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JDSU's Q2 Points Downhill

Light Reading
News Analysis
Light Reading
1/27/2005

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

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deer_in_the_light
deer_in_the_light
12/5/2012 | 3:28:34 AM
re: JDSU's Q2 Points Downhill
... are learning about optics. Margin sucks, price pressure, Chinese competition, consumer business... very different from selling routers to captive customers
o-man
o-man
12/5/2012 | 3:28:31 AM
re: JDSU's Q2 Points Downhill
Right on deaufaux!

I am in sales and marketing and to it is easy to beat JDSU, but the pants wear out quick!
deauxfaux
deauxfaux
12/5/2012 | 3:28:31 AM
re: JDSU's Q2 Points Downhill
I agree with Deer; welcome to the cold cruel world of optical components. Let me give you guys a survival tip:wearing the Intel & Cisco bravado on your sleeves won't help you with customers half as much as wearing trousers with reinforced knees.

Learning is expensive and painful, enjoy the ride guys



whyiswhy
whyiswhy
12/5/2012 | 3:28:18 AM
re: JDSU's Q2 Points Downhill
Kennedy and crew do not have the slightest clue as to what they are doing. They came from a house that prided itself on NOT MAKING A SINGLE FRIGGIN' PIECE OF HARDWARE!

Oops, guess what JDSU does folks?

Kennedy's only idea so far was to form an internal key account team made up of party loyalists to kick ass on those who do the actual work, and use industrial strength knee pads when talking to customers! Oh, that and lay on more Oracle. Like that will get things out faster, better, cheaper!

JDSU's investors and BOD are getting exactly what they deserve: their pick of CEO.

ROTFLMAO!

But hey, that's just my humble opinion...

-Why
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