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

To: voop who wrote (1580)	10/31/1999 5:46:00 PM
From: Cosmo Daisey	Respond to of 24042

voop, Good point. Even with competition if JDSU maintains its market share it's business will expand. The F/O business is expected to grow 400 percent in five years so the same percentage of a much bigger pie is what JDSU is expected to capture. cdaisey@big-pie.com

To: voop who wrote (1580)	10/31/1999 8:43:00 PM
From: Glenn McDougall	Read Replies (2) \| Respond to of 24042

<<where are you quoting from? Food for thought... these figures quoted in September 99... The current $5-billion (U.S.) fibre-optics industry is forecast to grow to $21.3 billion within five years. "JDS Uniphase now dominates the optical equipment industry," Savov says. "They are 50% bigger than the rest of their competitors combined.">> 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.