Trip,
No questions are dumb questions. Wish I could say the same for some of my answers. :)
I don't follow JDSU other than the general knowledge I pick up from the experts around here who do. But I believe I can provide some helpful perspective by responding to specific points you mentioned.
As discussed earlier it has King status(though I feel it would be hard to prove, with all the increased competition in the sector).
If you accept that JDSU is playing a royalty game, it should be relatively easy to determine whether or not it is a King and, if so, to also determine to a reasonable certainty the degree to which the kingdom is being threatened. If the company has at least twice the market share as its biggest competitor, it's a King. If not, it's not. To the extent that it is losing market share (I have no idea if it is), the kingdom is being threatened. To the extent that it is increasing market share, the kingdom is becoming stronger.
How the heck does one get a handle on the financials of a company growing so rapidly(Q to Q growth > 100%).
If I remember correctly, the reason the huge sequential growth occured last year in between two quarters is because the company acquired another company, ETEK if I remember correctly. That being the case, don't look at the astronomical sequential growth as it appears at a glance because it's not the result of internal growth; it's the result of acquired growth. To get a clearer picture of the growth over the entire year, add the revenue from the acquired company to JDSU for the previous two to six quarters prior to the acquisition. Though that doesn't tell you exactly what the picture would have been had the companies merged earlier, it does give you a better idea of the combined growth of the business efforts. I believe you'll find a picture that is a little easier to comprehend and put in perspective.
Once you've done that, if you really want to do the kind of stuff that I do (no, I'm not volunteering! :) you'll also combine the more important numbers of the balance sheets, the income statements, and the operating cash flow statements. Once you've done that, take a look at how R&D is growing compared to revenue. Is it growing faster or slower and can you conclude anything important about those observations? Also compare the change (or lack of change) over the last year to two years of the combined gross margins and operating margins. Do the same sort of digging into the balance sheet regarding debt levels and cash levels to see how the company's commbined infrastructure is holding up during this period of rapid growth. And last, look to see what the trend is for the combined operating cash flow.
ignore their negative net revenues,understanding that they are expanding through new factories and acquisitions and look at the projected growth of their market?
Don't ignore them but put it in perspective. If you go to any site that uses Zack's data feed you'll see that the company has consistently made money and drmatically improved net profits in each of the last four quarters if you look at profits excluding one-time accounting events such as acquisitions.
I suspect that their is no easy answer to this question and one's own tolerance to risk may be the deciding factor ...
For someone who thinks he might have asked a dumb question, you sure did come up with an awfully smart answer. I couldn't agree with you more. See! That makes me smart too! :)
--Mike Buckley
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