The JDSU Question (Again)

11:45 AM -- Should JDSU (Nasdaq: JDSU; Toronto: JDU) ditch optical components?

Your answer to that should be a question: "Didn't you guys write that a couple years ago?" (See JDSU May Be Mulling Optical Exit.)

A source says the rumor has made the rounds again -- namely, that JDSU is considering a sale of its optical components division. The idea has been valid for a long time, especially as JDSU has beefed up its test-and-measurement business, which is more lucrative and more predictable. (See JDSU CEO Sees Wireless Test Boom.) The problem is that there aren't any obvious buyers. The most likely scenario seems to be a private-equity takeout -- that is, JDSU sells the optical components business to a private equity firm, which then cleans it up (i.e., slashes product lines and lays people off) and eventually takes the spruced-up company public.

Whether that works will depend on the appetite for optical IPOs -- which, for the past several years, have been treated like food poisoning. Even though a JDSU spinoff would take a couple of years to reach an IPO, the suggestion I've heard is that the PE firms might keep an eye on NeoPhotonics Corp. (NYSE: NPTN) -- the first US IPO for optical components in years -- as a bellwether.

And that could be a problem, because the IPO market is losing steam.

Fabrinet Co. Ltd. (NYSE:FN) , which manufactures optical components and is a supplier to JDSU and many others, launched its IPO last Friday, to less than encouraging results. Hoping for a price between $12 and $14, the firm went public at $10 and was trading around $10.75 as of this morning. The backers can call it successful, but it was no Tesla.

(Yes, Tesla did well, but that's an anomaly, a celebrity IPO seemingly powered by dreams, not by the numbers.)

So, if NeoPhotonics goes through with its IPO, and if it goes well, expect a lot more chatter about JDSU.

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 4:30:54 PM
re: The JDSU Question (Again)

Copy desk pointed out, rightfully so, that I'm using Fabrinet as an indication of optical IPO interest while also not really counting it as an optical IPO (since they're a contract manufacturer).

Fair enough, although I'd suspect a lot of other people are thinking of it the same way.  How 'bout we call it a draw and consider Neo the *second* US optical IPO lately?

I would expect NeoPhotonics to go ahead with its IPO, even if the market isn't stellar.  Its backers have waited a long time, and it's finally got a window of profitability to show off.

Vishnu Goel 12/5/2012 | 4:30:53 PM
re: The JDSU Question (Again)

What a dilemma T&M industry is facing Globally and all the major emerging markets!Those who are associated with T&M Business for long time know that some companies want to ride T&M (good margins and technical pride) and few others are shedding their T&M strength.Irony is the nonavailability of techies in the Big and mature markets like the US,is not helping. either. Vishnu Goel T&M +919810101238


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