what you make of this, bo/greg?Analysts See JDS Buying Lucent Fiber Optic Unit
By Ian Karleff
TORONTO (Reuters) - Shares of JDS Uniphase Corp (Toronto:JDU.TO - news) (NasdaqNM:JDSU - news) fell in after hours trading on Monday after the company said it would announce key developments early Tuesday, which analysts speculated would involve the purchase of Lucent Technologies Inc.'s (NYSE:LU - news) fiber-optic cable unit.
Lucent, which is struggling with losses and heavy debt, said in March it was considering the sale of its Atlanta-based fiber-optic cable unit, which analysts said could be worth as much as $4 billion to $8 billion.
Investors speculated that Ottawa-based JDS will discuss an acquisition when it holds a conference call on Tuesday morning at 8:00 a.m. EDT (1200 GMT), rather than anything concerning third-quarter earnings, expected after the markets close on Thursday.
``It's either a significant acquisition or some sort of management change,'' said Charles Wilhoit, an analyst at J.P. Morgan. ``Given that they have their earnings conference call on Thursday I don't think its earnings related.''
Bids for the Lucent unit were due this week, a source close to the situation told Reuters. France's Alcatel (CGEP.PA), Italy's Pirelli SpA (PIRI.MI), Corning Inc. (NYSE:GLW - news) of the United States and Japan's Furukawa Electric Co. Ltd. (5801.T), as well as JDS, are potential bidders, the source said.
Driving the sale is a requirement under Lucent's new credit agreements that it raise $2.5 billion in nonoperating cash by the end of its fiscal year in September, analysts said.
``JDS certainly couldn't be ruled out as a potential buyer for (Lucent's) fiber-cable business only because if they did acquire it, it would bring them one step closer to having a more similar business model to Corning, where Corning has both a fiber-cable business and an optical components business,'' said ING Barings analyst Tom Lauria.
Shares of JDS fell 6.5 percent or $1.58 to $22.60 in after hours trading on the Instinet trading network, following a 15 percent drop in regular trading that saw the shares close down $4.35 at $24.18 on Nasdaq. On the Toronto Stock Exchange, the shares were down C$6.40 at C$39.30 in a broad-based selloff.
``There are a number of different possibilities, so people are speculating wildly,'' said another analyst, adding that Lucent reports earnings before the markets open on Tuesday, which would make for a good forum to discuss a divestiture.
Meanwhile, analysts told Reuters on Monday that JDS is likely to sharply cut its annual spending budget to $550 million from $750 million. The aggressive spending program was intended to boost manufacturing capacity by four times every 18 months. |
