JDSU's Q2 Points Downhill
JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) had warned investors that the second-quarter numbers would be disappointing, but it compounded the agony yesterday with a glum third-quarter forecast.
For its second quarter, which ended Dec. 31, JDSU reported losses of $43.5 million, or 3 cents per diluted share, on revenues of $180.5 million, compared with losses of $36 million, or 2 cents per share, on revenues of $194.5 million in the first quarter (see JDSU Q2 Revenues Drop).
For the second quarter last year, JDSU reported losses of $58.5 million, or 4 cents per share, on revenues of $152.6 million.
The $180.5 million revenues matched JDSU's prediction last week, when the company said a drop in revenues from one display-industry customer would put sales at the low end of its forecasts (see JDSU Unveils Q2 Prelims).
But yesterday, the company says things will get worse, with March-quarter revenues expected to be between $155 million and $165 million, generating losses of 2 cents per share. The forecast dropped JDSU shares by as much as 20 cents (8.1%) to $2.25 in early after-hours trading.
The problem is that JDSU is at the intersection of multiple transitions, CEO Kevin Kennedy told analysts on a conference call yesterday. Its markets are changing, particularly in the TV-display world, where the transition to high-definition TV is on. JDSU itself is still changing its product strategy, trying to offer subsystems rather than components. And even though JDSU is finished with its major layoffs, the company is still in flux, trying to shift to low-cost Asian manufacturing and shifting its power base to San Jose, Calif.
All these changes create uncertainty, but for now it's the display industry that's particularly vexing. The customer that caused last quarter's shortfall changed its forecasts to JDSU a "double digit" number of times during the quarter -- more than once a week, CFO Ronald Foster told analysts. With classic CFO understatement, Foster said that behavior "is not a normal phenomenon."
But JDSU's internal changes are causing their share of pain as well. "While we have made progress over the last 12 to 18 months, there are benefits to be gained" through continued cost-cutting, Kennedy said. Among the company's recent moves was the sale of some operations -- and more than 400 employees -- to Fabrinet Co. Ltd. (see JDSU Sells Manufacturing Operations).
Telecom, of all things, has been a bright spot. JDSU saw communications revenues of $106.7 million for the second quarter, up just slightly from $106.1 million the previous quarter. That was a pleasant surprise, as JDSU officials said they considered last quarter's figure to be an anomaly and were expecting a decline in communications revenues. But the communications business continues to lose money, reporting losses of $14.5 million for the second quarter.
Still, Kennedy noted that sales into metro networks have been "one of the real strengths for us the last few quarters." And the shift to subsystems appears to be working, as JDSU recently celebrated shipping 20,000 circuit packs and subsystems and 1,000 wavelength management modules (see JDSU Ships New Subsystems).
— Craig Matsumoto, Senior Editor, Light Reading