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Kevin Kennedy Gets His Dream Job

Light Reading
News Analysis
Light Reading
8/26/2003
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So, Kevin Kennedy finally gets his wish. The former Cisco Systems Inc. (Nasdaq: CSCO) executive, who reportedly left in search of a CEO post, has landed one: the helm of components behemoth JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU).

Whether it's a plum assignment or a bitter fruit remains to be seen. Either way, some of the territory is familiar to Kennedy. As chief operating officer of Openwave Systems Inc. (Nasdaq: OPWV), he's spent the last two years orchestrating the turnaround of a company overtaxed by acquisitions.

He'll also have the chance to define JDSU's post-bubble identity. Already one change is apparent: As Kennedy replaces JDS Fitel Inc. founder Jozef Straus, JDSU's headquarters will consolidate in San Jose, Calif., dropping Ottawa as a mirror HQ (see JDSU Launches Regime Change).

Kennedy spent 17 years at Bell Labs before joining Cisco in 1994. At Cisco he advanced to the position of senior vice president, but to become a CEO, he would have to look elsewhere -- because, as we know, there can be only one (see Cisco's Kennedy Ready to Leave? and Cisco's Nuti Talks Up Move to Symbol).

In 2001, rumors put him in the running for CEO posts at Nortel Networks Corp. (NYSE/Toronto: NT) and Redback Networks Inc. (Nasdaq: RBAK) (see Cisco's Kennedy: Recruiter's Dream?). Kennedy finally did leave Cisco in August 2001, part of a large-scale reorganization. He joined Openwave days later, not as CEO but as chief operating officer, reporting to fellow Cisco alumnus Don Listwin (see Kennedy Lands at Openwave).

"His desire from what I understood, was to be a CEO," says Scott Sutherland, an analyst who tracks Openwave for Wedbush Morgan Securities.

Openwave was foundering. The former Phone.com had seen its prospects in the Wireless Application Protocol (WAP) market dry up, and a $6.4 billion merger with Software.com was proving burdensome (see Openwave: Wave of the Future or Wipeout?).

"Openwave took off like a rocket and rode the wave of WAP until that crashed," says Seamus McAteer, senior analyst with Zelos Group LLC.

One major change under Kennedy was to emphasize specific products, such as client software for handsets, rather than grand concepts like delivering all interactive services for a carrier. "The objective was to come up with this 'services OS' vision, which never really caught fire," McAteer says.

Analysts consider the turnaround to be nearly done, but the numbers on the way were ugly. Goodwill write-downs led to losses exceeding $1 billion for the fiscal year ending June 30, 2002. For fiscal 2003, Openwave reported a net loss of $217 million on revenues of $268 million. Layoffs are continuing: Still employing more than 1,000, Openwave in June announced a 12 percent headcount cut, following a 25 percent reduction announced in September 2002 (see Openwave Cuts 180 Jobs).

On the plus side, Openwave expects to break even (in earnings before income tax and depreciation) by the end of 2003. Analysts also give Kennedy credit for keeping revenues steady, at around $65 million per quarter, through the rough patches.

"He did a great job. He got them through the tough part," Sutherland says.

With JDSU, Kennedy gets to see the flip side. He'll drive the final lap of the Global Realignment Program initiated by COO Syrus Madavi, who will be leaving the company soon and will not be replaced. (Coincidentally, Openwave won't be replacing Kennedy either; see Openwave Loses COO.)

Madavi's program has gotten past the "big number" stage of layoffs and write-downs, and analysts say he's made good strides in cutting expenses. Kennedy still has work to do, such as stabilizing the revenue slide while the company builds back to profitability, a process that could take more than a year (see Is JDSU's Cap Set Too High? and JDSU Revenues Still Declining).

Aside from bean counting, Kennedy has the chance to make his mark by defining JDSU's future personality. As the optical industry declined, JDSU was still digesting the feast of acquisitions that included the $41 billion SDL Inc. deal, leaving the company no time to create a unified whole out of its collection of parts.

Moreover, 50 percent of JDSU's revenues lately have come from the thin-film business, which includes off-the-wall applications such as pigmentation for U.S. dollar bills. As CEO, Kennedy inherits the question of whether JDSU should focus more on its telecom roots or continue to diversify.

— Craig Matsumoto, Senior Editor, Light Reading

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beachboy
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beachboy,
User Rank: Light Beer
12/4/2012 | 11:31:04 PM
re: Kevin Kennedy Gets His Dream Job
$41B would have bought a decent business with significant revenues.
For comparison, Boeing was valued at $59B at the time of the SDL acquisition. Boeing's sales in 2002 were $54B.
Conoco were valued at $37B, sales last year were $57B.
whyiswhy
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whyiswhy,
User Rank: Light Beer
12/4/2012 | 11:31:04 PM
re: Kevin Kennedy Gets His Dream Job
Madavi's program has gotten past the "big number" stage of layoffs and write-downs, and analysts say he's made good strides in cutting expenses. Kennedy still has work to do, such as stabilizing the revenue slide while the company builds back to profitability, a process that could take more than a year (see Is JDSU's Cap Set Too High? and JDSU Revenues Still Declining ).

There is much yet to be written down, and a lot of it is realestate in Ottawa. Also, there are rumors the books are loaded with old cost figures more appropriate for the heydays of high volume.

Are these just rumors emanating from disgruntled former employees over beer?

Josef did not / could not take the hit. Kevin Jr can.

-Why
lastmile
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lastmile,
User Rank: Light Beer
12/4/2012 | 11:30:54 PM
re: Kevin Kennedy Gets His Dream Job
I sincerely believe that the problem with this company is not the management.
The bad economy coupled with the distressed IT industry has taken a toll not just on JDSU, but the entire fiber industry.
Any new CEO will only provide a superficial uplift to the company's future prospects. Unless the economy improves and fiber is used for upgrades in a big way, JDSU will remain a small/mid cap company.
Fortunately the future of fiber is bright. As of now, many investors remain confused because no one knows when the recovery will start. It is not a question of 'IF' but it is a question of 'WHEN'
whyiswhy
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whyiswhy,
User Rank: Light Beer
12/4/2012 | 11:30:53 PM
re: Kevin Kennedy Gets His Dream Job
Reality:

Sales gets a prospect,
Engineering designs the product,
Procurement buys the parts,
Manufacturing puts them together or fabs them,
QA blesses or rejects them,
Fed-Ex delivers them,
Accounting sends a bill to the customer and pays the employees and the vendors.

This process repeats.....

If there is net cash generated between cycles, the company grows, if not, the company dies.

Management was not really involved, except pounding a drum (or board room table) made them think they kept it together and under control. It also made them think they were worth a lot of money, whether or not the net cash grew or shrank.

-Own
BobbyMax
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BobbyMax,
User Rank: Light Beer
12/4/2012 | 11:30:51 PM
re: Kevin Kennedy Gets His Dream Job
JDSU is battered because heavy stock options and bonuses awarded to the top management. Kevin Kennedy was a member of the Board of Directors. He never objected once to booty distribution. His hands are not clean and he is too clanish to do any thing.

There is nothing in the JDSU to manage.
gea
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gea,
User Rank: Light Beer
12/4/2012 | 11:30:49 PM
re: Kevin Kennedy Gets His Dream Job
BobbyMax:

All your base are belong to us.
Mr.Skyline
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Mr.Skyline,
User Rank: Light Beer
12/4/2012 | 11:30:47 PM
re: Kevin Kennedy Gets His Dream Job
Hi, Kevin,

In the company meeting at the spring of 1997 at JDS Ottawa Hunt Club road, I talked with Dr Straus on my view of future JDS. "We are building a fiber optic Intel and Microsoft here", I said. "What we need to do in North America to build a manufacture industry is to learn from the lessons that how American Car Manufacturers such as GM and Ford lost in the competition vs. Japanese car manufacturers such as Toyota and Honda in 1970s.

Now, history is repeating, but in different way, the manufacturers from China, India and the 3rd world countries are challenging western manufacturers. How to solve it, the similar way.

Find the way out, my friend!

Best regards!

whyiswhy
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whyiswhy,
User Rank: Light Beer
12/4/2012 | 11:30:46 PM
re: Kevin Kennedy Gets His Dream Job
http://www.lightreading.com/bo...

In short, the very idea that you ca build a sustainable powerhouse out of discretes is absolutely nonsense. It was and is claptrap BS.

You should look at the electronics industry outside of microprocessors and ASICs. It is 99.99% offshore, even in Japan.

The game is labor costs versus automation costs. If the vloume is low or highly variable, you have to make it with labor, so you find cheap labor. H1B's were the trick for awhile.

When the volume gets big, you can automate. But now you do it offshore, since that is where the factory is.

The only exception to the rule has been complex systems. Which is what a microprocessor is. That's slso why Huawei loses to NT and Siemens in China.

-Why
Mr.Skyline
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Mr.Skyline,
User Rank: Light Beer
12/4/2012 | 11:30:46 PM
re: Kevin Kennedy Gets His Dream Job
From whyiswhy's theory, JDSU don't need managers to make it work. That is exactly what we want to say the management problem of JDSU.
lightreceding
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lightreceding,
User Rank: Light Sabre
12/4/2012 | 11:30:35 PM
re: Kevin Kennedy Gets His Dream Job
Word is that Kennedy left Cisco at Chambers request after millions in orders that were improperly booked had to be debooked after the business was found to be non existant.

Apparently Kennedy, Listwin and DeNuncio were actively pumping the service provider line of business numbers to make quota and possibly for personal gain on stock options.

Kennedy also presided over dozens of failed acquisitions, pushed the company into the CLEC space, and began the practice of funding customers purchases of Cisco equipment, leaving Cisco paying for it years afterwards.

This appears to be another case of another Vally retread being recycled yet again with no due dilligence being done.
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