Optical components

JDSU Regresses in Q3

JDSU (Nasdaq: JDSU; Toronto: JDU) shares are down 13 percent this morning as the company reported weak earnings yesterday and initiated a new round of staff cuts.

The results show JDSU -- and really, the whole optical components industry -- isn't out of the woods yet. Big mergers among equipment companies, such as the one creating Alcatel-Lucent (NYSE: ALU), are partly to blame, but JDSU found plenty of other reasons why its largest optical customers reduced orders last quarter.

"Two of our top eight [customers], for example, were executing lean-manufacturing initiatives, an additional four of our top eight customers were involved in targeted inventory management actions, and separately, five of our most significant customers were involved in consolidation activities," JDSU chief executive Kevin Kennedy said on a call with analysts yesterday.

For its third quarter, which ended March 31, JDSU reported losses of $14.2 million, or 7 cents per share, on revenues of $361.7 million, compared with profits of $23.2 million, or 10 cents per share, on revenues of $366.3 million the previous quarter. (See JDSU Reports Q3.)

For its third quarter a year ago, JDSU reported net income of $3.7 million, or 2 cents per share, on revenues of $314.9 million.

Non-GAAP earnings did alright, reaching 13 cents per share, compared with analysts' estimates of 9 cents.

JDSU shares were down $2.22 (13.3%) at $14.42 in late-morning trading today.

JDSU's book-to-bill ratio for optical components was "considerably less than 1," in the third quarter, Kennedy said, noting that it's become clear that customers' inventories got bloated late in 2006. That led to a fourth-quarter forecast of $325 million to $345 million in sales, compared with the $346.6 million analysts were expecting, according to Reuters Research .

Overall, JDSU's optical communications revenues were down 3 percent from the previous quarter, at $128.7 million. A particularly weak point was in DWDM long-haul sales, which saw their first decline in "many quarters," Kennedy said.

In response, JDSU plans staff cuts of 400, mostly in optical components manufacturing in China and North America. The cuts, to be a combination of attrition and layoffs, will continue until year's end. JDSU employed 6,834 as of March 31.

Optical wasn't the only source of woes for JDSU. The test-and-measurement business was down 3 percent from the previous quarter, at $162.9 million.

— Craig Matsumoto, West Coast Editor, Light Reading

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bitsandbytes 12/5/2012 | 3:09:16 PM
re: JDSU Regresses in Q3 I wouldn't be surprised if this was limited to JDSU. Their management of the optical component business has been, on average, incompetent.

They have no position in next generation technology such as tunable since JDSU has no clue how to do post-merger management (despite the amount of practice they've had). They've had zero success in 10G components (EMLs, etc) since JDSU could not execute the transfer of technology from Eindhoven.

They seem surprised that their customers are moving to lean manufacturing. That this is a surprise at all leads me to conclude JDSU management cannot lead the business successfully. They merely hope to ride the waves and grab a lifeboat as their business continues to sink.
Pete Baldwin 12/5/2012 | 3:09:16 PM
re: JDSU Regresses in Q3 You had to expect the Alcatel/Lucent deal would have this kind of effect. But they're seeing more than that going on, which is what's surprising.

At least JDSU is now free cash flow positive, for the first time in years.
alcabash 12/5/2012 | 3:09:15 PM
re: JDSU Regresses in Q3 Jdsu is doing a management overhaul, ricci, shoquist got pushed out, gudmundsson is brought in to clean up the mess and sell the pig
twill009 12/5/2012 | 3:09:14 PM
re: JDSU Regresses in Q3 There are a lot of strange things about this JDSU report.

First of all, i don't think it is an isolated or company-specific event. Avanex just lowered guidance this afternoon, and Bookham is blaming "ongoing inventory reduction programs with some of our top customers" for its flat guidance. IDT and Altera also blamed 'lean' type initiatives for poor guidance. What seems most strange is that Cisco (which is always implicitly blamed in these reports) started Lean over a year ago. Why is it still going on today? Weren't they supposed to be done by now?

The other strange thing about JDSU is the evidence of a contra-trend: e.g., Corning opening a shuttered fiber plant, Ciena and Nortel doing better, Verizon pushing Fios hard.

Maybe 'lean' is just the new cover story for poor execution.
DNA-Lorrd 12/5/2012 | 3:09:11 PM
re: JDSU Regresses in Q3 Right. How can you cut cost by laying off people in China?
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