The company experienced an increase in sales of discreet components.

However, it is seeing evidence of inventory levels depleting. Given the expansion the company is seeing with many of its customers along with the inventory burn up, the management expects to see overall revenue remain flat in the June quarter with growth in the second half of the calendar year.

Nortel revenue declined significantly from December levels.

The company now expects that Nortel sales in the March quarter will represent the low point in calendar 2007, and that the new growth in the June quarter would continue to ramp up in the second half of the year. New product activity is progressing well and the company is beginning to see a number of design wins for products that address both the metro and long-haul platforms

Since the beginning of calendar 2006, the company had introduced many new products focused on fast growing areas in the industry.

These included the company’s tunable solutions represented by the integrated tunable laser assembly, the tunable transmitter assemble and small compacted transponder along with new design wins for the high-powered laser and submarine, the high power laser and submarine markets.

In the third quarter, the company recorded several wins for its iTLA and have begun to shipping quantity. In addition, the company is making progress building up revenue in its two newest tunable products the TTA and small form factor transponder, which are based on the co-packaged tunable laser modulator.

In the March quarter, the company received its first TTA design win and has started delivery to this customer.

Also Bookham has now started sample deliveries of the small form factor transponder and that the sales of this product should accelerate in the second half of the year.

In February, Bookham announced that Tyco selected its 980-nanometer pump laser technology for use in the undersea cable deployment.

- The management estimates that the market share in the submarine business will expand this year as the company qualifies additional customers in this growing sector of the market.
- Volume deliveries are expected to commence in the September quarter.
- Focus technology investment continues to be central to the company’s strategy.

The company is currently evaluating, monolithically integrated tunable transmitter chips as well as parallel integrated combination of modulators.

The management believes that the company’s technology platform enables Bookham to reach the lowest cost points in the industry, while at the same time allowing the company to address future performance requirements. In particular, parallel integration are expected to enable simple and cost effective implementation of some of the advances coding techniques necessary to manage dispersion of 40-gigabits and 100-gigabits.

Current Telecom Market Conditions

There are some short-term challenges due to inventory reductions and slower-than-expected carrier spending in the first half of calendar 2007. However, the management believes that the long-term state of the optical component industry is positive. Significantly increases in capacity requirements are expected between now and 2009 driven primary by data and video applications. This will drive growth in optics with speed increasing from current 10-gigabits to 40-gigabits and beyond.

Non-telecom Business

- Revenue in the quarter was a record $13 million, up 11% over the previous quarter. Increased sales of High Power Lasers from the New Focus subsidiary was the primary driver.
- Revenue in both telecom and non-telecom businesses was up 56% and 28% respectively over a year earlier.

The management sees good prospects for its non-telecommunication business driven primarily by three factors:
- additional design wins and continued rapid market growth for fiber lasers pumps and direct diode applications;
- growth in the company’s new focus OEM business based on high performance optical systems;
- increased revenue from bixel chip for the sensing market and short reach data communication links.

Despite flat revenue in the June quarter, the company expects to achieve further diversification of customer base and revenue growth from several new products. In addition, Bookham expects further improvement in the macro environment leading to better conditions in the second half of the year.

An update on the progress with the overhead reduction plans: