Friday March 9 2:43 PM ET
JDS to Continue Acquisition Drive
By Susan Taylor
OTTAWA (Reuters) - Undaunted by slumping sales and a crumbling share price, JDS Uniphase Corp. (Toronto:JDU.TO - news), the world's No. 1 supplier of fiber-optic components for telecom networks, said on Friday it will continue to acquire and invest in companies to fuel growth.
In a deal that underscored that strategy, it was announced on Friday that JDS will buy a 5.1 percent stake in Finland's Okmetic (OKM1V.HE) for about $8.4 million in cash. JDS has also struck a long-term contract to buy Okmetic silicon wafers.
``I'm very proud of both (types of) growth: from (an) organic point of view and acquisitions,'' said JDS chief executive Jozef Straus at a Robertson Stephens investment conference in Ottawa.
``Both activities, I want to go on record, will continue, despite what the market states with respect to the pricing of our shares.''
JDS stock tumbled about 5 percent on Friday after a warning of weak sales from computer chip giant Intel Corp. (NasdaqNM:INTC - news) sent a chill through the markets and a key U.S. jobs report dampened hopes for aggressive Federal Reserve (news - web sites) interest-rate cuts.
A demand slowdown resulting from the weakening U.S. economy has pulled JDS shares down 80 percent from their 52-week high.
At mid afternoon on Friday, JDS shares were at C$41.80 on the Toronto Stock Exchange, down C$2.20. On Nasdaq, they were at $26-1/2, down $1-5/8.
That's a far cry from market conditions in 2000, which drove stocks of fiber-optic suppliers to lofty heights as JDS and others struggled to keep pace with blistering demand.
Supported by its high-flying stock, JDS has spent at least $21.5 billion on 10 major takeovers since September 1999.
But as the air has been squeezed out of their stock valuations, many companies have clamped down on acquisitions.
Nortel Networks Corp. (NYSE:NT - news), the world's No. 1 supplier of fiber-optic equipment, had set a target of spending 10 percent of its market capitalization on acquisitions each year. The company, whose stock has tumbled 78 percent from its year high, said in November that it would shelve purchase plans until the market stabilized.
``Acquisitions are like breathing -- you've got to continue breathing, you don't hold back your breath,'' Straus told the media after his keynote speech on Friday.
``It's just a strategic point: acquisitions allowed us to build the company from (a) product level, so if the market allows us, the investors allow us, and there's the right currency, then we will continue to do (acquisitions).''
Given the slowdown for telecommunication equipment vendors, which are JDS' largest customers, the timing of a recovery is far from certain.
UBS Warburg analyst Nikos Theodosopoulos cut his growth forecast for global telecom equipment sales for 2001 to 9 percent this week from a recent forecast of 10-15 percent. He said it may not be until 2003 that growth rates return to the 15-25 percent range that was recorded between 1993 and 2002.
``Clearly the business environment in softer now,'' Robertson Stephens analyst Arun Veerappan told Reuters.
``March is going to be a horrible quarter, it's going to be down sequentially pretty significantly. I think June will be probably equal to or slightly down from March and then September will probably be equal to or slightly higher than June.''
JDS cut its third- and fourth-quarter earnings estimates this week, the second such reduction in a month, and withdrew its earlier forecast of 2002 sales of $6 billion, citing uncertain customer demand. |
