Oops! JDSU Writes Off Again

JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) has taken another hit on the shares it got from Nortel Networks Corp. (NYSE/Toronto: NT) when Nortel bought JDSU's Zurich, Switzerland subsidiary in February of 2001.

According to a filing JDSU made this week with the SEC, as of March 31, 2002, JDSU held some 24.7 million Nortel shares with a fair value of $110.9 million. When Nortel said it was acquiring JDSU's plant, the approximately 65.7 million common shares Nortel planned to issue in the deal were valued at $2.5 billion (see Nortel Buys JDSU Plant for $2.5B).

JDSU, which has already written off some of this staggering loss, is now writing off another chunk of the losses on the Nortel stock. For the nine months ended March 31, 2002, JDSU recorded a writedown of $114.4 million for an "other-than-temporary decline in fair value of [its] investments."

In September 2001, JDSU reclassified some $512 million worth of Nortel shares it held from the Zurich plant purchase as a "realized loss." The investment counted as a one-time charge against JDSU's earnings (see JDSU Writes Off Billions More).

As of February 1, 2001, Nortel's shares traded at $38.27. Since May 3, 2002, the company's stock has traded below $3.

When JDSU agreed to sell the Zurich facility, Nortel also committed to accept a certain level of component supplies from JDSU. If it could not take that supply, the company was required to pay JDSU $500 million by December 31, 2003.

Elsewhere in JDSU's filing, the company revealed that during the nine-month period ended March 31, it had taken a $13.9 million writedown related to its 29 percent stake in ADVA AG Optical Networking (Frankfurt: ADV).

— Phil Harvey, Senior Editor, Light Reading
Dr.Q 12/4/2012 | 10:23:45 PM
re: Oops! JDSU Writes Off Again How does the fair market value of the Zurich subsidiary compare with the fair market value of what Nortel paid?

Nortel "paid" $2.5Billion for Zurich as 65.7 Million Nortel shares. Those shares are now worth ($2.47 each) $162 Million.

How much of a writedown has Nortel taken on the
Zurich operation?

- Dr. Q
techdocs 12/4/2012 | 10:23:40 PM
dljvjbsl 12/4/2012 | 10:23:39 PM

It would be better to post somehing with some content rather than vacuous statements that do not bear scrutiny. What evidence do you have that Nortel faces imminent bankruptcy?

The company states that it has adequate funds. It has announced that it is de-emphasizing its disatrous optical product line. Management is now focussed on the bottom line rather than on the spouting some half-thought-out vision. This all should tend to make the company's prospects brighter.

I acknowledge that Nortel may yet leave the scene either through voluntary or involuntary acquisition through bankruptcy. However that contigency is not yet necessary.
bongwang 12/4/2012 | 10:23:38 PM
re: Oops! JDSU Writes Off Again Wow, well said dljvjbsl. An actual thought-through post. Will wonders never cease. Thanks.

rafaelg 12/4/2012 | 10:23:23 PM
re: Oops! JDSU Writes Off Again I consider myself adequate for the knowledge needed to manage personal stocks. However, an Accountant I am not.
Several questions.
1 Nortel claims a loss in their stock (call it X).
They purchased with X options as part of the cash
The company that X was given claims a loss on that stock also. Isn't that claiming 2 losses on the same stock?
2 Is that taking into assumption that both companies lost the same amount and devalued the goods at an equal rate?
3 Can one keep writing off the stock even if the acquisition is not devalued at the same percentage?
Last one

Nortel gives 2 options (at least when I was there). A- Keep the old stock or, B- it offers to buy back all the old stock but gives you 2/3 of the total stock at a current value.

Eventually if the offers are the same, one ends up with 2/3 of nothing...Like an integral, you really never get there...

I am confused.
Opinion. -
Nortel, Lucent, etc., will not be allowed to dissolve (bankruptcy). These companies are embedded into the Telecom System. It would be disastrous for any of the once dominant players to be out of commission. Too much equipment, software, contracts and stock ownership. Worse case, there will be government intervention. Refresh with the recent news about the airlines bailout for the US.
Gandalf 12/4/2012 | 10:21:45 PM
re: Oops! JDSU Writes Off Again I completely agree with the previous post regarding the telco / government intervention. Not only the US side - the Canadian goverment would bend over to salvage the Nortel situation, consequently the likelihood of the Chapter 11 is not very high. However, that does not mean an automatic rejuvenation of the stock price, only many years ahead with small (if any) incremental value growth spurs. Pitty the shareholders. Anyway, to answer the question #1 - No, those are 2 separate companies making 2 separate claims against 2 different assets. And #3 - also no, both the IRS and the Revenue Canada would reject that claim.
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