ANTHONY R. MULLER - JDS UNIPHASE CORPORATION - (JDSU)
CEO Interview - published 06/15/00
DOCUMENT # KAD278
ANTHONY R. MULLER, 56, is Senior Vice President and Chief Financial Officer of JDS Uniphase Corporation. Mr. Muller joined Uniphase Corporation in January 1998 after serving on the Uniphase Board of Directors for fourteen years. He has been Chief Financial Officer during a period of considerable company growth and substantial increases in its balance sheet strength and capitalization. Prior to joining Uniphase, as Senior Vice President and Chief Financial Officer of Micro Focus Group Plc, he led the turnaround of this enterprise software tools provider. Mr. Muller has held senior financial and operations positions with manufacturers of telecommunications systems, lasers and optics, and semiconductor equipment. His earlier experience included advising clients on corporate strategy with the Boston Consulting Group.
Sector: Communications Equipment
TWST: Could you begin with a brief history and overview of JDS Uniphase Corporation?
Mr. Muller: We are a high technology company that designs, develops, manufactures and distributes a comprehensive range of products for the growing fiberoptic communications market. These products are used by systems manufacturers worldwide to develop advanced optical networks.
TWST: What do you see as the most significant trends or developments in the world of fiberoptic networks?
Mr. Muller: Without question, the most compelling trend is the overwhelming growth in demand. This demand is continually exceeding our forecasts and those of our customers.
TWST: What do you think your response will be to that?
Mr. Muller: We have had one and only one response, and that is to serve our customers. And in serving our customers, we have to continue to add capacity very rapidly so we can meet their current needs, and we must continue to advance the technology rapidly so we can continue to offer our customers the latest technology, the best economics, and the highest performance.
TWST: And are your customers worldwide?
Mr. Muller: Yes, they are. Our customers the telecommunications systems manufacturers.
TWST: Do you see any major challenges and/or risks that JDS Uniphase faces?
Mr. Muller: The challenge is growing as fast as our markets demand. That is clearly a major challenge, and it is coupled with the compelling need to continue to innovate and remain a technical leader in our business. The risk, of course, is that we could not do it right. If one does not do it right in this business the industry moves so quickly that we could miss a lot of opportunities. I might add, however, that we certainly do not plan on falling short of meeting our customers? needs. This market is going to grow very quickly, and for anyone who has any doubts about that, just ask that person if he or she is happy with his Internet performance today.
TWST: Are you also providing lasers?
Mr. Muller: The different types of lasers we manufacture are just some of the components that are used to build fiberoptic networks. They are very critical parts of the fiberoptic network. Without laser transmissions, nothing else happens.
TWST: What do you see as your competitive advantages? What?s the competition?
Mr. Muller: Clearly, we have competition. We have competitors that we hold in very high regard. Our competitive advantages are 1) our relationships with our customers; 2) our size and scale, which gives us the opportunity to meet large demands and large changes and demands by our customers; 3) the talents of the people we have in our company and their very high levels of competence, and 4) our financial strength. We have the cash required for a business that is moving forward very quickly. We invest aggressively on capital spending. We make acquisitions, sometimes for cash and sometimes for stock to strengthen our strategic position and give opportunities to do more for our customers. These are some of the competitive advantages we have.
TWST: Would you say that you have the superior relationship with your customers?
Mr. Muller: I believe we have very good relationships with our customers. These are close partnerships where we work together to make sure that we can all do what is necessary for our customers and our customers? customers in the future. As for such relationships being superior, that would imply that they are better than those of other companies, and I cannot comment on our customers? relationships with our competitors.
TWST: What do you see as the opportunities for improvement?
Mr. Muller: The biggest opportunities we have for improvement are to continue to add capacity. We are currently in a program where we are working to quadruple our capacity over the next 18 months. We have substantial opportunities to do this not only by investing in more buildings, machines and people, but by outsourcing, by continuing to improve our operational methods and by continuing to make heavy investments in automation to further extend our capabilities.
TWST: What do you see as the specific goals for JDS in terms of the market position and growth?
Mr. Muller: We express our goals in terms of satisfying our customers? requirements. If we have the advanced products our customers need and work with them to make sure the products are right for their applications, and then have enough capacity available so that our customers can obtain all the components and modules they need, and do this at reasonable costs, I think we will meet our goals.
TWST: What do you see as the rate of gains in sales and earnings for JDS over the next few years?
Mr. Muller: We have provided specific guidance for the current quarter and for our next fiscal year ending June 30, 2001. This guidance reflects the strong growth we anticipate.
TWST: How do you feel about your stock price?
Mr. Muller: It is down a lot from its high, yet business is very strong. As to what our stock price should be, I will leave that to people in the financial community.
TWST: What two or three reasons would you give potential long-term investors for investing in JDS Uniphase?
Mr. Muller: The first reason I would give is that the fiberoptics industry is growing extremely rapidly, and I believe it will continue to grow rapidly for years to come. I can give you many reasons for that, but the most compelling reason is the growth of the Internet. The growth of the Internet will depend in part on improved access to the Internet. For example, if you have a more rapid connection to the Internet at home, that will create a lot more traffic throughout the network. This will be further amplified as generation three wireless terminals come into widespread use operating at two megabits per second. This will place tremendous demands on the fiberoptic network. Also, as the data intensity of Internet content increases, tremendous demands on the fiberoptic network will continue to emerge. The Internet today is really just a crude version of what we expect it to become because today most content is just textual data, numbers, or still photographs. But we do not yet see much full motion video on the Internet. We are not doing video conferencing on the Internet. So, I believe this rapid market growth is the reason investors should consider investing in the fiberoptics space. Of course, there are many companies in the fiberoptics space. Now the second reason investors may want to at least look at JDS Uniphase is that we are one of the significant companies in the fiberoptics space. And, as such, our growth prospects will be affected by what happens in the fiberoptic market overall. There will be major winners in fiberoptics, and we hope that we can continue to be one.
TWST: Are you also involved in what is known as optoelectronics?
Mr. Muller: Very much so. Everything we do is involved in optoelectronics. That is the generic name for the technologies that we use in fiberoptics. This is analogous to the question asked of a company in the computer industry, ?Are you in the electronics industry?? Of course they are.
TWST: At some point in the next near future, will we be seeing more and more images of the Internet?
Mr. Muller: Certainly. There was an example last week when Victoria?s Secret had their spring fashion show Webcasted. Such content is much more data intensive than still pictures.
TWST: Yes, I am sure they got a big response.
Mr. Muller: I did not see it, but full motion video requires a tremendous amount of data. There is an Internet 2, which is now currently available only to universities, which I understand is much more media rich, much more data intensive and will require considerably more bandwidth. When that comes, it too will have a considerable impact on the demand for fiberoptics.
TWST: Is there anything that I may have missed or overlooked that you might want to discuss before we conclude?
Mr. Muller: I have never seen an industry where the growth prospects look to be as bright as they are in fiberoptics. I have also never been involved in an industry that has had capacity shortages as long as this one has. The reasons there are capacity shortages are: 1) demand growth has continued to exceed everyone?s forecast; and 2) it is very difficult to build these products. We are not duplicating CDs with software, we are manufacturing extremely high technology products, in many cases with semiconductor processes. So it has been a business opportunity that I have not seen before. Without being specific to JDS Uniphase, I think fiberoptics is a business opportunity that can grow rapidly for many years. I just hope that we can continue to flourish in this market, and I think we have a very good chance of doing that.
TWST: When you say there is a capacity shortage, what do you mean exactly?
Mr. Muller: Customers needs exceed what the industry can produce.
TWST: Is there anything else that you want to add?
Mr. Muller: A key point in the history of our company is the merger in July of last year between Uniphase Corporation and JDS FITEL that formed our company. Since the close of the merger, we have been very active in acquiring other companies, and we have announced nine acquisitions subsequent to the merger. These acquisitions are all of manufacturing companies that give us the opportunity to provide a broader range of products to our customers. We have been executing a multi-phase strategy. Phase I was to have a broad product line for our customers, and we have, we believe, the broadest product line in the industry. Phase II is to expand into modules, which are products that have multiple components in a board or other package. Modules represented 30% of our sales last quarter. Phase III, the one that is consuming our attention now, is massive capacity expansion to make sure that we are there with the volumes of products that our customers need.
TWST: You continue to acquire acquisitions for those?
Mr. Muller: It is very likely that we will make additional acquisitions in the future because there is no monopoly on brains and no monopoly on good ideas. And where we find companies that add to the value proposition that we present to our customers, we will seek to acquire such companies.
TWST: Thank you.
ANTHONY R. MULLER
EVP & CFO
JDS Uniphase Corporation
163 Baypointe Parkway
San Jose, CA 95134
(408) 434-1800
Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investors Brief or other highlight material to be provided and sponsored by and for the company. This Interview with Anthony R. Muller, EVP & CFO of JDS Uniphase Corporation, is accompanied by an Investors Brief containing corporate information.
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