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Optical/IP

JDSU Launches Regime Change

With the pending retirement of CEO Jozef Straus, the book is closing on the era of megamergers that created JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU).

Straus announced his Sept. 1 departure in a crack-of-dawn conference call with analysts. His replacement will be Kevin Kennedy, chief operating officer at Openwave Systems Inc. (Nasdaq: OPWV) and a former CEO hopeful at Cisco Systems Inc. (Nasdaq: CSCO).

Straus is expected to remain on JDSU's board.

JDSU COO Syrus Madavi will be leaving at an undetermined future date -- probably the result of being snubbed for the CEO spot. (On the call, Straus confirmed Madavi had been considered but passed up.) Formerly chairman and CEO of Burr-Brown Corp., Madavi moved to JDSU after his company was acquired by Texas Instruments Inc. (NYSE: TXN).

Another effect of Straus's departure is that JDSU no longer will split headquarters between Ottawa (Straus's home) and San Jose, Calif. All HQ functions will be moved to San Jose.

Straus is reportedly well liked by customers, but some observers have worried that he lacks the bean-counter mentality that's been required during JDSU's brutal restructuring. "Speaking with investors, it comes as no surprise to see Jozef announced his departure," wrote analyst John Jungjohann of CIBC World Markets, in a report this morning. (Jungjohann didn't elaborate on why his sources felt that way, however.)

Kennedy, by contrast, will take an active role in the restructuring, a job that had been Madavi's baby. On the conference call, Kennedy said JDSU has no immediate plans to replace Madavi.

The changes begin a new era at JDSU. Analyst John Harmon of Needham & Co. wrote Straus's retirement "represents the departure of the last of the old [guard] from the company’s progenitors," namely JDS Fitel Inc., Uniphase Corp., Optical Coating Laboratory Inc. (OCLI), and SDL Inc. As founder and CEO of JDS Fitel, Straus agreed to the merger with Kevin Kalkhoven's Uniphase in 1999, then became CEO of JDS Uniphase upon Kalkhoven's 2000 departure (see Kalkhoven to Depart JDS Uniphase).

With Straus leaving, the selection of Kennedy is no surprise. He was already on JDSU's board of directors, making him a known quantity. And he understands JDSU's business from the customer side, having spent seven years at Cisco and 17 at Bell Labs. Finally, it's been speculated that Kennedy wanted a CEO position, one of the reasons he left Cisco in August 2001. (See Cisco's Kennedy Ready to Leave?, Reorg Rips Through Cisco's Ranks, Kennedy Lands at Openwave and JDSU Adds to Board.)

No one says the job will be easy, though. JDSU's Global Realignment Program isn't finished, and the company faces continuing weakness in its telecom markets. "It appears that the decline in JDS Uniphase’s markets will outpace cost cuts through the end of fiscal 2004," Harmon wrote.

Investors seemed heartened by the changes. JDSU's stock was up 29 cents, at $3.48, late today, trading on nearly twice its normal volume.

— Craig Matsumoto, Senior Editor, Light Reading

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pooh-bear 12/4/2012 | 11:32:19 PM
re: JDSU Launches Regime Change So the man who reined supreme over Cisco' failed Service Provider strategy, fueled by all those very expensive and extravegent acquisitions, is going to run JDSU. All I can say is "Sell".
BobbyMax 12/4/2012 | 11:32:18 PM
re: JDSU Launches Regime Change Kevin Kennedy has no experience in the optical industry. He also has no experience in optical technology and manufacturing. JDSU is experiencing shrinking market which cannot be improved by Kennedy.

In addition, when the company waas bleeding to death, a lot of management personnel bankrupted the company throgh bonuses and stock options.

The company also used acquisition technique to inflate artificially its stock value.

The company having two locations hurts the bottomline of the company. Its investors and stockholders are hurt beyond repair.

Even with dimished revenue and stock losing about 90% of its value, Kevin Kennedy will have infinite staying power and making a lot of money.
gea 12/4/2012 | 11:32:16 PM
re: JDSU Launches Regime Change BobbyMax:

All your base are belong to us.
whyiswhy 12/4/2012 | 11:32:10 PM
re: JDSU Launches Regime Change Gea: Bobby Max is spot-on this time. Kevin, Dave, Greg, Don, and Josef a few others robbed the cash and made their dash. The neuvo-Kevin is all-name and no-game, just like Syrus.

But that's JMHO

-Why
beachboy 12/4/2012 | 11:32:06 PM
re: JDSU Launches Regime Change
Investors seemed heartened by the changes. JDSU's stock was up 29 cents, at $3.48, late today, trading on nearly twice its normal volume.

<font color="#FF0000" face="Verdana" size="3">
So was everyone elses - nothing to do with the changes.
Before Joe made the comment about Syrus being passed over I would've gussed it was either that or the fact that Syrus realised that the business was in a much worse predicament than he could have imagined. Knowing him and JDSU I now think that he is better off elsewhere. I've sold my stock today.
The majority of JDSU's sales are from OCLI, non optical. TI is their biggest customer - MEMS hermetic lids for DLP chips and color wheels. That business is transferring to the Far East. If you look at JDSU's product listing there many many non-revenue generating products.
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jinlu28 12/4/2012 | 11:32:04 PM
re: JDSU Launches Regime Change Good By Dr. Straus! We thank you to bring us to Ottawa and experience the "Fibre Optic Bubbles". There will be many entrepreneurs coming out from 10 K former employees of Ottawa's JDS. We will learn the lessons of your management style and your experience of technical visions. We will do better than what you have done. Once again make Ottawa a high-Tech town with brilliant future.


A former JDS employee (1997 ~ 1998)
Current founder of new high tech company
beachboy 12/4/2012 | 11:32:04 PM
re: JDSU Launches Regime Change Oops - I meant non-telecom, not non-optical.
SIVROCX 12/4/2012 | 11:32:03 PM
re: JDSU Launches Regime Change Like Lucent, JDS just doesn't get it! The world is looking for cost competitive solutions to optical requirements. Both want to live at the top of the food chain while building components. While I must admit there some very good, smart, and creative folks at both places, it is time to get real! Communications is a commodity product like the PC and we had better start seeing that way. JDS and Lucent need to get management aboard that know not only how to select strategic staying markets, but how to produce cost competitive products. Having sold products to Cisco in the past they know how to drive the cost down ----squeeze the vendors 30% per year. Now can a man that knows how to demand cost reductions show us all how to do just that? I think not!
zhadum 12/4/2012 | 11:32:02 PM
re: JDSU Launches Regime Change straus is a visionary and made the best of the bubble created by the frauds at the top of the food chain (read: mci, globalcrossing, c&w, qwest, etc). while many of the acquisitions were overpriced (since the floor fell out under his feet), the biggest issue with jdsu was the lack of a coherent strategy for post-integration issues. i.e., how can geographically-dispersed entitities using diverse technologies meet the same market needs?

while his moving on is timely, i cannot see how kennedy can fill the shoes of not only a visionary ceo but also an operational disciplinarian.

kennedy better bring in an optically savvy senior team to help him (unless he plans to diversify out of optical) - and his cisco contacts won't help him here!

z
whyiswhy 12/4/2012 | 11:31:58 PM
re: JDSU Launches Regime Change I think you mean Straus and Scifres were the visionaries that grew the companies; Kalkoven and Dougherty were the hard balls business types that took them to the top. Actually, the bubble part pretty was easy with the bega-bucks that GX, WC and many others were literally fire hosing out.

Straus and Scifres had a simple integrated strategy, or vision, to provide higher and higher performance optical components. That's it, period. That was when people would pay $3000 for a 980nm pump module, and $10K for a 2.5Gbps DFB module. No brainer.

Today, a pump module goes for under $400, and as low as $200 in volume of only 1000 pieces. 2.5 Gbps DFBs aren't around anymore, but if they are, they sell for under $200. This in the midst of the cost of making the chips not fundamentally changing.

You have to be world-class in manufacturing to keep your head above water, and then your competition sells for less than what it costs him to buy/make the raw materials, let alone assempble the thing.

There is no offset to Moores law for optical components like there is for CMOS with higher clock speeds and lower linewidths. In microprocessors the game is rich in variables...not so in optics.

Computing versus communication. The mocroprocessor was never much about how much it cost, it was always about how fast it could go....more and more functions, faster floating point, more cache, etc.

Optics is sort of like having reached the '386 stage and found nobody is even remotely interested in the Pentium, just dirt cheap '386's. And there is no consumer market-volume drivng anything.

Sigh.

-Why

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