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JDSU Scores a Q4 Hit

Light Reading
News Analysis
Light Reading
7/29/2004

JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) got back in investors' good graces -- for now, at least -- with yesterday's earnings call, the most upbeat in more than three years.

While JDSU lost money in its fourth quarter, which ended June 30, its revenues were better than expected, and its book-to-bill ratio, which compares incoming business to recently completed business, exceeded 1.2, the best level it's hit in 14 quarters, according to CEO Kevin Kennedy.

Speaking to analysts on yesterday's earnings call, Kennedy saw reason to smile, but cautiously. "We continue to believe we are experiencing an inflection point towards growth," he said, adding on the flip side that JDSU has "work left to do" on lowering operating costs.

The news garnered JDSU an 8 percent jump in its stock price after hours, with shares trading up 23 cents at $3.23.

JDSU's pro forma losses of 1 cent per share for its fourth quarter ended June 30 matched analysts' expectations, according to Reuters.

But it's the revenues that packed a surprise: $174.5 million for the quarter, beating analysts' $166.7 million consensus estimate and even beating their estimate for the next quarter. Moreover, JDSU predicted revenue growth of between 8 percent and 13 percent, placing the September quarter between $188.5 million and $197.2 million.

For the June quarter, losses according to generally accepted accounting principles (GAAP) were $24.3 million, or 2 cents per share, on revenues of $174.5 million, compared with the previous quarter's losses of $7.3 million, 1 cent per share, on revenues of $161.4 million (see JDSU Losses Grow in Q4).

For the fourth quarter of fiscal 2003, JDSU had reported GAAP losses of $61.6 million, 4 cents per share, on revenues of $160.6 million.

JDSU's upbeat numbers stood in stark contrast to the gloom of last quarter, when revenue growth was pegged at 5 percent or less (see JDSU Spooks Investors).

Some of JDSU's surprise boost came from E2O Communications Inc., which was acquired in May and contributed $3.7 million in revenues for the June quarter, executives said (see JDSU Buys E2O). But business was up overall, and communications, which makes up half of JDSU's total revenues, grew 8 percent. (The other half of JDSU's business includes consumer and thin-film products unrelated to optical communications.)

JDSU might not flip into profitability just yet, however. CFO Ronald Foster noted that JDSU is still "in startup mode in a number of product areas" on both the display and communications sides of the business, and the ramping of new products creates a drag on earnings.

On the networking side, the new products include circuit packs (line cards, basically) and subsystems, part of JDSU's attempt to sell integrated products in addition to simple components. These products comprised 5 percent of JDSU's communications revenues in the June quarter, officials said.

Further, JDSU's restructuring isn't done just yet. JDSU will continue to tweak its operating model to reduce costs, particularly by shifting more manufacturing to low-cost regions such as China. "So, more focus on new product introduction, less site-to-site transfer, fewer sites," Kennedy said.

JDSU will incur the usual restructuring charges as sites close, officials said. That could keep the company in negative net income territory for a while, whereas analysts had expected JDSU to be teetering on the breakeven line throughout calender 2004.

A couple of noteworthy changes buried in the news:

  • In the June quarter, JDSU closed its Eindhoven facility, which built lasers. Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI) had sold the plant to Uniphase Corp. in 1998; Uniphase merged with JDS Fitel Inc. the following year to form JDSU.
  • Jozef Straus, the JDS Fitel founder who masterminded the Uniphase merger, has left JDSU's board. Straus, who had retired as CEO a year ago, will be a "part time adviser" to the company, Kennedy said. (See JDSU Launches Regime Change.)


— Craig Matsumoto, Senior Editor, Light Reading


For more info on the state of industry financials, check out the coming Light Reading Live! event:

  • Light Reading's Telecom Investment Conference, in New York City, November 10.

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    particle_man
    particle_man
    12/5/2012 | 1:24:39 AM
    re: JDSU Scores a Q4 Hit
    Gross Margins are 24%. Ouch.
    sunra
    sunra
    12/5/2012 | 1:24:37 AM
    re: JDSU Scores a Q4 Hit
    <gross 24%.="" are="" margins="" ouch.="">

    Compared with BKHM's -11% GM thats not too bad.</gross>
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