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Kennedy Bids JDSU Adieu

Craig Matsumoto
10/29/2008

Amid an earnings call with gloomy overtones, JDSU (Nasdaq: JDSU; Toronto: JDU) CEO Kevin Kennedy announced today that he's resigning from the company.

Kennedy has gotten a job somewhere else and expects to leave JDSU in December. He made the announcement in the middle of today's earnings call with analysts.

His departure comes as JDSU prepares yet another round of cost-cutting, this time in response to the overall economic gloom. JDSU noted today that revenues in the second quarter, which ends in December, could fall compared with the $386.7 million reported for the first quarter. (See JDSU's Not Down and JDSU Reports Q1.)

The company will be cutting 400 employees and contractors as a result, Kennedy said.

Other cuts will include a reduction to 12 sites from 19, "reducing manufacturing sites by several," Kennedy said. No major product changes are planned, but JDSU will be cutting some of its lower-speed datacom products, which carry lower margins than highfalutin 8- and 10-Gbit/s models.

Light Reading will update this story as events warrant.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin
Pete Baldwin
12/5/2012 | 3:28:30 PM
re: Kennedy Bids JDSU Adieu
This arrived too late for deadline. It's JDSU's prepared statement:

JDSU president and chief executive officer, Kevin Kennedy notified the Company of his intent to resign to assume a position with another company. He will remain on with JDSU's Board of Directors as Vice Chairman. A succession committee has been formed by the Board and has already commenced the process of selecting a new CEO.

Kennedy stated "My decision to leave JDSU reflects the convergence of a unique opportunity presenting itself as well as my confidence in the JDSU leadership team that is in place to execute the initiatives now underway which should result in best in class operating metrics. I look forward to continuing to work with the team as a member of the board of directors."
Pete Baldwin
Pete Baldwin
12/5/2012 | 3:28:29 PM
re: Kennedy Bids JDSU Adieu
Well, I can't say I blame him. He expected (and arguably deserved) better out of this position, but the industry just keeps hammering the optical guys.

The way this got announced was probably meant to minimize the drama but had the opposite effect. They ran through all the prepared remarks, including the CFO part with all its accounting jargon.... and then, they hand the mic back to Kennedy for what's usually a summary and the official start of the Q&A portion.

But instead he says, "Oh, by the way, I'm leaving!" (Not literally, but that was the effect.)
HomerJ
HomerJ
12/5/2012 | 3:28:24 PM
re: Kennedy Bids JDSU Adieu

I heard he'll be leading the mgmt buyout of Nortel MEN.
rahat.hussain
rahat.hussain
12/5/2012 | 3:28:23 PM
re: Kennedy Bids JDSU Adieu
Craig: A few questions for you.

1) Hello? You don't blame him? Who then do you blame for a stock price that was at $35-40 in 2004 when he joined, coming down to $5.50 now?

2) He deserves better? How so? After completely mangling what coulda been a superpower in optical components, he deserves better?

3) Again, hello? The industry keeps hammering him? Maybe all CEO's in this space should use this excuse with their boards. Or maybe this will lead to a new breed of outside CEOs taking over and cleaning up this mess. That will be a good thing!

odo <-- still aghast at the kid-gloves being used!
HomerJ
HomerJ
12/5/2012 | 3:28:22 PM
re: Kennedy Bids JDSU Adieu
avaya. good move for him. a zillion times more fun than the turd-fest that is jdsu
Pete Baldwin
Pete Baldwin
12/5/2012 | 3:28:22 PM
re: Kennedy Bids JDSU Adieu
1) meant that I don't blame him for taking another job when offered. Wouldn't you?

2+3) You could argue he ran JDSU into the ground. You could also argue that optical components, for the big companies in the last six to eight years, have been a no-win scenario -- certainly not the kind of job he, or anyone else joining the sector, signed up for. (Finisar, which wasn't in telecom, doesn't count.)

Personal opinion: I think Kennedy wanted to do the right thing, namely, ditch optics and concentrate on other businesses. Didn't turn out to be feasible.

If you think we're not being harsh enough, well, here's your chance. Let him have it, with the full benefit of 20/20 hindsight. What should Kennedy have done?
rahat.hussain
rahat.hussain
12/5/2012 | 3:28:21 PM
re: Kennedy Bids JDSU Adieu
Craig;

My two cents.

When Bookham and Avanex complain about the circumstances, my heart goes out to them. They have to struggle in a bad industry with nothing going right in any dimension - cash, margins, size, vanishing customers, etc.

But when in a struggling sector, the one gorilla with a multibillion dollar marketcap (and a lot of cash) can't dominate in terms of technology- and thought-leadership, isn't there a problem?

(By dominate, I mean new products, better margins, better customer traction, resulting in better stock price).

They did try to acquire their way out of this mess - Acterna, Agility, Picolight - and yet the stock price is a mere fraction. Part of this is clearly the stock market, but I don't believe this is all the stock market's fault.

For example, how do you condone a market leader for missing out on tunable lasers (Agility), VCSELs/pluggables (Picolight) and 40G (Mintera partnership)? And I am sure there are similar examples in other areas ..

So, in response to your question, I don't have the braincells to figure out, even 20/20, what Kennedy should have done. What I do feel is that a more connected CEO who understood market forces and customer trends could have done better.

odo <-- explaining why she is not a ceo.
Pete Baldwin
Pete Baldwin
12/5/2012 | 3:28:21 PM
re: Kennedy Bids JDSU Adieu
http://www.lightreading.com/do...

or, if you wanna get all official about it,

http://tinyurl.com/5rcuf4 (press release on Avaya's site)
Pete Baldwin
Pete Baldwin
12/5/2012 | 3:28:20 PM
re: Kennedy Bids JDSU Adieu
Excellent points, odo. Tunable lasers were a huge miss, in particular.

The problem with domination in this sector is that things are so fragmented. None of JDSU's optical customers have a Cisco-like market share (including Cisco; you know what I mean). That's got to make it tough.

Maybe -- and this is idle speculation with lunch on my mind -- maybe acquiring their way out wasn't the way to go? (Minus Acterna; that's their future in a basket, imho.)

And you're right about the stock. JDSU peaked somewhere near 40 after Kennedy joined and was in the teens this year before the market truly tanked. That kind of 5-year record, regardless of the reasons, is something we should have mentioned.
gbmorrison
gbmorrison
12/5/2012 | 3:28:07 PM
re: Kennedy Bids JDSU Adieu
Seriously, JDSU is that much worse off than Avaya? Or maybe you are being sarcastic?
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