JDSU Cuts Continue

With revenues down from the previous quarter, JDSU announces another closure, this time in China

April 27, 2005

3 Min Read
JDSU Cuts Continue

Cost-cutting at JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) has spread even to China, where the company plans to sell its facility at Fuzhou to Fabrinet Co. Ltd.

The move was announced today as JDSU reported third-quarter earnings and told analysts that the restructuring days aren't over.

This latest move doesn't affect JDSU's telecom operations, as Fuzhou was building display optics and neodymium-doped yttrium vanadate devices. It comes on the heels of JDSU's sale of two New Jersey facilities to Fabrinet and the announced closure of a Florida site (see Fabrinet Acquiring JDSU China Facility and Trimming Continues at JDSU).

Combined, the actions show JDSU is still struggling with getting its costs in line. And CEO Kevin Kennedy, speaking with analysts on a conference call today, made no secret that JDSU, having dropped to eight manufacturing facilities from 12, isn't done cutting.

"You should expect further consolidation of our manufacturing footprint," he says. He adds that the company will likely announce more changes to the product mix -- including possible acquisitions -- to get better gross margins and align the product portfolio with future plans. Along those lines, JDSU is still in discussions to divest the cable TV business that was at the Ewing, N.J. site. "We expect to complete this divestiture in the current quarter," Kennedy says.

The comms-division cuts should result in quarterly savings of $12 million, Kennedy says. Another $8 million savings will come from JDSU's non-communications businesses, through layoffs of about 385 in Santa Rosa, Calif., and 500 more with the Fuzhou closing.

The full $20 million-per-quarter savings should kick into gear by the June 2006 quarter, JDSU officials say.

For its third quarter, which ended March 31, JDSU reported revenues of $166.3 million and losses of $38.6 million, or 3 cents per share, compared with second-quarter revenues of $180.5 million and losses of $41 million, again 3 cents per share.

For the third quarter a year ago, JDSU had reported revenues of $161.4 million and losses of $7.3 million, or 1 cent per share.

Pro forma losses for the March 2005 quarter were 2 cents per share, matching analysts' estimates, and revenues exceeded the $160.4 million consensus estimate reported by Reuters Research.

Still, investors may have been concerned to hear of more cuts. JDSU stock was down 9 cents (5.4%) to $1.56 in after-hours trading.

All of the major optical components players continue to struggle, as their costs remain high while average selling prices stay stubbornly low. Bookham Inc. (Nasdaq: BKHM; London: BHM) has incurred huge costs while transferring manufacturing to Asia, but found some relief on the pricing side due to negotiations last month with primary customer Nortel Networks Ltd. (NYSE/Toronto: NT). Avanex Corp. (Nasdaq: AVNX) this week announced layoffs in France to supplement the company's restructuring in North America.(See Components Competition Is Killing, Bookham Soars on Nortel News, and Avanex Does a French Trim.)

The next largest publicly traded player, TriQuint Semiconductor Inc. (Nasdaq: TQNT), gave up the market entirely, announcing last month it had sold the business to privately held CyOptics Inc. TriQuint had purchased its optical components business from Agere Systems Inc. (NYSE: AGR.A) in January 2003 (see TriQuint to Acquire Agere's Optics and TriQuint Exits Optics).

— Craig Matsumoto, Senior Editor, Light Reading

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