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

To: Glenn McDougall who wrote (943)	9/3/1999 1:41:00 PM
From: Chris Stovin	Respond to of 24042

Swiped this from Individual Investor via a Raging Bull post... UPDATE: Meet JDS Uniphase, the Anti-Elizabeth Taylor TODAY I. I. A N A L Y S I S UPDATE: Meet JDS Uniphase, the Anti-Elizabeth Taylor By Chris Bulkey (9/3/99) In early July, Uniphase completed its merger with JDS Fitel and changed its name to JDS Uniphase (NASDAQ: JDSU - Quotes, News, Boards). But unlike Elizabeth Taylor, who has been married eight times, we think JDS Uniphase will enjoy a long union. In fact, we think the combined company's outlook is stronger than ever and continue to recommend the stock as a core holding. Like this Article? Despite a lofty valuation, we recommended shares of Uniphase in April. At that time the shares were trading at around $57 (adjusted for a 2-for-1 split). They subsequently surged to $120.88 before backing off to a recent $107.06. The combination creates an optoelectronic powerhouse with unmatched product breadth. Uniphase's dominant market position in active components (i.e. those that generate and power light requiring an electrical input, such as lasers and transmitters) and JDS Fitel's market leading position in passive components (i.e. those that manipulate and direct signals and do not require an electrical input, such as switches and isolators) provides original equipment manufacturers (OEMs) with a one-stop shop. Management has said there is almost no product overlap and significant customer overlap, which offers significant cross-selling opportunities. The market for Dense Wave Division Multiplexing (DWDM) has huge growth potential due to the explosion of data traffic, which has pushed many service providers to near 100% capacity utilization across their networks. To increase carrying capacity, carriers essentially have three options: lay new cable, increase bandwidth by increasing the speed of transmission using Time Division Multiplexing (TDM) technology, or increase bandwidth using DWDM. Laying new fiber is not cost effective in most areas, while TDM does not fully utilize the intrinsic capacity of fiber compared to DWDM, making the economics of moving beyond OC-192 unattractive compared to the bandwidth potential of DWDM technology. Therefore the optimal solution is to combine the appropriate TDM system with a DWDM system. At a recent analyst meeting, JDS Uniphase management noted that Ryan, Hankin Kent (RHK), a market research firm, increased its forecast for the optical component market. RHK raised its 1999 forecast to $5.5 billion from $4 billion and sees the market expanding to $21.3 billion by 2003, for a compounded annual growth rate (CAGR) of 40.3%. As the industry moves to higher speed transmission (from OC-48 to OC-192 and possibly to OC-768) system complexity will increase, which will require more and more components, a particularly favorable trend for JDS Uniphase. Growth in DWDM has come primarily from long-haul terrestrial deployments over the past few years, but there are other areas that are set to explode. The submarine market is beginning to develop rapidly with the potential for up to $30 billion in investment over the next five years. JDS Uniphase, as the dominant submarine qualified supplier of components is nicely positioned. The long-haul terrestrial market refers to networks across a region via land-based applications. Conversely, submarine deployment represents fiber optic cable that goes under water and connects different countries, such as the TPC-5, which connects the U.S. with Japan. The Cable TV market (CATV) is another area of DWDM deployment that is still somewhat nascent, but will ramp-up as providers deploy more fiber into their networks. As cable providers introduce digital services such as Internet access and high definition TV, bandwidth will become a critical issue. Frost & Sullivan estimates that the market for interactive television products in Canada and The U.S. will total $5 billion by 2006 and the number of users will increase by a CAGR of 37% over the next seven years to 20 million. In addition, cable modems are expected to continue to gain momentum. Cahners In-Stat Group projects that the ADSL market is poised to take off over the next few years. The key point is that digital services will continue to strain the capacity in fiber optic networks and continue to drive the demand for DWDM systems. AT & T (NYSE: T - Quotes, News, Boards) is expected to give a big boost to DWDM deployment later this year and into 2000 now that the TCI deal has closed and the company begins to upgrade its cable infrastructure. Giving credence of the inevitable move of fiber deeper into the networks is two recent acquisitions by Cisco Systems (NASDAQ: CSCO - Quotes, News, Boards). Cisco paid steep multiples to acquire two privately held optical networking startups, which shows the importance that this area will have on next-generation voice/data systems. Thus far the integration of the merger is going well. JDS Uniphase's fourth quarter Pro Forma earnings came in at $0.48 per share, which was ahead of previous guidance. The combined company maintains a strong balance sheet with over $800 million in cash (including proceeds from the recent secondary), no debt and good cash flow. This puts the optical component powerhouse in position to continue to expand capacity without increasing financial risk. Management gave guidance for continued 15% sequential and 60% annual revenue growth and stated that margins should remain at 1999 levels. That should put fiscal 2000 revenue in the range of $941 million and earnings around $1.10 per share to $1.12 per share (after adding in the newly created shares for the secondary, adjusting for the 2-for-1 split and using a 35% tax rate). Beyond 2000, the consensus is fairly tightly grouped at $1.55 per share, which could be exceeded if management is able to extract synergies and boost operating margin beyond previous guidance. Given the highly touted reputation of the management team, this is almost a certainty. Bottom Line: There is risk due to the high multiple and the rapid addition of capacity. If the company fails to meet any quarterly expectations, as capacity ramps, the stock would get hit. The CEOs of both companies (now acting as co-CEO's), however, have proven track records of sound execution. We see the shares of JDS Uniphase hitting $150 over the next 12-18 months and continue to recommend purchase. Tell us what you think in JDSU's Board

To: Glenn McDougall who wrote (943)	9/3/1999 2:11:00 PM
From: Beltropolis Boy	Read Replies (1) \| Respond to of 24042

>JDSU news...KK will be on Power-Lunch today. a slew of informative posts today -- thank you, boys (and girls). fwiw, here's the transcript of KK's appearance (including a link to the audio if you prefer). mktnews.nasdaq.com\\www\nasdaq\news\msnbc\1999\9\3\NASDAQ_1310_24567.htm&usymbol=JDSU&logo=True&companyname=JDS+Uniphase+Corporation ----- CNBC - POWER LUNCH INTERVIEW WITH JDS UNIPHASE CHAIRMAN AND CEO KEVIN KALKHOVEN SEPTEMBER 3, 1999 SUMMARY: Kalkhoven comments on the currently strong demand for bandwidth. Kalkhoven says the company is highly profitable. Bill: Shares of JDS Uniphase on the move again today. The stock is up over six dollars. There are analyst recommendations all over the place. The latest in a string of buy recommendations from Wall Street over the past few weeks, which have helped push this stock into the stratosphere. Today it is up five and change at 112. JDS Uniphase is the leader in fiber optic technology equipment maker. A white-hot growth area as demand for larger bandwidth has made fiber optic the primary choice for phone networks. Here to talk about his industry and the outlook going forward is Kevin Kalkhoven, Chairman and CEO of JDS Uniphase, joining us from Stanford, California. Merged last June, what was it, closed the deal? Yes. Bill: You made it work apparently. Everybody loves this company. That is nice to know. Bill: The one problem, you can't keep up demand right now? Yeah, everyone is asking me the risk of the company and my answer is the same, manufacture, volume. The company has had, as a joint entity, a three year historic growth record of 66% and now we're heading toward a billion dollar company, 66% is a lot of growth that we have to do in terms of actual manufacturing capacity, in the like turning out floppies. Clearly, something we have a lot of attention on, I mean just a huge amount of attention and it is an issue that both Joseph Strauss, the President and coo and myself are committed to solving. Bill: How are you planning to solve that? I mean, do you ramp up production and risk over doing it at some point, or you just try and get along as best you can while you are in this phase. Let me ask you, how long do you expect this kind of white-hot demand to continue? Well, let me answer the first question. The way in which you increase capacity is really twofold. One you have to build more conventional manufacturing capacity. Then on the other side, simultaneously, you have to be working on breakthroughs in automation and technology and frankly, the company is doing both in parallel at this moment. In terms of demand, how long is demand for bandwidth going to go on. There is a historical perspective of that computer mips. Years ago as a computer programmer, the thought of a mip was enormous. Today, everybody has one or two or five or ten. That keeps growing. Connect them together and the demand for bandwidth keeps growing and that is our business. Bill: How long before we are all enjoying the benefits of a cable modem and broadband technology and so forth? I think it you look at industry forecasts, they are saying the breakthroughs in supplying more speed to the end consumer, you and I as opposed to inter computer linkage, is really, I think going to start next year. We're going to see the advent of a lot of cable modems, the advent of a competitive technology from the DSL. All of these, as they grow and provide, you know, maybe as much as ten, twenty, fifty times as much bandwidth to us as consumers is going to place an enormous back log on the backbones, which will have to be gone through again. It is a continual cycle as we provide more capacity to the end consumer, we're again there to have to back up and provide capacity to the trunk lines. Bill: No profits yet, when do you expect that to happen? The company is highly profitable. What we have done though, in the acquisition we have a large amount of goodwill, which is purely paper notional amount. In terms of actually operating profits, we make a very significant amount of profits. I think we are running somewhere around 28, 29%. Bill: What does it show up on the bottom line? I think if you look at analyst numbers, they are already disregarding the goodwill and just looking at operating profits and to maintain 60% plus growth rates and 25 to 30% pretax profits. In reality, and the consequential cash that goes with it is a good performance. Bill: It certainly is. Thank you for joining us. Thank you. Bill: Kevin Kalkhoven, Chairman and CEO of JDS Uniphase. Look at a one-year stock chart of the company, up another 5 13/16 today at 112 7/8.