JDS Uniphase splits stock, eyes growth
Company boosts capital to fund acquisitions, future splits
Bert Hill
The Ottawa Citizen
January 4, 2000
JDS Uniphase is loading up with more than two billion in shares worth $400 billion U.S. to finance future acquisitions and stock splits.
Taking advantage of market demand for a stock that has jumped 984 per cent in the past 12 months, the big fibre-optic components company announced its third stock split in six months yesterday.
The 2-1 split will take effect March 10, assuming shareholders approve the decision. That is a formality because splits usually trigger price rises: JDS stock rose more than 50 per cent in the six-week run up to last month's split.
The new split isn't a surprise because JDS stock was still trading at prices well beyond the reach of many small investors. Yesterday, it surged $26 11é16, or 17 per cent, to close at $188 U.S. in trading on the Nasdaq exchange. There was no trading in Canada because the Toronto Stock Exchange was closed.
The decision to increase authorized capital from 600 million shares to three billion shares gives a hint of the size and number of JDS deals to come in the future.
Michael Urlocker, an analyst with Scotia Capital, said: "Since the merger (that created JDS Uniphase in July) the company has done a handful of small to medium deals. This increase in shares is consistent with a company pursuing a path of growth and on the lookout for larger acquisitions."
JDS stock is flying because it makes the equipment telephone companies need to keep up with the rising wave of traffic created by the Internet.
"These guys are the arms merchants selling to all of the equipment guys," said J.P. Morgan Securities analyst Charlie Willhoit. "Not many people know how to make optical components, and a lot of people need them."
At the last stock split in December, the number of shares only doubled from 300 million to 600 million. With the latest split, the authorized capital jumps not to 1.2 billion shares but to three billion shares. About 226 million shares were in the hands of shareholders last month and that number will increase to 552 million with the split.
The additional shares won't be issued now but will sit in the JDS treasury until they are needed.
"We've requested authority for three billion shares because every time we've wanted to do anything running the company, we've had to go to the shareholders for approval," said chief financial officer Anthony Muller.
Mr. Muller declined to discuss possible takeover targets but made it clear there will be more. Indeed, JDS has said it plans to increase output by 90 per cent this year through acquisitions and internal growth to keep ahead of demand from Nortel Networks, Lucent Technologies and other big fibre-optic systems makers.
"From the date of the merger July 6 to the end of December, we had six acquisitions and two stock splits," Mr. Muller said. "People who want to know what we will do in the future should look at what we have done in the last six months.
"It takes a lot of shares to operate in a rapidly changing and competitive environment. We need to have enough shares on hand to deal with situations as events dictate."
Since JDS's annual meeting in Ottawa last month, Cisco Systems, the dominant maker of equipment that loads traffic on to the Internet, continued its drive into the industry that carries most Internet traffic. It bought the fibre-optic business of Pirelli S.p.A of Milan for $2.15 billion just before Christmas. In August it bought start-up companies Cerent Networks for $6.9 billion and Monterey Networks for $500 million to gain footholds. Still, Cisco trails far behind Nortel and Lucent in fibre-optics.
Mr. Muller said JDS will benefit from the deal because it creates opportunity to sell equipment to Cisco.
"We have business relations with Cerent and Pirelli and we would very much like to have a business relationship with a great company like Cisco."
JDS, the world's biggest fibre-optic component maker, also sells parts to Cisco's major competitors such as Nortel, Lucent, Alcatel and Marconi. It has no desire to take on these companies head-to-head. Instead, it is trying to increase business by assembling parts into modules for sale to the big systems makers. In fact, it is counting on the major systems makers to sell off their parts operations, as several have done, creating more potential acquisition targets for JDS.
Pirelli will continue to make fibre-optic parts with Cisco providing about $100 million investment and taking a minority stake. JDS's future acquisitions are likely to come from smaller competitors such as E-Tek Dynamics, SDL, Corning and a host of tiny start-ups in California, Massachusetts, Europe and Asia.
The Acquisition Trail
JDS Uniphase Inc. of Nepean and San Jose has made six deals since creating the world's biggest fibre-optic parts maker through a $7-billion U.S. merger in July:
Date Company Product Price Employees
Sept. 15 AFC Techno- amplifiers N.D. 12
logies, Hull
Oct. 4 Epitaxx Inc., receivers $400M U.S. NA
Trenton, N.J. (stock)
Oct. 17 Ramar Corp., modulators N.D. 14 Northborough, Mass.
Nov. 4 Optical Coating filters $2.8B U.S. 1,600 Laboratory Inc. (stock)
Santa Rosa, Calif.
Nov. 22 Sifam Ltd., amplifier $98M U.S. 180 Torquay, UK parts (cash)
Dec. 15 Oprel Techno- amplifiers N.D. 25 logies, Nepean
N.D. Not disclosed
N.A. Not available |
