Optical components

JDSU Shoots Low

Shares of JDSU (Nasdaq: JDSU; Toronto: JDU) plummeted nearly 15 percent in after-hours trading yesterday as the company missed a fourth quarter earnings target and delivered a downer of a forecast for September.

For its fourth quarter, which ended June 30, JDSU reported losses of $45.8 million, or 3 cents per share, on revenues of $318.2 million, compared with profits of $3.7 million, zero cents per share, on revenues of $314.9 million the previous quarter. (See JDSU Reports Q4.)

For its fourth quarter a year ago, JDSU reported losses of $145.7 million, 10 cents per share, on revenues of $170.9 million.

Analysts were looking for JDSU to have GAAP net losses that rounded to zero cents per share, according to Reuters Research . Analysts likewise expected zero cents per share for non-GAAP losses, a mark that JDSU did hit.

But then JDSU disappointed with its first quarter forecast of $312 million to $328 million in revenues. Analysts polled by Reuters Research were looking for $328.9 million in the first quarter.

JDSU shares were down 39 cents (14.8%) at $2.24 after hours.

So, what went wrong?

JDSU got the cost savings it was expecting from restructuring that's gone on since March 2005. But that factor was "more than offset by an unfavorable mix" of sales in optical components and test and measurement equipment, CEO Kevin Kennedy said on yesterday's conference call with analysts.

JDSU also got hit by "near-term forecast softening" and order delays due to the mergers happening among carriers and among equipment vendors, Kennedy said. But he depicted that as a short-term concern, saying the "network growth drivers" such as IPTV and broadband buildouts shouldn't be affected by consolidation.

Some of JDSU's earnings shortfall came from disappointing earnings in test and measurement, a sector spearheaded by last year's acquisition of Acterna. (See JDSU Buys Into Testy Market.) Kennedy gave no specifics but was willing to drop hints about what had happened.

For one, he noted that any delay in an IPTV or access network buildout would hurt the sales of certain products (he'd noted earlier that IPTV was creating a good market for Ethernet test equipment). He also suggested that JDSU, while seeing a normal flow of test and measurement sales, was seeing fewer of the large orders that normally boost the revenues of that sector.

Separately, JDSU's earnings were dented by some "transitory" costs associated with transferring manufacturing to other sites, Kennedy said.

JDSU's optical components and modules business grew 4 percent to $133 million in the fourth quarter, while its test and measurement business was sequentially flat at $126.3 million.

— Craig Matsumoto, Senior Editor, Light Reading

Pete Baldwin 12/5/2012 | 3:42:37 AM
re: JDSU Shoots Low ... JDSU did say it's preparing to wrap up this restructuring round during the coming fiscal year, meaning it should return to a more normal business trajectory. Light at the end of the tunnel (or, the start of the *next* restructuring round, if you want to be pessimistic.)

I still think test will be a good and steady business for JDSU in the long term, and it's a nice cushion against the tough margins of the optical sector. Ironic, though, that test is responsible for so much of the hiccup here.
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