the development, production, promotion and sale of products; and

	•		deliver competitive products at lower prices.

Many of our current competitors, as well as a number of our potential competitors, have longer operating histories, greater name recognition, broader customer relationships and industry alliances and substantially greater financial, technical and marketing resources than we do. In addition, market leaders in industries such as semiconductor and data communications, who may also have significantly more resources than we do, may in the future enter our market with competing products. All of these risks may be increased if the market were to further consolidate through mergers or other business combinations between competitors.

We may not be able to compete successfully with our competitors and aggressive competition in the market may result in lower prices for our products or decreased gross profit margins. Any such development would have a material adverse effect on our business, financial condition and results of operations.

We generate a significant portion of our revenues internationally and therefore are subject to additional risks associated with the extent of our international operations.

For the nine months ended March 29, 2008 and the years ended June 30, 2007, July 1, 2006 and July 2, 2005, 24%, 23%, 21%, and 28% of our revenues, respectively, were derived in the United States and 76%, 77%, 79%, and 72% of our revenues, respectively, were derived outside the United States. We are subject to additional risks related to operating in foreign countries, including:

	•		currency fluctuations, which could result in increased operating expenses and reduced revenues;

	•		greater difficulty in accounts receivable collection and longer collection periods;

	•		difficulty in enforcing or adequately protecting our intellectual property;

	•		foreign taxes;

	•		political, legal and economic instability in foreign markets; and

	•		foreign regulations.

Any of these risks, or any other risks related to our foreign operations, could materially adversely affect our business, financial condition and results of operations.

Our business will be adversely affected if we cannot manage the significant changes in the number of our employees and the size of our operations.

We have significantly reduced the number of employees and scope of our operations because of declining demand for certain of our products and continue to reduce our headcount in connection with our on going restructuring and cost reduction efforts. During periods of growth or decline, management may not be able to sufficiently coordinate the roles of individuals to ensure that all areas of our operations receive appropriate focus and attention. If we are unable to manage our headcount, manufacturing capacity and scope of operations effectively, the cost and quality of our products may suffer, we may be unable to attract and retain key personnel and we may be unable to market and develop new products. Further, the inability to successfully manage a more geographically diverse organization, or any significant delay in achieving successful management, could have a material adverse effect on us and, as a result, on the market price of our common stock.

We may be faced with product liability claims.

Despite quality assurance measures, defects may occur in our products. The occurrence of any defects in our products could give rise to liability for damages caused by such defects, including consequential damages. Such defects could, moreover, impair the market’s acceptance of our products. Both could have a material adverse effect on our business and financial condition. In addition, we may assume product warranty liabilities related to companies we acquire, which could have a material adverse effect on our business and financial condition. In order to mitigate the risk of liability for damages, we carry product liability insurance with a $26 million aggregate annual limit and errors and omissions insurance with a $5 million annual limit. We cannot assure investors that this insurance could adequately cover our costs arising from defects in our products or otherwise.

If we fail to attract and retain key personnel, our business could suffer.

Our future depends, in part, on our ability to attract and retain key personnel. Competition for highly skilled technical people is extremely intense and we continue to face difficulty identifying and hiring qualified engineers in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Our future also depends on the continued contributions of our executive management team and other key management and technical personnel, each of whom would be difficult to replace. The loss of services of these or other executive officers or key personnel or the inability to continue to attract qualified personnel could have a material adverse effect on our business.

Similar to other technology companies, we rely upon our ability to use stock options and other forms of equity-based compensation as key components of our executive and employee compensation structure. Historically, these components have been critical to our ability to retain important personnel and offer competitive compensation packages. Without these components, we would be required to significantly increase cash compensation levels (or develop alternative compensation structures) in order to retain our key employees. Accounting rules relating to the expensing of equity compensation may cause us to substantially reduce, modify, or even eliminate, all or portions of our equity compensation programs which may, in turn, prevent us from retaining or hiring qualified employees.

Our business and future operating results may be adversely affected by events outside of our control.

Our business and operating results are vulnerable to interruption by events outside of our control, such as earthquakes, fire, power loss, telecommunications failures, political instability, military conflict and uncertainties arising out of terrorist attacks, including a

global economic slowdown, the economic consequences of additional military action or additional terrorist activities and associated political instability, and the effect of heightened security concerns on domestic and international travel and commerce.

We may not be able to raise capital when desired on favorable terms, or at all, or without dilution to our stockholders.

The rapidly changing industry in which we operate, the length of time between developing and introducing a product to market and frequent changing customer specifications for products, among other things, makes our prospects difficult to evaluate. It is possible that we may not generate sufficient cash flow from operations or otherwise have the capital resources to meet our future capital needs. If this occurs, we may need additional financing to execute on our current or future business strategies.

In the past, we have sold shares of our common stock in public offerings, private placements or otherwise in order to fund our operations. On November 13, 2007, we completed a public offering of 16,000,000 shares of common stock that generated $40.9 million of cash, net of commissions and expenses. On March 22, 2007, pursuant to a private placement, we issued 13,640,224 shares of common stock and warrants to purchase up to 4,092,066 shares of common stock. In September 2006, pursuant to a private placement, we issued an aggregate of 11,594,667 shares of common stock and warrants to purchase an aggregate of 2,898,667 shares of common stock. In January and March 2006, pursuant to a private placement, we issued an aggregate of 10,507,158 shares of common stock and warrants to purchase an aggregate of 1,086,001 shares of common stock.

If we raise funds through the issuance of equity or convertible debt securities, our stockholders may be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of securities held by existing stockholders. We cannot assure you that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, develop or enhance our products, or otherwise respond to competitive pressures could be significantly limited.

Risks Related to Regulatory Compliance and Litigation

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, which may cause stockholders to lose confidence in the accuracy of our financial statements.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our brand and operating results could be harmed. In addition, compliance with the internal control requirements, as well as other financial reporting standards applicable to a public company, including the Sarbanes-Oxley Act of 2002, has in the past and will in the future continue to involve substantial cost and investment of our management’s time. We will continue to spend significant time and incur significant costs to assess and report on the effectiveness of internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. In our prior fiscal years ended July 1, 2006 and July 2, 2005, we reported certain material weaknesses, in fiscal 2006 relating to inconsistent treatment of translation/transaction gains and loses in respect to certain intercompany loan balances, and in fiscal 2005 relating to: i) shortage of, and turnover in, qualified financial reporting personnel to ensure complete application of U.S. generally accepted accounting principles, ii) insufficient management review of analyses and reconciliations, iii) inaccurate updating of accounting inputs for estimates of complex non-routine transactions, and iv) accounting for foreign currency exchange transactions. Although we have since concluded as to the satisfactory remediation of these material weaknesses, finding more material weaknesses in the future could make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers, which could harm our business. In addition, if we discover future material weaknesses, disclosure of that fact could reduce the market’s confidence in our financial statements, which could harm our stock price and our ability to raise capital.

Our business involves the use of hazardous materials, and we are subject to environmental and import/export laws and regulations that may expose us to liability and increase our costs.

We historically handled small amounts of hazardous materials as part of our manufacturing activities and now handle more and different hazardous materials as a result of the manufacturing processes related to our New Focus division, the optical components business acquired from Nortel Networks and the product lines we acquired from Marconi. Consequently, our operations are subject to environmental laws and regulations governing, among other things, the use and handling of hazardous substances and waste disposal. We may incur costs to comply with current or future environmental laws. As with other companies engaged in manufacturing activities that involve hazardous materials, a risk of environmental liability is inherent in our manufacturing activities, as is the risk that our facilities will be shut down in the event of a release of hazardous waste. The costs associated with environmental compliance or remediation efforts or other environmental liabilities could adversely affect our business. Under applicable EU regulations, we, along with other electronics component manufacturers, are prohibited from using lead and certain other hazardous materials in our products. We have incurred unanticipated expenses in connection with the related reconfiguration of our products, and could lose business or face product returns if we failed to implement these requirements properly or on a timely basis.

In addition, the sale and manufacture of certain of our products require on-going compliance with governmental security and import/export regulations. Our New Focus division has, in the past, been notified of potential violations of certain export regulations which on one occasion resulted in the payment of a fine to the U.S. federal government. We may, in the future, be subject to

investigation which may result in fines for violations of security and import/export regulations. Furthermore, any disruptions of our product shipments in the future, including disruptions as a result of efforts to comply with governmental regulations, could adversely affect our revenues, gross margins and results of operations.

Litigation regarding Bookham Technology plc’s and New Focus’ initial public offering and follow-on offering and any other litigation in which we become involved, including as a result of acquisitions on the arrangements we have with suppliers and customers, may substantially increase our costs and harm our business.

The Amended Class Action Complaint asserts claims under certain provisions of the securities laws of the United States. It alleges, among other things, that the prospectuses for Bookham Technology plc’s and New Focus’s initial public offerings were materially false and misleading in describing the compensation to be earned by the underwriters in connection with the offerings, and in not disclosing certain alleged arrangements among the underwriters and initial purchasers of ordinary shares, in the case of Bookham Technology plc, or common stock, in the case of New Focus, from the underwriters. The Amended Class Action Complaint seeks unspecified damages (or; in the alternative; rescission for those class members who no longer hold our or New Focus common stock), costs, attorneys’ fees, experts’ fees, interest and other expenses. In October 2002, the Individual Defendants were dismissed, without prejudice, from the action subject to their execution of tolling agreements. In July 2002, all defendants filed Motions to Dismiss the Amended Class Action Complaint. The motion was denied as to Bookham Technology plc and New Focus in February 2003. Special committees of the board of directors authorized the companies to negotiate a settlement of pending claims substantially consistent with a memorandum of understanding negotiated among class plaintiffs, all issuer defendants and their insurers.

Plaintiffs and most of the issuer defendants and their insurers entered into a stipulation of settlement for the claims against the issuer defendants, including us. This stipulation of settlement was subject to, among other things, certification of the underlying class of plaintiffs. Under the stipulation of settlement, the plaintiffs would dismiss and release all claims against participating defendants in exchange for a payment guaranty by the insurance companies collectively responsible for insuring the issuers in the related cases, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On February 15, 2005, the District Court issued an Opinion and Order preliminarily approving the settlement provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. The parties agreed to the modification narrowing the scope of the bar order, and on August 31, 2005, the District Court issued an order preliminarily approving the settlement.

On December 5, 2006, following an appeal from the underwriter defendants the United States Court of Appeals for the Second Circuit overturned the District Court’s certification of the class of plaintiffs who are pursuing the claims that would be settled in the settlement against the underwriter defendants. Plaintiffs filed a Petition for Rehearing and Rehearing En Banc with the Second Circuit on January 5, 2007 in response to the Second Circuit’s decision and have informed the District Court that they would like to be heard as to whether the settlement may still be approved even if the decision of the Court of Appeals is not reversed. The District Court indicated that it would defer consideration of final approval of the settlement pending plaintiffs’ request for further appellate review. On April 6, 2007, the Second Circuit denied plaintiffs’ petition for rehearing, but clarified that the plaintiffs may seek to certify a more limited class in the District Court. In light of the overturned class certification on June 25, 2007, the District Court signed an Order terminating the settlement. We believe that both Bookham Technology plc and New Focus have meritorious defenses to the claims made in the Amended Class Action Complaint and therefore believe that such claims will not have a material effect on our financial position, results of operations or cash flows.

$2.9 million based on an exchange rate of $1.00 to 7.0075 Chinese Yuan as in effect on April 22, 2008) and require that Bookham, Inc. and Bookham Technology (Shenzhen) Co., Ltd. pay its legal fees in connection with the suit. Bookham, Inc. and Bookham Technology (Shenzhen) Co., Ltd. believes they have meritorious defenses to the claims made by Xi’an Raysung Photonics Inc. and therefore believes that such claims will not have a material effect on its financial position, results of operations or cash flows.

Litigation is subject to inherent uncertainties, and an adverse result in these or other matters that may arise from time to time could have a material adverse effect on our business, results of operations and financial condition. Any litigation to which we are subject may be costly and, further, could require significant involvement of our senior management and may divert management’s attention from our business and operations.

Some anti-takeover provisions contained in our charter and under Delaware laws could hinder a takeover attempt.

We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware prohibiting, under some circumstances, publicly-held Delaware corporations from engaging in business combinations with some stockholders for a specified period of time without the approval of the holders of substantially all of our outstanding voting stock. Our certificate of incorporation and bylaws contain provisions relating to the limitations of liability and indemnification of our directors and officers, dividing our board of directors into three classes of directors serving staggered three year terms and providing that our stockholders can take action only at a duly called annual or special meeting of stockholders. All of these provisions could delay or impede the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, even if such events could be beneficial, in the short-term, to the interests of the stockholders. In addition, such provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock.

These provisions also may have the effect of deterring hostile takeovers or delaying changes in control or management of us.

Risks Related to Our Common Stock

A variety of factors could cause the trading price of our common stock to be volatile or decline.

The trading price of our common stock has been, and is likely to continue to be, highly volatile. Many factors could cause the market price of our common stock to rise and fall. In addition to the matters discussed in other risk factors included herein, some of the reasons for the fluctuations in our stock price are:

	•		fluctuations in our results of operations;

	•		changes in our business, operations or prospects;

	•		hiring or departure of key personnel;

	•		new contractual relationships with key suppliers or customers by us or our competitors;

	•		proposed acquisitions by us or our competitors;

	•		financial results that fail to meet public market analysts’ expectations and changes in stock market analysts’ recommendations regarding us, other optical technology companies or the telecommunication industry in general;

	•		future sales of common stock, or securities convertible into or exercisable for common stock;

	•		adverse judgments or settlements obligating us to pay damages;

	•		acts of war, terrorism, or natural disasters;

	•		industry, domestic and international market and economic conditions;

	•		low trading volume in our stock;

	•		developments relating to patents or property rights; and

	•		government regulatory changes.

Since Bookham Technology plc’s initial public offering in April 2000, Bookham Technology plc’s ADSs and ordinary shares, our shares of common stock and the shares of our customers and competitors have experienced substantial price and volume fluctuations, in many cases without any direct relationship to the affected company’s operating performance. An outgrowth of this market volatility is the significant vulnerability of our stock price and the stock prices of our customers and competitors to any actual or perceived fluctuation in the strength of the markets we serve, regardless of the actual consequence of such fluctuations. As a result, the market prices for these companies are highly volatile. These broad market and industry factors caused the market price of Bookham Technology plc’s ADSs, ordinary shares, and our common stock to fluctuate, and may in the future cause the market price of our common stock to fluctuate, regardless of our actual operating performance or the operating performance of our customers.

We may incur significant costs from class action litigation due to our expected stock volatility.

Our stock price may fluctuate for many reasons, including as a result of public announcements regarding the progress of our product development efforts, the addition or departure of key personnel, variations in our quarterly operating results and changes in market valuations of companies in our industry. Recently, when the market price of a stock has been volatile, as our stock price may be, holders of that stock have occasionally brought securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit were without merit, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management. In addition, if the suit were resolved in a manner adverse to us, the damages we could be required to pay may be substantial and would have an adverse impact on our ability to operate our business.

Because we do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have never declared or paid any dividends on our common stock. We anticipate that we will retain any future earnings to support operations and to finance the development of our business and do not expect to pay cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

We can issue shares of preferred stock that may adversely affect your rights as a stockholder of our common stock.

Our certificate of incorporation authorizes us to issue up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of holders of our common stock. For example, an issuance of shares of preferred stock could:

	•		adversely affect the voting power of the holders of our common stock;

	•		make it more difficult for a third party to gain control of us;

	•		discourage bids for our common stock at a premium;

	•		limit or eliminate any payments that the holders of our common stock could expect to receive upon our liquidation; or

	•		otherwise adversely affect the market price of our common stock.

We may in the future issue additional shares of authorized preferred stock at any time.

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 6. Exhibits

See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this Quarterly Report on Form 10-Q, which Exhibit Index is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BOOKHAM, INC.
May 5, 2008	By:	/s/ Stephen Abely
		Stephen Abely
		Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

DOUG AND KATE TO COMMENT ON ANY OTHER EXHIBITS NEEDED.


Exhibit
Number		Description of Exhibit

10.1		Form of Executive Severance and Retention Agreement between the Registrant and its Executive Officers.

31.1		Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer.

31.2		Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer.

32.1		Section 1350 Certification of Chief Executive Officer.

32.2		Section 1350 Certification of Chief Financial Officer.

EX-10.1 2 f40403exv10w1.htm EXHIBIT 10.1 exv10w1

Exhibit 10.1

BOOKHAM, INC.

Executive Severance and Retention Agreement

THIS EXECUTIVE SEVERANCE AND RETENTION AGREEMENT by and between Bookham, Inc., a Delaware corporation (the “Company”), and (the “Executive”) is made as of , 2008 (the “Effective Date”).

WHEREAS, the Company and Executive wish to provide for agreed-upon severance arrangements in the event that the Executive ceases to be an employee of the Company under certain circumstances prior to any change in control of the Company,

WHEREAS, the Company also recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control of the Company exists and that such possibility, and the uncertainty and questions which it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company and its stockholders, and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Board”) has determined that appropriate steps should be taken to reinforce and encourage the continued employment and dedication of the Company’s key personnel without distraction from the possibility of termination under certain circumstances or a change in control of the Company and related events and circumstances.

NOW, THEREFORE, as an inducement for and in consideration of the Executive remaining in its employ, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement under the terms and subject to the provisions, provided below.

1. Key Definitions.

As used herein, the following terms shall have the following respective meanings:

1.1 “Cause” means:

(a) the Executive’s willful and continued failure to substantially perform Executive’s reasonable assigned duties as an officer of the Company (other than any such failure resulting from incapacity due to physical or mental illness or any failure after the Executive gives notice of termination for Good Reason), which failure is not cured within 30 days after a written demand for substantial performance is received by the Executive from the Board of Directors of the Company that specifically identifies the manner in which the Board of Directors believes the Executive has not substantially performed the Executive’s duties; provided that, for purposes of Section 3.1, for all Executives other than the Chief Executive Officer (“CEO”), substantial performance shall be determined by the CEO and such written demand for substantial performance shall be provided by the CEO; or

(b) the Executive’s willful engagement in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

For purposes of this Section 1.1, no act or failure to act by the Executive shall be considered “willful” unless it is done, or omitted to be done, in bad faith and without reasonable belief that the Executive’s action or omission was in the best interests of the Company.

1.2 “Change in Control” means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):

(a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 30% or more of either (x) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this Section 1.2; or

(b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (i) who was a member of the Board on the date of the execution of this Agreement or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

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(c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company in one or a series of transactions (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively; and (ii) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 30% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or

(d) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

1.3 “Change in Control Date” means the first date during the Term (as defined in Section 2) on which a Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and (c) it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of this Agreement the “Change in Control Date” shall mean the date immediately prior to the date of such termination of employment.

1.4 “Disability” means the Executive’s absence from the full-time performance of the Executive’s duties with the Company for 180 consecutive calendar days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

1.5 “Good Reason” means the occurrence, without the Executive’s written consent, of any of the events or circumstances set forth in clauses (a) through (f) below.

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Notwithstanding the occurrence of any such event or circumstance, such occurrence shall not be deemed to constitute Good Reason if, prior to the Date of Termination specified in the Notice of Termination (each as defined in Section 4.1(a)) given by the Executive in respect thereof, such event or circumstance has been fully corrected and the Executive has been reasonably compensated for any losses or damages resulting therefrom (provided that such right of correction by the Company shall only apply to the first Notice of Termination for Good Reason given by the Executive).

(a) the assignment to the Executive of duties inconsistent in any material respect with the Executive’s position (including status, offices, titles and reporting requirements), authority or responsibilities in effect immediately prior to the earliest to occur of (i) the Change in Control Date, (ii) the date of the execution by the Company of the initial written agreement or instrument providing for the Change in Control or (iii) the date of the adoption by the Board of Directors of a resolution providing for the Change in Control (with the earliest to occur of such dates referred to herein as the “Measurement Date”), or any other action or omission by the Company which results in a material diminution in such position, authority or responsibilities;

(b) a reduction in the Executive’s annual base salary as in effect on the Measurement Date or as the same was or may be increased thereafter from time to time;

(c) the failure by the Company to (i) continue in effect any material compensation or benefit plan or program (including without limitation any life insurance, medical, health and accident or disability plan and any vacation or automobile program or policy) (a “Benefit Plan”) in which the Executive participates or which is applicable to the Executive immediately prior to the Measurement Date, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan or program, (ii) continue the Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, than the basis existing immediately prior to the Measurement Date or (iii) award cash bonuses to the Executive in amounts and in a manner substantially consistent with past practice in light of the Company’s financial performance;

(d) a change by the Company in the location at which the Executive performs Executive’s principal duties for the Company to a new location that is both (i) outside a radius of 35 miles from the Executive’s principal residence immediately prior to the Measurement Date and (ii) more than 20 miles from the location at which the Executive performed Executive’s principal duties for the Company immediately prior to the Measurement Date; or a requirement by the Company that the Executive travel on Company business to a substantially greater extent than required immediately prior to the Measurement Date;

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(e) the failure of the Company to obtain the agreement from any successor to the Company to assume and agree to perform this Agreement, as required by Section 6.1; or

(f) any material breach by the Company of this Agreement or any employment agreement with the Executive.

2. Term of Agreement. This Agreement, and all rights and obligations of the parties hereunder, shall take effect upon the Effective Date and shall expire upon the first to occur of (a) the expiration of the Term (as defined below) if a Change in Control has not occurred during the Term, (b) the termination of the Executive’s employment with the Company prior to the expiration of the Term, other than by reason of a termination by the Company without Cause, (c) the fulfillment by the Company of all of its obligations under Section 3 if the Executive’s employment with the Company is terminated without Cause prior to a Change in Control, (d) the date 12 months after the Change in Control Date, if the Executive is still employed by the Company as of such later date, or (e) the fulfillment by the Company of all of its obligations under Section 4 if the Executive’s employment with the Company terminates within 12 months following the Change in Control Date. “Term” shall mean the period commencing as of the Effective Date and continuing in effect through December 31, 2011; provided, however, that commencing on January 1, 2012 and each January 1 thereafter, the Term shall be automatically extended for one additional year unless, not later than 90 days prior to the scheduled expiration of the Term (or any extension thereof), the Company shall have given the Executive written notice that the Term will not be extended.

3. Benefits Prior to a Change in Control.

3.1 Termination of Employment without Cause. Subject to Section 4.4, in the event that the Executive’s employment is terminated because of the death of the Executive or by the Company without Cause at any time prior to a Change in Control (such date of termination or death, the “Section 3 Date of Termination”), the Executive (or Executive’s heirs) shall be entitled to the following aggregate benefits:

(a) The sum of (i) the Executive’s Target bonus approved by the Company’s Compensation Committee for the then current bonus payment period, multiplied by a fraction, the numerator of which is the number of days preceding the Section 3 Date of Termination in the current bonus period and the denominator of which is the total number of days in the current bonus period, (ii) any prior period bonus approved by the Board but not paid, (iii) the amount of any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not previously paid (the sum of the amounts described in clauses (i), (ii) and (iii) shall be hereinafter referred to as “Accrued Obligations”), payable in a lump sum in cash within 30 days of the Section 3 Date of Termination;

(b) An amount equal to Executive’s base salary then in effect multiplied by a fraction, the numerator of which shall be (i) the sum of eight (8) plus one (1) for each whole year of the Executive’s employment by the Company, but in no event more

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than eighteen (18), measured from the Section 3 Date of Termination (the “Section 3 Termination Payment Period”), and (ii) the denominator of which shall be 12, which amount shall be paid as a lump sum cash payment basis within 30 days of the Section 3 Date of Termination. Existing option, restricted stock and other equity awards will continue to be governed by the terms of their respective grants and plan provisions.

3.2 Release. The payment to the Executive (or Executive’s heirs) of the amounts and benefits payable under this Section 3 shall (x) be contingent upon the execution by the Executive (or Executive’s heirs) of a separation agreement and release in a form reasonably acceptable to the Company and substantially as set forth in Exhibit A to this Agreement (the “Executive Release”) and upon the Executive Release becoming effective in accordance with its terms, (y) agreement by the Executive to standard confidentiality obligations, a non-solicitation of Company customers for six-months following the Section 3 Date of Termination and a non-solicitation of Company employees for twelve-months following the Section 3 Date of Termination and (y) shall constitute the sole remedy of the Executive’s employment in the circumstances set forth in this Section 3.

4. Termination after a Change in Control.

4.1 Termination of Employment.

(a) If the Change in Control Date occurs during the Term, any termination of the Executive’s employment by the Company or by the Executive within 12 months following the Change in Control Date or termination due the Executive’s death within 12 months following the Change in Control Date, shall be communicated by a written notice to the other party hereto (the “Notice of Termination”), given in accordance with Section 7. Any Notice of Termination shall: (i) indicate the specific termination provision (if any) of this Agreement relied upon by the party giving such notice, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the Date of Termination (as defined below). The effective date of an employment termination (the “Date of Termination”) shall be (I) the close of business on the date specified in the Notice of Termination (which date may not be less than 15 days or more than 120 days after the date of delivery of such Notice of Termination) or (II) the date of the Executive’s death. In the event the Company fails to satisfy the requirements of Section 4.1(a) regarding a Notice of Termination, the purported termination of the Executive’s employment pursuant to such Notice of Termination shall not be effective for purposes of this Agreement.

(b) The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting any such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

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(c) Any Notice of Termination for Cause given by the Company must be given within 90 days of the occurrence of the event(s) or circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination for Cause being given (and prior to any termination for Cause being effective), the Executive shall be entitled to a hearing before the Board of Directors of the Company at which the Executive may, at the Executive’s election, be represented by counsel and at which Executive shall have a reasonable opportunity to be heard. Such hearing shall be held on not less than 15 days prior written notice to the Executive stating the Board of Directors’ intention to terminate the Executive for Cause and stating in detail the particular event(s) or circumstance(s) which the Board of Directors believes constitutes Cause for termination.

(d) Any Notice of Termination for Good Reason given by the Executive must be given within 90 days of the occurrence of the event(s) or circumstance(s) that constitute(s) Good Reason.

4.2 Benefits to Executive.

4.2.1. Stock Acceleration. If the Change in Control Date occurs during the Term, then, effective upon the Change in Control Date or the Executive’s death, (a) each outstanding option to purchase shares of Common Stock of the Company held by the Executive (or Executive’s heirs) shall become immediately exercisable in full and shares of Common Stock of the Company received upon exercise of any options will no longer be subject to a right of repurchase by the Company, (b) each outstanding restricted stock award or restricted stock unit shall be deemed to be fully vested and will no longer be subject to a right of repurchase by the Company and (c) notwithstanding any provision in any applicable option agreement to the contrary, each such option shall continue to be exercisable by the Executive (to the extent such option was exercisable on the Date of Termination) for a period of six months following the Date of Termination.

4.2.2. Compensation. If the Change in Control Date occurs during the Term and the Executive’s employment with the Company terminates within 12 months following the Change in Control Date, the Executive shall be entitled to the following additional benefits:

(a) Termination Without Cause or for Good Reason. Subject to Section 4.4, if the Executive’s employment with the Company is terminated by the Company (other than for Cause or by the Executive for Good Reason within 12 months following the Change in Control Date, then the Executive shall be entitled to a lump sum payment in cash, within 30 days after the Date of Termination, of the aggregate of the following amounts:

(1) the Accrued Obligations and

(2) the amount equal to Executive’s base salary then in effect multiplied by a fraction, the numerator of which shall be (a) the sum of eight months plus one additional month for each whole year of the Executive’s employment by the Company, but

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in no event more than eighteen months, measured on the Termination Date (the “Termination Payment Period”), and (b) the denominator of which shall be 12..

(b) Resignation Without Good Reason or Disability. Subject to Section 4.4, if the Executive voluntarily terminates Executive’s employment with the Company following the Change in Control Date, excluding a termination for Good Reason, or if the Executive’s employment with the Company is terminated by reason of the Executive’s Disability, then the Company shall pay the Executive in a lump sum in cash within 30 days after the Date of Termination, the Accrued Obligations.

4.3 Taxes.

(a) Notwithstanding any other provision of this Agreement, except as set forth in Section 4.3(b), in the event that the Company undergoes a “Change in Ownership or Control” (as defined below), the Company shall not be obligated to provide to the Executive a portion of any “Contingent Compensation Payments” (as defined below) that the Executive would otherwise be entitled to receive to the extent necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)) for the Executive. For purposes of this Section 4.3, the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Payments” and the aggregate amount (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Amount.”

(b) Notwithstanding the provisions of Section 4.3(a), no such reduction in Contingent Compensation Payments shall be made if (i) the Eliminated Amount (computed without regard to this sentence) exceeds (ii) 110% of the aggregate present value (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the amount of any additional taxes that would be incurred by the Executive if the Eliminated Payments (determined without regard to this sentence) were paid to Executive (including, state and federal income taxes on the Eliminated Payments, the excise tax imposed by Section 4999 of the Code payable with respect to all of the Contingent Compensation Payments in excess of the Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such reduction in Contingent Compensation Payments pursuant to this Section 4.3(b) shall be referred to as a “Section 4.3(b) Override.” For purpose of this paragraph, if any federal or state income taxes would be attributable to the receipt of any Eliminated Payment, the amount of such taxes shall be computed by multiplying the amount of the Eliminated Payment by the maximum combined federal and state income tax rate provided by law.

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(i) “Change in Ownership or Control” shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code.

(ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of compensation that is made or made available (under this Agreement or otherwise) to a “disqualified individual” (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.

(d) Any payments or other benefits otherwise due to the Executive following a Change in Ownership or Control that could reasonably be characterized (as determined by the Company) as Contingent Compensation Payments (the “Potential Payments”) shall not be made until the dates provided for in this Section 4.3(d). Within 30 days after each date on which the Executive first becomes entitled to receive (whether or not then due) a Contingent Compensation Payment relating to such Change in Ownership or Control, the Company shall determine and notify the Executive (with reasonable detail regarding the basis for its determinations) (i) which Potential Payments constitute Contingent Compensation Payments, (ii) the Eliminated Amount and (iii) whether the Section 4.3(b) Override is applicable. Within 30 days after delivery of such notice to the Executive, the Executive shall deliver a response to the Company (the “Executive Response”) stating either (A) that Executive agrees with the Company’s determination pursuant to the preceding sentence, in which case Executive shall indicate, if applicable, which Contingent Compensation Payments, or portions thereof (the aggregate amount of which, determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be equal to the Eliminated Amount), shall be treated as Eliminated Payments or (B) that Executive disagrees with such determination, in which case Executive shall set forth (i) which Potential Payments should be characterized as Contingent Compensation Payments, (ii) the Eliminated Amount, (iii) whether the Section 4.3(b) Override is applicable, and (iv) which (if any) Contingent Compensation Payments, or portions thereof (the aggregate amount of which, determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be equal to the Eliminated Amount, if any), shall be treated as Eliminated Payments. In the event that the Executive fails to deliver an Executive Response on or before the required date, the Company’s initial determination shall be final and the Contingent Compensation Payments that shall be treated as Eliminated Payments shall be determined by the Company in its absolute discretion. If the Executive states in the Executive Response that Executive agrees with the Company’s determination, the Company shall make the Potential Payments to the Executive within three business days following delivery to the Company of the Executive Response (except for any Potential Payments which are not due to be made until after such date, which Potential Payments shall be made on the date on which they are due). If the Executive states in the Executive Response that Executive

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disagrees with the Company’s determination, then, for a period of 60 days following delivery of the Executive Response, the Executive and the Company shall use good faith efforts to resolve such dispute. The Company shall, within three business days following delivery to the Company of the Executive Response, make to the Executive those Potential Payments as to which there is no dispute between the Company and the Executive regarding whether they should be made (except for any such Potential Payments which are not due to be made until after such date, which Potential Payments shall be made on the date on which they are due). The balance of the Potential Payments shall be made within three business days following the resolution of such dispute. Subject to the limitations contained in Sections 4.3(a) and (b) hereof, the amount of any payments to be made to the Executive following the resolution of such dispute shall be increased by amount of the accrued interest thereon computed at the prime rate announced from time to time by The Bank of America, compounded monthly from the date that such payments originally were due.

(e) The provisions of this Section 4.3 are intended to apply to any and all payments or benefits available to the Executive under this Agreement or any other agreement or plan of the Company under which the Executive receives Contingent Compensation Payments.

4.4 Payments subject to Section 409A.

(a) Subject to this Section 4.4, payments or benefits under Sections 3.1 and 4.2.2 shall begin only upon the date of a “separation from service” of the Executive (determined as set forth below) which occurs on or after the termination of the Executive’s employment. The following rules shall apply with respect to distribution of the payments and benefits, if any, to be provided to the Executive under Sections 3.1 and 4.2.2, as applicable:

(i) It is intended that each installment of the payments and benefits provided under Sections 3.1 and 4.2.2 shall be treated as a separate “payment” for purposes of Section 409A of the Code and the guidance issued thereunder (“Section 409A”). Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

(ii) If, as of the date of the “separation from service” of the Executive from the Company, the Executive is not a “specified employee” (within the meaning of Section 409A), then each installment of the payments and benefits shall be made on the dates and terms set forth in Sections 3.1 and 4.2.2.

(iii) If, as of the date of the “separation from service” of the Executive from the Company, the Executive is a “specified employee” (within the meaning of Section 409A), then:

(1) Each installment of the payments and benefits due under Sections 3.1 and 4.2.2 that, in accordance with the dates and terms set forth herein, will in

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all circumstances, regardless of when the separation from service occurs, be paid within the Short-Term Deferral Period (as hereinafter defined) shall be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A. For purposes of this Agreement, the “Short-Term Deferral Period” means the period ending on the later of the 15^th day of the third month following the end of the Executive’s tax year in which the separation from service occurs and the 15^th day of the third month following the end of the Company’s tax year in which the separation from service occurs; and

(2) Each installment of the payments and benefits due under Sections 3.1 and 4.2.2 that is not described in Section 4.4(a)(iii)(1) and that would, absent this subsection, be paid within the six-month period following the “separation from service” of the Executive from the Company shall not be paid until the date that is six months and one day after such separation from service (or, if earlier, the Executive’s death), with any such installments that are required to be delayed being accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following the Executive’s separation from service and any subsequent installments, if any, being paid in accordance with the dates and terms set forth herein; provided, however, that the preceding provisions of this sentence shall not apply to any installment of payments and benefits if and to the maximum extent that that such installment is deemed to be paid under a separation pay plan that does not provide for a deferral of compensation by reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary separation from service). Any installments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of the Executive’s second taxable year following Executive’s taxable year in which the separation from service occurs.

(b) The determination of whether and when a separation from service of the Executive from the Company has occurred shall be made and in a manner consistent with, and based on the presumptions set forth in, Treasury Regulation Section 1.409A-1(h). Solely for purposes of this Section 4.4(b), “Company” shall include all persons with whom the Company would be considered a single employer under Section 414(b) and 414(c) of the Code.

(c) All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of Section 409A to the extent that such reimbursements or in-kind benefits are subject to Section 409A.

4.5 Release. The obligation of the Company to make the payments and provide the benefits to the Executive under Sections 4.2(a)(i)(2) and 4.2(a)(ii) is conditioned upon (a) the Executive (or Executive’s heirs) signing the Executive Release, and (b) agreement by the Executive to (i) a non-solicitation of Company customers for six-months following the Change of Control, (ii) a non-solicitation of Company employees for twelve months following the Change of Control and (iii) standard confidentiality obligations. The Company shall not be obligated to make any payments to the Executive under Section 4.2(a)(i)(2) until the Executive Release has become effective; provided that at such time as the Executive Release becomes effective, the Company shall promptly pay to the Executive any payments that would otherwise

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have been made to the Executive between the Date of Termination and date on which the Executive Release becomes effective.

5. Disputes.

5.1 Settlement of Disputes. All claims by the Executive for benefits under Section 4 of this Agreement shall be directed to and determined by the Board of Directors of the Company and shall be in writing. Any denial by the Board of Directors of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board of Directors shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim.

5.2 Expenses. The Company agrees to pay as incurred, to the full extent permitted by law, all legal, accounting and other fees and expenses which the Executive may reasonably incur as a result of any claim or contest by the Company, the Executive or others regarding the validity or enforceability of, or liability under, Section 4 of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive regarding the amount of any payment or benefits pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code; provided that Executive prevails in the outcome of such claim or contest. Notwithstanding the foregoing, (i) the expenses eligible for reimbursement may not affect the expenses eligible for reimbursement in any other taxable year, (ii) such reimbursement must be made on or before the last day of the year following the year in which the expenses were incurred, and (iii) the right to reimbursement is not subject to liquidation or exchange for another benefit.

5.3 Compensation During a Dispute. If the Change in Control Date occurs during the Term and the Executive’s employment with the Company terminates within 12 months following the Change in Control Date, and the right of the Executive to receive benefits under Section 4 (or the amount or nature of the benefits to which Executive is entitled to receive) are the subject of a dispute between the Company and the Executive, the Company shall continue (a) to pay Executive, the Executive’s base salary in effect as of the Measurement Date and (b) to provide benefits to the Executive and the Executive’s family at least equal to those which would have been provided to them, if the Executive’s employment had not been terminated, in accordance with the applicable Benefit Plans in effect on the Measurement Date, until such dispute is resolved either by mutual written agreement of the parties or by final adjudication. Following the resolution of such dispute, the sum of the payments made to the Executive under clause (a) of this Section 5.3 shall be deducted from any cash payment which the Executive is entitled to receive pursuant to Section 4; and if such sum exceeds the amount of the cash payment which the Executive is entitled to receive pursuant to Section 4, the excess of such sum over the amount of such payment shall be repaid (without interest) by the Executive to the Company within 60 days of the resolution of such dispute.

6. Successors.

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6.1 Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Executive elects to terminate employment, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement, by operation of law or otherwise.

6.2 Successor to Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive or Executive’s family hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.

7. Notice. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide overnight courier service, in each case addressed to the Company, at 2584 Junction Avenue, San Jose, CA 95134, Attn: General Counsel, and to the Executive at the Executive’s address indicated on the signature page of this Agreement (or to such other address as either the Company or the Executive may have furnished to the other in writing in accordance herewith). Any such notice, instruction or communication shall be deemed to have been delivered five business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service. Either party may give any notice, instruction or other communication hereunder using any other means, but no such notice, instruction or other communication shall be deemed to have been duly delivered unless and until it actually is received by the party for whom it is intended.

8. Miscellaneous.

8.1 Employment by Subsidiary. For purposes of this Agreement, the Executive’s employment with the Company shall not be deemed to have terminated solely as a result of the Executive continuing to be employed by a wholly-owned subsidiary of the Company.

8.2 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

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8.3 Injunctive Relief. The Company and the Executive agree that any breach of this Agreement by the Company is likely to cause the Executive substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Executive shall have the right to specific performance and injunctive relief.

8.4 Exclusive Severance Benefits. The making of the payments and the provision of the benefits by the Company to the Executive under this Agreement shall constitute the entire obligation of the Company to the Executive as a result of the termination of Executive’s employment, and the Executive shall not be entitled to additional payments or benefits as a result of such termination of employment under any other plan, program, policy, practice, contract or agreement of the Company or its subsidiaries.

8.5 Mitigation. The Executive shall not be required to mitigate the amount of any payment or benefits provided for in Sections 3.1 and 4.2.2 by seeking other employment or otherwise. Further, except as provided in Sections 3.1(c) and 4.2.2(a)(ii), the amount of any payment or benefits provided for in this Agreement shall not be reduced by any compensation earned by the Executive as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company or otherwise.

8.6 Not an Employment Contract. The Executive acknowledges that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain the Executive as an employee and that this Agreement does not prevent the Executive from terminating employment at any time. If the Executive’s employment with the Company terminates for any reason and subsequently a Change in Control shall occur, the Executive shall not be entitled to any benefits hereunder except as otherwise provided pursuant to Section 1.3.

8.7 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the State of Delaware, without regard to conflicts of law principles.

8.8 Waivers. No waiver by the Executive at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time.

8.9 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but both of which together shall constitute one and the same instrument.

8.10 Tax Withholding. Any payments provided for hereunder shall be paid net of any applicable tax withholding required under federal, state or local law.

8.11 Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled.

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8.12 Amendments. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive.

8.13 Executive’s Acknowledgements. The Executive acknowledges that Executive: (a) has read this Agreement; (b) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Executive’s own choice or has voluntarily declined to seek such counsel; (c) understands the terms and consequences of this Agreement; and (d) understands that the law firm of WilmerHale is acting as counsel to the Company in connection with the transactions contemplated by this Agreement, and is not acting as counsel for the Executive.

8.14 Section 409A. This Agreement is intended to comply with the provisions of Section 409A and the Agreement shall, to the extent practicable, be construed in accordance therewith. The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A and do not satisfy an exemption from, or the conditions of, Section 409A.

Remainder of Page Intentionally Blank

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.


	Bookham Inc.
	By:
		Title:


	Executive

	Address:

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Exhibit A

Form of Executive Release Agreement

This Release Agreement (the “Agreement”) is between Bookham, Inc. (“Company”) and (“Executive”).

Recital

The Company and Executive have entered into a Executive Severance and Retention Agreement dated , 2008 (“ESRA”), providing for the execution of this release as a condition to receipt of benefits under the ESRA.

1. Consideration.

a. The Recital set forth above is incorporated herein by reference as if fully set forth. All capitalized terms used in this Agreement have the same meaning as those contained in the ERSA, except where expressly defined otherwise.

b. Executive agrees that as of the date Executive signs this Agreement, and as a condition precedent to Executive’s receipt of any benefits, including any payments under the ERSA, the following provisions of his or her Executive’s Employment Agreement are hereby declared null, void, unenforceable, and of not effect whatsoever: ______________________________ (hereinafter referenced as “Cancelled Provisions”). Executive expressly understands and agrees that Executive is not entitled to any of the benefits or payment contemplated by the Cancelled Provisions. Instead, Executive shall be entitled to receive the benefits and payments to which he is entitled under the ERSA in accordance with its terms. Executive expressly agrees that the consideration set forth in this Agreement is sufficient consideration for the promises and obligations contained in this Agreement.

c. Executive expressly acknowledges and agrees that as of the date this Agreement is signed and except as otherwise provided in subparagraph 1(b) above, Executive has received all compensation Executive has earned while employed by the Company, save and except for base salary which has accrued since Executive’s last paycheck from the Company. Executive further acknowledges and agrees that as of the date this Agreement is signed, Executive has submitted for reimbursement all claims which he has for reimbursement of expenses Executive has incurred in connection with the performance of Executive’s duties for the Company, and that Executive has no dispute with the Company pertaining to any expense reports and reimbursements submitted to or received from the Company.

2. Release. As of the date Executive signs this Agreement, Executive waives all claims Executive might have against the Company (or any person or entity that could be made liable through the Company, including such persons as officers, directors, partners, members, managers, employees, representatives, agents, assigns, investors, stockholders, insurers, purchasers, successors, assigns, and others) arising out of or relating in any manner to Executive’s prior or current relationship, or change of relationship, with the Company, whether

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or not Executive’s claims have matured and whether or not Executive is aware of such claims. As used throughout this Agreement, “claims” means and includes all claims for breach of contract, fraud, discrimination on any prohibited basis (including, but not limited to, race, color, ancestry, national origin, religion, disability, age, sex, sexual orientation, gender identity, medical condition, marital status, or veteran status), breach of the covenant of good faith and fair dealing, violation of any statute, defamation, breach of any benefit plan provision, breach of any California Labor Code provision, breach of any Business & Professions Code provision, breach of any securities laws or regulations, breach of any Corporations Code provision, interference with contract, interference with economic advantage, violation of ERISA, violation of any wage and hour laws (including any applicable wage orders and regulations) and any other claim arising out of or relating in any manner to the parties’ former or current relationship, or change of that relationship. Executive specifically waives the provisions of Civil Code section 1542 which provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

The Company and Executive agree that this release does not apply to claims which cannot be waived as a matter of law or public policy (including, by way of example, claims for unemployment insurance benefits, or claims arising under the Workers Compensation Act). In addition to the foregoing, Executive expressly represents and warrants that Executive has not and will not assign any claim released in this Agreement to any other person or entity. Executive will indemnify and defend the Company for all liabilities (including costs, attorneys fees, damages, settlements, compromises, judgments, penalties, interest, and any other sums) it incurs arising in whole or part from Executive’s untrue representation and warranty.

[Remainder of Page Intentionally Blank]

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3. Miscellaneous. This Agreement is the complete agreement between the Company and Executive concerning the subject matters discussed herein, and supersedes all previous discussions, understandings, and agreements between them concerning said matters, except as otherwise expressly stated in this Agreement. This Agreement is governed by California law (except to the extent its conflict of laws principles would apply the law of a different jurisdiction), is entered into and performed entirely in Santa Clara County, San Jose, California. If any provision of this is found invalid by any court having jurisdiction, the remainder of this Agreement shall be fully valid and enforceable. Executive and the Company understand this is a binding, legal agreement. This Agreement is binding on the parties’ respective heirs, successors, assigns, and representatives


				“Executive”
DATED: ____________________________

				Signature


				Print Name
				“Company”


	Bookham, Inc.
DATED: _____________________________	By:
		Signature
		Print Name, Title

EX-31.1 3 f40403exv31w1.htm EXHIBIT 31.1 exv31w1

Exhibit 31.1

CERTIFICATIONS

I, Alain Couder, certify that:

1.		I have reviewed this Quarterly Report on Form 10-Q of Bookham, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 5, 2008	By:	/s/ Alain Couder
		Alain Couder
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2 4 f40403exv31w2.htm EXHIBIT 31.2 exv31w2

Exhibit 31.2

CERTIFICATIONS

I, Stephen Abely, certify that:

1.		I have reviewed this Quarterly Report on Form 10-Q of Bookham, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 5, 2008	By:	/s/ Stephen Abely
		Stephen Abely
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1 5 f40403exv32w1.htm EXHIBIT 32.1 exv32w1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Bookham, Inc. (the “Company”) for the period ended March 29, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Alain Couder, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350,that:

(1)		the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: May 5, 2008	By:	/s/ Alain Couder
		Alain Couder
		President and Chief Executive Officer (Principal Executive Officer)

EX-32.2 6 f40403exv32w2.htm EXHIBIT 32.2 exv32w2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Bookham, Inc. (the “Company”) for the period ended March 29, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Stephen Abely, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350,that:

(1)		the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: May 5, 2008	By:	/s/ Stephen Abely
		Stephen Abely
		Chief Financial Officer (Principal Financial and Accounting Officer)

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