Earnings reports

JDSU Warns of Another Shortfall

The end of a grim day in the telecommunications market just got grimmer. JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU) announced after the North American stock markets closed that it was further revising its revenue forecasts downward for the next two quarters (see JDSU Lowers Outlook).

The company now expects sales for its fourth quarter to be approximately $600 million as compared to earlier guidance of $700 million. The quarter ends June 30, 2001.

Further yet, the company expects sales of only $450 million for its first quarter of fiscal 2002 ending September 29, 2001. That would mark yet another significant sequential decline in revenue.

"This revised outlook reflects continued weakness in telecommunications carrier spending and inventory reductions by the company's system provider customers," reads a company statement. Investors had already been expecting some bad news; JDSU stock had gradually eroded to a 52-week low before the news was announced today at 4:05 PM ET. Shares had dropped 0.37 (2.61%) to 13.81 during regular market hours.

But the magnitude of the shortfall is likely to rattle the market on Friday. After the news was announced, shares dropped another 1.60 to 12.21 in after-hours trading on the Island ECN.

"The sentiment that September might be worse than June was on people's minds already," says Joseph Wolf, an analyst with UBS Warburg. "But the magnitude of the cut in expectations is surprising.

"This is an industry that is going through a dramatic change. Different pieces will be valued in different ways. We'll see some things becoming commoditized, and pieces of JDSU may end up looking like that."

The company will record inventory write-downs in its fourth quarter. This is expected to result in a fourth-quarter pro forma loss of $0.06 to $0.08 per share after exclusion of restructuring charges.

"The business downturn has been rapid, steep, and unprecedented, and the continuing lack of visibility from our customers suggests to us that a cautious outlook continues to be warranted for the short term," stated Jozef Straus, Cochairman, President, and CEO. "At present, order levels clearly reflect lower carrier capital spending and the resulting desire of our customers to reduce inventories sharply.

— R. Scott Raynovich, Executive Editor, and Marguerite Reardon, Senior Editor, Light Reading

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