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The components firm announces another 500 layoffs but might be nearing profitability
The tanker ship that is JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) might finally be turning around, but the process is requiring that a few more bodies be chucked overboard.
True profitability isn't necessarily around the corner, but earnings before interest, taxes, depreciation, and amortization (EBITDA) could reach positive territory in JDSU's second quarter, which ends in December, officials said on an earnings call yesterday.
JDSU also predicted second-quarter revenues to be $300 million to $320 million, outpacing the analyst forecast of $297 million as tallied by Thomson Financial.
But layoffs are still in the works, as JDSU announced it's cutting another 380 employees: 80 from its Rochester, Minn., site, which officials announced will close by the end of June 2006, and another 300 in Ottawa, where functions such as product R&D will remain.
All the affected jobs come from manufacturing, where the relevant products are being transferred to contract manufacturers or to "JDSU's own non-U.S. manufacturing sites," CEO Kevin Kennedy told analysts on the call -- referring to facilities in Beijing and Shenzhen, China. That's in addition to an 850-employee cut announced in April. (See Trimming Continues at JDSU.)
JDSU also announced it had sold the Melbourne, Fla., facility that closed in October. By June 2006, the company expects to have two North American manufacturing sites for optical -- San Jose, Calif., and Bloomfield, Conn. -- not including the pending acquisition of tunable laser manufacturer Agility Communications Inc. (See JDSU Tunes In Agility.) That's down from seven optical manufacturing facilities as of March 31.
More cuts are imminent for JDSU's non-communications areas, too. Kennedy announced the likely removal of "125 additional jobs in calendar 2006" in a "next phase" of restructuring to hit Santa Rosa, Calif.
The silver lining is that JDSU might finally be reaching the final stages of a massive turnaround that began in 2001, when the company was writing off tens of billions of dollars in the aftermath of the tech bubble. (See Sizing Up JDSU's Massive Loss.)
That JDSU's earnings are improving isn't exactly a shock, as some analyst forecasts had JDSU reaching profitability as early as, well, now. But most analysts think JDSU has a couple of quarters to go yet.
As of yesterday, analysts' estimates had the company reaching pro forma breakeven -- net income of 0 cents per share -- for its December and March quarters, with a one cent per share profit coming in the June 2006 quarter.
It might be a while, though, before JDSU is profitable according to generally accepted accounting principles (GAAP). Quarter after quarter lately, JDSU's GAAP results have included special charges tied to ongoing restructuring efforts, and that's not going to stop just yet.
JDSU's current restructuring move was announced with a price tag of $30 million. About $12 million has been incurred so far, leaving another $18 million in charges yet to come, CFO David Vellequette said on the call. Moreover, the layoffs announced today will bring more restructuring charges in the "high single-digit to low double-digit millions of dollars," he said.
For its first quarter, which ended Sept. 30, JDSU reported losses of $67 million, or 4 cents per share, on revenues of $258.3 million, compared with losses of $145.7 million, or 10 cents per share, on revenues of $170.9 million for the previous quarter. (See JDSU Releases Q1.)
For its first quarter a year ago, JDSU reported losses of $36 million, or 2 cents per share, on revenues of $194.5 million.
JDSU's first-quarter pro forma loss per share was one cent, matching analyst expectations. Revenues topped analysts' consensus forecast of $250 million, aided by two months of revenues from newly acquired test-and-measurement firm {dirlink 2|4} (See JDSU Buys Into Testy Market.)
During the call, JDSU had some sunshine for the optical communications market, noting that business is coming back. "This quarter, both long haul and metro were very strong," Kennedy said, noting that metro had enjoyed more than a year's worth of good business.
JDSU stock was down $0.18 (7.69%) to $2.16 in late morning trading on Thursday.
— Craig Matsumoto, Senior Editor, Light Reading
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