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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dljvjbsl 12/4/2012 | 11:31:58 PM
re: JDSU Launches Regime Change This is just another bit of proof that the Ottawa high tech scene is dead. It was killedby teh arrogance and inexperience of management groups who considered themsleves geniuses because tehy could spend lots of money to buy worthless companies during the bubble.
mordecai 12/4/2012 | 11:31:57 PM
re: JDSU Launches Regime Change Hey,

If you think Ottawa high tech is dead, maybe the dead zone's epicenter is you. Have you considered moving on? Might help to change your attitude.

I for one think things are just fine in Ottawa. It's a tough time right now, but we are a creative clever bunch. I have no doubt that the great talent here will breed great businesses (again).

dljvjbsl 12/4/2012 | 11:31:56 PM
re: JDSU Launches Regime Change
I for one think things are just fine in Ottawa. It's a tough time right now, but we are a creative clever bunch. I have no doubt that the great talent here will breed great businesses (again).

Seriously, in which high tech area do you think these businesses will grow? I realy do not see any area of this business that justifies any signficant amont of investment. All of the Ottawa companies (Nortel and Alcatel included) are just hanging on hoping for some miracle. This is especially true for Nortel of course.
vermillion 12/4/2012 | 11:31:55 PM
re: JDSU Launches Regime Change One hates to get involved with BoobyMix posting, especially re: old hat like the sorry state of the optical components industry, but here goes. Let's see if we can set the record straight.

"Kevin Kennedy has no experience in the optical industry.."
Umm... that might be a good thing. Besides, if JDSU can find something (???) to sell Cisco, that would be something. The story has always been that Cisco and JDSU had bad blood because JDS wouldn't play with Cisco (and their bargain-driving ways?) back in the days before The Bubble.

"...management personnel bankrupted the company throgh bonuses and stock options."
JDSU is not hurting because of sweet deals to insiders or the rank-and-file staff during The Bubble. It is hurting because there is no market for telecom components any more. The appropriateness of executive or staff compensations through options, etc. is an important issue, but is not unique to telecom and has nothing to do with the anemic demand that plagues our industry.

The $56B (?) loss in the first quarter after The Bubble Burst was due to the write down of the value of acquisitions made using JDSU stock was shocking, but it was indeed a paper loss. Sure, speculators played and lost, but that is the nature playing a game of chicken with other investors in inflated stocks, and always has been.

JDSU didn't really control that, and the options they offered were no different than the incentives given by others. So if BoobyMarx has a case of "sour grapes" since others did well out of the bubble and he didn't, that is too bad. I certainly didn't strike it rich, but I don't hold a grudge against my colleagues who did.

My understanding is that JDSU still holds ~$1B in CASH and has no debt. It may be hurting badly but it is sure as hell isn't bankrupt. The question is whether they can get the burn rate down far enough when only non-telecom business (OCLI) brings in revenue and telecom component prices and volumes fall through the floor.

"The company also used acquisition technique to inflate artificially its stock value."
The company made acquisitions, and investors *chose* to buy the stock. Maybe WorldComm's decision to report new capacity as if were new *traffic* meant the investors were misinformed. Lots of analysts who were thought to be very clever told investors to buy stock in the telecom sector.

"The company having two locations hurts the bottomline of the company."
I agree. R&D and corporate HQ really should move to either OTTAWA or SHENZHEN, where the people are much smarter (and nicer), yet much cheaper due to foreign exchange and cost-of-living considerations.

"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."
There you go! BabyMucks got something right for a change!

Have a weekend,
vermillion 12/4/2012 | 11:31:53 PM
re: JDSU Launches Regime Change Sorry, my blatantly Mainland Chinese Tong Zhi (Comrade) but we who know can tell you are a product of The Great Proletarian Cultural Revolution: "Rise up you 10,000 unskilled ex-JDS fiber optic assembly workers and build a Glorious Hi-Tech Workers Paradise in our Great Northern Motherland using Free Markets & Socialism." Give me a break!

Seriously, I agree that there are good opportunities for good people, especially with connections to China, but please spare us the propoganda. This situation is true everywhere, and Ottawa is just one possible location. There are many places in the USA and elsewhere with better access to VC's and angel investors.

So save the slogans and boosterism for China (have you considered Shenzhen?) Canada has too much of that crap already. We should all give up that junk and focus on engineering solutions to real problems for a good dollar.

No one town or region can guarantee a "destiny" to hi-tech greatness. Every business is either profitable or not, whether in CA, NC, Mass., Texas, Canada, UK, Europe or Asia. If a new business opens or closes in this or that place, history will not change. Any technical or business revolutions that were in store would just occur elsewhere, and the details of the story of the eventual "winners" would be different, that is all.

Sure it's great that a few people are going to be new tech entrepreneurs, if only out of necessity. But sadly, most of those 10,000 JDSU staff in Ottawa were unskilled assemblers are either flipping burgers, shovelling sh!^ or sitting around picking their nose on welfare.

As for the real tech entrepreneurs, if The Bubble never happened, those people would have been further along in applying their skills in other areas. Instead they and their city are several years behind, having been distracted by supernovae like JDSU and Nortel. Thanks to The Bubble, investors would rather sit on their money than risk it on you and others like you. We are all paying a massive opportunity cost.


Since you appear not to have adapted culturally despite being in Ottawa at least since 1997, please listen to some friendly advice. The art of being Canadian is not necessarily in being cynical, or in being an overly optimistic booster. The first is annoying, but the second gets embarrassing. Either way, nobody will take you seriously.

You don't have to go over the top and try to be as Canadian as maple syrup. Just be "as Canadian as possible, under the circumstances", as the saying goes. Our destiny is to take our pathetic government, our cold winters and our role as poor unknown relative to the USA with good humour, or at least with indifference, coffee and donuts!
jinlu28 12/4/2012 | 11:31:43 PM
re: JDSU Launches Regime Change If you think those 10,000 JDSU staff in Ottawa were unskilled assemblers, how could your American high tech companies lost in the competition during those years?
Irishboy 12/4/2012 | 11:31:39 PM
re: JDSU Launches Regime Change With Due Respect the seeds for JDSU's success was built 10 yrs ago in a garage shop when Strauss et al started building and selling VOA's to Nortel, not in '97 or '98 when Shady Bernie told us all those lies.

(The inconvenient fact that Strauss still worked at Nortel we don't have to address now :) )

The next generation of businesses need to find that next "VOA" opportunity and as another poster said, build it for a good dollar.

There's been enough crying for the last two years. That horse is dead. Move on people!!!
dljvjbsl 12/4/2012 | 11:31:37 PM
re: JDSU Launches Regime Change A view from the Ottawa Citizen. Ottawa high tech is moribund but it really isn't and if it is it is a bad thing but if it is a bad thing then that is a good thing.

Mr.Skyline 12/4/2012 | 11:31:36 PM
re: JDSU Launches Regime Change When you read Business Week two weeks ago, there are many new "VOAs&#8221; if you have Dr. Straus&#8217;s vision.

By the way, we admire that Dr. Strauss et al (JDSS &#8211;&#8220;gang of the four&#8221;) have done right thing to build JDS Fitel up to about 1K employees in Ottawa. However, from 1K ~ 30K growth, he could not make JDSU as strong as MS, Intel or CISCO. Now Intel has taken Optics by herself and I think that the chance is flying away from JDSU.
dodo 12/4/2012 | 11:31:35 PM
re: JDSU Launches Regime Change Let's hope the car industry ( no matter what happens in Detroit)maintains its current pace and JDSU will keep making money selling these special paint pigment to the manufacturers :-)

Well Mr Kennedy, need to get acquainted with Japan, Germany and Korea.
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