Optical components

JDSU Pleads the Fifth on Capex

Unlike some other companies, JDSU (Nasdaq: JDSU; Toronto: JDU) is not predicting a slow second half to 2012.

Neither are executives forecasting that things will be good. Executives wouldn't commit either way on Tuesday's earnings call, instead sticking to the plain-fact statements that AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) haven't changed their capital expenditure forecasts for the year.

"If the capex numbers hold up, there's pent-up demand," said CFO David Vellequette -- who will be leaving the company in September for another job, as executives announced on the call.

AT&T, for instance, has said all year that it expects to spend about $20 billion in 2012. The carrier's capex for the first two quarters has totaled $8.83 billion.

The capex question comes up because Oclaro Inc. (Nasdaq: OCLR) recently said optical components demand isn't likely to improve for the rest of the year. (See Oclaro Predicts Dim 2012 for Optical.)

JDSU sells test equipment, so it's in a different position from Oclaro's. It can sell test equipment into some recent optical buildouts, as CEO Tom Waechter pointed out. Then again, the September quarter is traditionally show for test equipment, so any benefit probably wouldn't show up until the end of the year.

JDSU does expect revenues for Communications and Commercial Optical Products, the division that includes optical components, to rise 3 percent to 7 percent during the current quarter compared with the previous quarter. That would amount to between $191 million and $198 million.

For the moment, JDSU seems to be doing relatively well, as its earnings beat analysts' expectations as tallied by Thomson Reuters .

For its fourth quarter, which ended June 30, JDSU reported revenue of $439.3 million and a net loss of $24.3 million, or $0.10 per share. For the same quarter a year ago, JDSU had reported revenue of $409.2 million and a net loss of $17.4 million, or $0.08 per share.

The revenues bettered analysts' forecast of $422.6 million, and non-GAAP net income of $0.15 per share beat the consensus estimate of $0.12 per share.

JDSU shares were up $0.38 (3.6%) at $11.06 in after-hours trading Tuesday.

— Craig Matsumoto, Managing Editor, Light Reading

gtchavan 12/5/2012 | 5:23:52 PM
re: JDSU Pleads the Fifth on Capex This is good. I wonder what would trigger it, iPhone 5?
Pete Baldwin 12/5/2012 | 5:23:51 PM
re: JDSU Pleads the Fifth on Capex

Well, what would theoretically release the pent-up demand is just the calendar -- as December approaches, department managers at the big carriers will start eating up the budget.

So, JDSU is just repeating that conventional wisdom, and there's a good chance they're right.

The question is where the money gets spent. Oclaro seems pessimistic about optical spending. But JDSU has test equipment, so they could benefit in ways Oclaro and Finisar can't.

Pete Baldwin 12/5/2012 | 5:23:48 PM
re: JDSU Pleads the Fifth on Capex

Actually, let me state that another way. The story didn't explain this well:

There's a hunch out there that AT&T and Verizon might pull back on capex due to the weak economy. Alex Henderson of Needham thinks so, e.g.  Not all other analysts agree.

Now, in addition to that, it's looking like Q3 is not going to be the big "catch-up" quarter for spending, so -- that means Q4 is going to have to make up for it all. Which is fine, unless you start wondering about that capex pullout happening.

So, analysts are pecking around for hints of whether the December quarter might be unusually good or bad. I like the way Henderson puts it: "Everything hinges on the Q4 budget flush."

^Eagle^ 12/5/2012 | 5:23:48 PM
re: JDSU Pleads the Fifth on Capex

Also depends on the exact mix of products that JDSU optical components sell as compared to the mix that Oclaro sells.  It would be interesting to see a fine grained breakdown of things like ROADM numbers (by ROADM type), transceiver numbers by type, transponder numbers, modulator numbers, tunable numbers, edfa sales, raman sales, passives sales (mux / demux, etc), and so forth.  

There is need for a finer grain analysis than just gross numbers by the quarter.  I believe this could be revealing.  You might see some trends on what part of each network is being deployed.  

Likewise the entire food chain of impacts from Thailand.  Thailand did not just hit optical components companies.  Some of the systems OEM's major CM's were hit as well.  So for the deals where Oclaro sold into those key CM's, the entire food chain was hit.

There is also a move inside China to source components where possible from chinese vendors.  Various western components companies have differing levels of exposure to this phenomena depending on the mix of products they sell and where they have design in for key component portfolio.  And depending on the increasing sophistication of internal chinese suppliers.  So some have missed numbers due to slowing buys from Huawei and ZTE.

Likewise, companies dependent on FIOS builds for component revenues are being hit somewhat as VZ slows / stops build outs. 

It would be interesting to see Finisar numbers compared in this fine grain way to the Oclaro, and JDSU.

might be revealing.

Of course, I don't have that detail and suspect we will never really get it.  Maybe one of the market survey firms like Heavy Reading, Ovum, or Del Oro have something like this.


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