JDSU Cuts Guidance Again

JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU) has reduced its earnings guidance for the second time this quarter. In a conference with Wall Street analysts last night, the company announced it expects to see third-quarter pro forma earnings of 14 cents per share on revenues of $925 million. Guidance is expected to be the same for the fourth quarter of 2001, JDSU says.

The revised guidance is lower than JDSU's original quarterly estimates, which had already been reduced. Following its acquisition of SDL Inc. (Nasdaq: SDLI) in February, JDSU said it expected EPS of 17 cents on revenues of about $1 billion. Like last night's guidance, those expectations included the merged SDLI revenues (see JDSU: Less from More).

Analysts say they expected the reduction. JDSU was reportedly hard hit by the revised guidance from key customer Nortel Networks Corp. (NYSE/Toronto: NT) in February (see Nortel's Nasty Surprise). Also, it's been struggling to keep pace with market forces, to the point of laying off a sizeable group of employees in its passive components unit (see JDS Uniphase Announces Layoffs).

JDSU isn't alone in contending with market moodiness. Earlier this week, New Focus Inc. (Nasdaq: NUFO) reduced its outlook (see New Focus Slows Down). And late last month, Avanex Corp. (Nasdaq: AVNX) took a dive on similar warnings (see Avanex Shares Stumble).

"This news is clearly not JDS specific," wrote Joseph Wolf and James Hillier, analysts with UBS Warburg, in a research note today. "In recent weeks, we have seen downward revisions from [Corning, Avanex, and New Focus]. Our longer-term view is that the optical network is a long-term investment opportunity and that this is a bump, albeit a severe one, in that road."

Analysts say the belt-tightening and the revised guidance should help JDSU weather the storm. "We think the ongoing issues in the communications equipment industry -- carrier spending concerns, inventory reductions, and lack of visibility -- are already priced in JDS Uniphase shares," wrote Mark Langley and John Harmon, analysts with Epoch Partners, in a research note this morning. "We think it is just a matter of time before carriers resume a more aggressive spending posture, and JDS Uniphase remains one of the best-positioned companies to benefit when carrier spending resumes."

Questions remain, however, about how long the downturn will last before JDSU can see its way clear again. "These figures imply a more difficult June quarter," writes analyst Jim Parmelee of Credit Suisse First Boston in a note this morning. "We anticipate positive sequential growth to resume in the [first quarter of 2002]."

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com