Optical components

JDSU Sees Optical Rebound

After three quarters of declines, optical sales are back on the rise at JDSU (Nasdaq: JDSU; Toronto: JDU), although they haven't regained the levels of a year ago.

In reporting its first-quarter earnings yesterday, JDSU noted that optical revenues rose to $121.3 million from $113.7 million the previous quarter, and the optical segment recorded a book-to-bill ratio of more than 1 for the second quarter in a row, a clear sign that sales are growing. (See JDSU Reports Q1.)

That's a reversal from the previous three quarters, which saw optical revenues sag. That decline was due partly to some customers -- especially Cisco Systems Inc. (Nasdaq: CSCO), analysts say -- starting lean-manufacturing initiatives that stalled their purchasing.

Table 1: JDSU's Optical Revenues
Quarter ended Optical Communications
Revenues ($M)
Sept. 2005 100.5
Dec. 2005 109.6
March 2006 127.5
June 2006 133
Sept. 2006 138
Dec. 2006 132.7
March 2007 128.7
June 2007 112.7
Sept. 2007 121.3
Source: JDSU

This was the first full quarter of JDSU having Picolight Corp. under its wing, but that's not where the optical growth came from.

"It would be fair to say the majority of the growth this quarter from last quarter -- and I'll say it's a slight majority -- came from organic products," said CEO Kevin Kennedy on the firm's earnings conference call.

No, that's not a plug for Whole Foods; it means JDSU's non-Picolight products saw better sales. (See JDSU Acquires Picolight.) The optical business remains unprofitable, though, with an operating loss of $2.9 million in the first quarter.

The company's Test and Measurement business accounted for $168 million, or 47 percent, of the quarter's revenues. That was down nearly 2 percent from the previous quarter's $171.3 million, but up nearly 44 percent from a year ago. Test and Measurement generated $26.3 million in operating profit in the first quarter.

Overall, JDSU reported revenues of $356.7 million and a net loss of $6.9 million, or 3 cents per share, compared with revenues of $318.1 million in revenues and a net loss of $17.4 million, or 8 cents per share, in the same quarter a year ago.

First-quarter non-GAAP net income of 8 cents per share beat the analyst estimate of 6 cents reported by Reuters Research .

But JDSU might have disappointed investors with its second-quarter outlook, predicting revenues of $372 million to $394 million. The consensus analyst forecast was $392 million, barely inside JDSU's announced range.

JDSU shares traded down 27 cents (1.8%) at $14.99 in early after-hours trading Wednesday.

— Craig Matsumoto, West Coast Editor, Light Reading

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