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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: Kent Rattey who wrote (529)	7/8/1999 5:55:00 AM
From: Glenn McDougall	Respond to of 24042

Supply problems for nortel. Message 10420018 Regards Glenn

To: Kent Rattey who wrote (529)	7/8/1999 12:17:00 PM
From: LBstocks	Read Replies (1) \| Respond to of 24042

UNPH: Raising Estimates And Price Target To $215 Salomon Smith Barney Tuesday, July 06, 1999 -------------------------------------------------------------------------------- --SUMMARY:--Uniphase Corporation--Connectors & Other Components Merger complete and new company trading under "JDSU." Raising estimates and price target to $215. Our new estimates for FY2000 and FY2001 are $2.10 and $3.10, up from $1.87 and $2.70. Revenue growth appears to be accelerating beyond the pro forma combination of the two companies. *We expect Uniphase to modestly exceed our fourth-quarter estimate of $0.40 and discuss new opportunities as a combined company on the conference call this quarter. --EARNINGS PER SHARE-------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 06/98 EPS $0.17A $0.20A $0.23A $0.26A $0.85A Previous 06/99 EPS $0.27A $0.27A $0.36A $0.40E $1.33E Current 06/99 EPS $0.27A $0.27A $0.36A $0.40E $1.33E Previous 06/00 EPS $0.38E $0.44E $0.47E $0.58E $1.87E Current 06/00 EPS $0.47E $0.50E $0.54E $0.59E $2.10E Previous 06/01 EPS $N/A $N/A $N/A $N/A $2.70E Current 06/01 EPS $0.69E $0.74E $0.79E $0.87E $3.10E Footnotes: --FUNDAMENTALS-------------------------------------------------------------- Current Rank........:2H Prior:No Change Price (7/2/99)......:$167.87 P/E Ratio 06/99.....:126.2x Target Price..:$215.00 Prior:135.00 P/E Ratio 06/00.....:79.9x Proj.5yr EPS Grth...:40.0% Return on Eqty 98...:16.2% Book Value/Shr(99)..:6.13 LT Debt-to-Capital(a)0% Dividend............:$N/A Revenue (99)........:280.20mil Yield...............:N/A% Shares Outstanding..:42.3mil Convertible.........:No Mkt. Capitalization.:7100.9mil Hedge Clause(s).....: Comments............:(a) Data as of the most recently reported quarter. Comments............: --OPINION:------------------------------------------------------------------ DEAL CLOSED--NEW TICKER IS JDSU--RAISING ESTIMATES AND PRICE TARGET TO $215--REVENUE GROWTH ACCELERATING We expect this to be the last quarter for which Uniphase will report separately from JDS. We are forecasting revenue of the combined company, JDS Uniphase, of $954 million for FY2000 versus $575 million pro forma for FY1999, up nearly 66%. Our new estimates are slightly higher than our original forecast, which was based on a fairly straightforward combination of our two models. Revenue growth appears to be accelerating from the 45% we saw for Uniphase last quarter (excluding acquisitions) to well above 60% for the new company, suggesting that the business is accelerating beyond what the contribution from the higher-growth JDS portion will offer. We believe that the initial ramp up of high-channel count systems and the rapidly moving market, which is not allowing the OEMs to produce enough of their own components, are resulting in even stronger growth and greater visibility. We expect the company to invest at very high levels and not attempt to take any merger effects to the bottom line, but top-line prospects continue to be outstanding. NEW PRICE TARGET--$215 The stock has had an explosive move over the last several months as investors anticipate a combined company with nearly $1 billion in revenues and over $13 billion in market capitalization. JDS Uniphase should have a strong position in anything optical, a technology crucial for today's and tomorrow's telecommunications. The combined company not only has the resources of both Uniphase and JDS Fitel at its disposal, but a high-growth revenue base over which to leverage a continued high level of investment and a high-multiple currency with which to make acquisitions. The current 66 multiple on our new calendar 2000 estimate of $2.54 is about the company's current growth rate. That's a little rich, but given the strong visibility on the market and JDS Uniphase's solid position in it, we believe that the shares will go higher still, retaining this type of multiple on strong growth. Assuming nearly 50% growth in FY2001, we think that in 18 months the stock can go to $250. Our intermediate-term target (12 months) is $215. FOURTH-QUARTER PREVIEW We expect Uniphase to modestly exceed our $0.40 estimate for its fourth fiscal quarter and its last reported one as a stand-alone company. The company plans to report on July 26. Given the strength in Uniphase's markets during the quarter, internal revenue growth should be at least the 53% we are forecasting. OEMs are reporting 2x-3x sonet line-card growth, an indicator for most of Uniphase's businesses, in our view. Our revenue forecast is for a 15% sequential growth to $85.6 million, 64% year over year, or roughly 53% excluding the Philips acquisition. This should translate into $0.40 a share versus $0.29 last year, up 39% on 11% more shares. Although the deal closed after quarter end, we expect the company to refer to its pro forma earnings this quarter, as well as offer details about JDS's results. Combined, we expect JDS Uniphase to grow the top line at least 60% this quarter, excluding the Philips acquisition, and just under 66% in FY2000. We believe that the $0.40 we are forecasting for Uniphase will be more like $0.42 pro forma, up 66%, and that both the actual and proforma estimates will be exceeded. The proforma estimates for the combined company (published below) indicate about 12% accretion from the merger for FY2000. For FY1999, we estimate the deal is 5% accretive.