JDS Uniphase (JDSU)
Rating: BUY
July 27, 2000
Solid Upside; Aggressive Capacity Expansion Continues; Awaiting Merger News
JDS Uniphase reported $524M/0.14, ahead of our (and the consensus) $0.12 EPS estimate. Upside was driven by across-the-board strength. Gross margin declined slightly Q/Q due to unfavorable comparison, but remained within guidance.
The demand outlook is more of the same --- extremely encouraging, especially for high-power, high-speed long-haul/submarine and metro products.
We believe the Company remains on-track with its Company-wide capacity expansion, which remains a gating factor.
As expected, there's no news on the SDLI merger. In our view, this merger would clearly bolster JDS' position, especially in the amplifier, terrestrial and submarine 980nm pump, and Raman markets. But we believe the Company could have difficulty gaining DoJ clearance. Our consolidated estimates are $641/0.14 (FY) and $3.5/0.70 for FY:01. Given strong market fundamentals and the Company's position, we believe upside is likely. We rate JDSU shares BUY, but believe SDLI shares offer a better risk/reward tradeoff. |
