JDSU Spooks Investors
JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) beat analysts' expectations by announcing breakeven earnings yesterday, but the company's cloudy outlook sent the stock south.
JDSU beat analysts' expectations of a 1 cent per share loss, according to Reuters Research. Still, its shares closed down 60 cents, roughly 15 percent, at $3.26 today, as JDSU disappointed on multiple fronts.
For the quarter ending March 31, JDSU reported revenues of $161 million -- higher than the previous quarter's $155 million, but less than the $166 million reported a year ago. The company's pro forma net loss was $6.7 million, which rounds off to zero cents per share, compared with a loss of $44.8 million, or 3 cents per share, for the same quarter a year ago. (See JDSU Reports Revenue Increase.)
JDSU's net loss, according to generally accepted accounting principles (GAAP), was $7.3 million, or 1 cent per share.
The numbers weren't any big surprise, but investors were dismayed at JDSU's weak forecast, as executives said revenues would climb 5 percent at best in the June quarter.
There's also the fact that the communications business was tepid. Optics grew just 2 percent in last quarter, while thin-film products -- JDSU's non-communications business -- grew 10 percent. Each side represents roughly half of JDSU's revenues.
JDSU has had this happen before, where half the company does well, only to be held back by a disappointment from the other half (see JDSU Revenues Still Declining). It's as if the numbers are conspiring to make JDSU the Sisyphus of profitability:
Table 1: JDSU Financials
|Quarter||Dec'02||Mar. '03||Jun. '03||Sept. '03||Dec. '03||Mar. '04||Jun.'04|
|Net Income ($)||-0.07||-0.03||-0.02||-0.01||-0.01||0.00||-0.01*|
Source: Reuters Research
In a research note today, analyst Stephen Koffler of Wachovia Securities Inc. says it appears JDSU's optical business is slowing, something he'd like to see the company try harder to change.
"It doesn't appear that JDSU's acquisition strategy includes any moves to greatly expand the addressable market," Koffler writes. Koffler had upgraded JDSU in September, expecting a "more aggressive acquisition strategy" to emerge by now. He took it back today, downgrading JDSU to Market Perform from Outperform.
Most analysts gave JDSU good marks for the quarter but still cautioned that the stock's valuation is high, "nearly three times as large as the optical component market," writes analyst John Harmon of Needham & Co. in a research note today (see Is JDSU's Cap Set Too High?).
In part, that's because of JDSU's prominence. The stock tends to get bumped higher whenever the networking industry reports happy news, Harmon writes.
— Craig Matsumoto, Senior Editor, Light Reading