JDS UNIPHASE'S WHITE-HOT Q1
The optical networking component maker's fiscal Q1 earnings came
in looking strong. Will they be enough to reverse this week's
mass sell-off in the sector?
By Dave Marino-Nachison
An upbeat fiscal first-quarter earnings report from fiber optic
components leader JDS Uniphase (Nasdaq: JSDU) following last
night's bell perked up investors in after-hours trading, pumping
the stock 12%, after a 25% plummet on Wednesday. JDSU and other
fiber optics companies, such as Sycamore Networks (Nasdaq: SCMR)
and Ciena (Nasdaq: CIEN), have been capsized by the wake of
Nortel's (NYSE: NT) earnings report from earlier in the week.
(Nortel is a major customer of JDSU.)
Nortel's optical networking division didn't grow as quickly as
some analysts hoped, which compounded another recent
disappointment from Lucent (NYSE: LU). But Rule Maker JDSU's
results sparkled: Revenues rose 171% year-over-year and, at $785
million, overcame the projections of market watchers. Pro forma
net income rose 29% to $0.18 per share, beating Street forecasts
by two pennies.
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Now JDSU expects to earn $0.80 per share -- a dime better than
expected -- for the fiscal year, CFO Tony Muller reportedly said
on a conference call. He also pointed investors toward top-line
growth of between 115% and 120%. "Optical demand is good and
healthy," a Robertson Stephens analyst told Bloomberg.
"We believe demand remains strong,'' COO Charles Abbe was quoted
as saying. He maintains the company isn't seeing the inventory
channel grow fat at the expense of future sales: "We can't find
any meaningful evidence of an industry slowdown.'' Look for Q2
pro forma earnings of $0.19 or $0.20 per share, execs said,
compared with $0.17 as projected by Wall Street.
While short-term market movements are of little interest to
Fools, today's trading should prove interesting as investors
work to make sense of the recent rash of seemingly conflicting
indications. While some might say the fiber optic sector was
merely due for a "correction" of sorts, of greater importance
are clues about the sort of demand that lies ahead to justify or
confound even today's damaged -- but still extremely high --
valuations.
Demand for the components that speed data transmissions and
fatten networks to meet skyrocketing bandwidth needs isn't
expected to slow significantly for the next several years. For
more information, check out a column Richard McCaffery wrote
back in July.
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