JDS Uniphase Warns on 1Q Sales

Baldwin Louie — Mon, 24 Sep 2001 15:00:00 -0700

SAN JOSE, Calif. -- JDS Uniphase Corp. warned that its fiscal first-quarter sales will fall short of already lowered expectations, but indicated its business was starting to stabilize.

The maker of fiber-optic telecommunications equipment said Monday it now expects sales of $325 million for the quarter ending Sept. 29. Analysts surveyed by Thomson Financial/First Call had expected the company to report revenue of $ 357.4 million, and a loss of three cents a share.

In the year-earlier quarter, the company lost about $1.01 billion, or $1.07 a share, including items, on sales of about $786.5 million. Excluding items, JDS earned 18 cents a share in last year's first quarter.

Nevertheless, Monday's sales downgrade is not as low as some had feared following moves the company announced last week.

Last Wednesday -- the same day the stock hit a 52-week low -- JDS announced that it was writing off an additional $5.3 billion in goodwill in the completed third and fourth fiscal quarters. More important, the company said it was taking a $76 million increase in inventory reserves, which indicated the company expected to miss sales estimates.

Investors also took comfort from the hints of stabilization, sending shares of JDS (JDSU) up 78 cents, or 15%, to $6.14 in midday trading on the Nasdaq Stock Market.

JDS said the current economic climate makes it difficult to predict its performance going forward. However, the company believes its ability to predict future sales has improved.

"In this time of change and uncertainty, we are continuing to work closely with our customers to help them prepare for new generations of products and to respond to the challenges ahead," Jozef Straus, co-chairman, president and chief executive, said in a written statement.

"And while the downturn in our markets has not yet reversed, we believe we are beginning to see the early signs of stabilization at levels from which our industry can grow in the future," he added.

Previously, JDS and its peers have warned of little or no visibility into sales and talked with an overwhelmingly pessimistic tone. In July, the company warned that sales for the first quarter would be below previous estimates of $ 450 million and that the company saw no signs of a reversal in declining telecom spending.

Over the past several months, the company has announced plans to cut its work force as it moves to restructure. In April, JDS announced 5,000 job cuts and in July it said it would eliminate a total of 16,000 jobs.

The company said Monday that it has already reduced its staff to less than 14, 000 people -- a figure it didn't expect to reach until the second quarter. JDS had 29,000 employees in early 2001.

Jim Jungjohann, optical equipment analyst with CIBC World Markets, raised his rating on the stock to "buy" from "hold" Monday.

"Our upgrade is mainly based on a more expeditious restructuring than previously thought, greater profitability leverage and expectations for positive earnings per share as soon as the third quarter, a strong balance sheet and a valuation that still trades at a sizable discount" to its peers, he said. "Granted, we are early with our upgrade, but buyers should be patient."

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JDS Uniphase Warns on 1Q Sales