JDS Uniphase Q4 CC, July 26, 2000
[if anyone sees errors, please correct]
Revenue growth, 33% sequential, 173% y/y, not including ETEK. Demand for products is strong; rate of growth dependent on how fast we can meet ramp.
Module sales were up 22% seq, and represented 27% of sales; communication products were up 28% sequentially.
Sales to LU represented 20%, up 26% sequentially; sales to NT rep 15%, up 25% sequentially.
Sales to others grew at similar or higher rates
Gross margins were 50.3% for Q, and 59% for year.
7.7% R&D for Q
SGA 11.3% vs. 12.4 in Q3
Op marg 31.3% above 33% guidance
Op profit up 34%
34% tax rate
.14 EPS, pro forma
headcount 18,000 including ETEK
88M in cash flow for Q
Capital spending $128 million in Q
54 days accts rec., not etek
4X turns, from 56 to 59 (?)
ETEK results:
123M up 36%seq 139 y/y
ETEK 346M full year. Up 101%
ALA largest at 36%, NT 13%
Sales accelerated
Gross margins were 49.7% for year (didn’t get number for Q)
R&D 9.1% vs. 9.4%
DSO 53 vs 55 for Q, inv. turns flat at 3.3
Josef –
How to help customers. Will reflect on last 12 mos. Then talk about future of Indus. And co.
As bandwidth needs increase our customers ask for assistance.
Phase I --- combine actives and passives --- jds and uniphase.
Phase II – higher level of integration of products.
Phase III --- to expand manufacturing. Will increase 4X over 12 to 18 mos.
Phase IV --- merge with NT, ALA or GLW, depending on who offers the best package, and appoint Joel Klein as head of transition team [just kidding. . . checking to see if anyone reads these things :))]
On product portfolio, we completed OCLI merger. Enhanced products through acquisitions. More recently we completed merger with ETEK. They had a great year. Great expectations. These acquisitions address Phases I and II. Always looking for new technologies and companies.
10 and 40 gig products had great quarter.
2.2gig modulators demonstrate strong growth. Increasing 10 gig. Capabilities.
Epitaxx increasing 10 gig production. Outsourced some.
Design win for amplifier for high-speed. In 1480 chips began testing 300mW. Evaluating Raman applications. Cronos exhibited growth – at customer for evaluation. We are optimistic.
Orders for module products were strong. Amplifiers had designs to customer specs. Gain equilizer developed.
Will execute Phase IV, and report as appropriate.
Bandwidth demand will continue unabated. Higher systems are a priority. Proposed merger with SDLI will allow advanced level products. Bring these products to JDSU. Identified product bottlenecks. Many complementary technologies. We can speed introduction of products.
ETEK -- growth every quarter. 100% y/y growth.. btob over 2. Backlog at all-time high. Customer base expanded. Qualified in Taiwan for couplers and isolators. In process for DWDM . 333,000 sq. ft. xpanded facility should be ready in Jan. Using 80,000 sq. ft. temporary facility. 600 employees in China, being trained for DWDM devices. Doubled capacity and expect to double again in 2001. New product pipeline is strong. New prods over 20% of rev for Q. New customers gaining – Sycamore, Corvis, LuxN, ONI, etc.
Jay:
4X plan --- to increase unit output over 18 mo period. And reduce unit costs.
Announced outsourcing agreement with Celistica.
Four principles of integration:
How does it strengthen customer satisfaction ---
4X capacity
Reduce new product time-to-market
What keeps people motivated
26 days into integration with ETEK. Very pleased. Integrate sales at outset. 77 targeted initiatives under way across all areas of both companies.
Working on approval on merger. We ask that there be no questions on filings.
Guidance 15% seq. in sales. B/c of strength of business we feel we can increase to high teens. 90% sales growth y/y. 1.77B combined sales estimate. Will spend over 700M in cap. 931m in backlog. Margin remains unchanged at 50 to 51%. Tax 34%.
Q&A:
Q: Customer response to SDL proposed merger? GM question, what is decrease in GMs and impact on future?
A: Continue to engage with customers. Several customers are very excited. Gross margins across 20 divisions --- a lot of moving parts. Had favorable surprises in 3Q, and 4Q was more normalized.
Q: Size of eliminations at ETEK. And what impact from ETEK?
A: OEM with ETEK was under 10M. All eliminations are assumed in that number.
Q: Guidance on filters, 100 and 200 ghz. And rollout of 50 gigahertz?
A: Begun to see importance of 100 ghz volumes. Increase in demand in Ottawa and at ETEK. 200 ghz is still major item it terms of shipments. 50ghz, we are getting inquiries. No major shipments. With interleavers 100 ghz can perform at 50 ghz. We are doing development around 50 ghz using AWGs, as well.
Q: Any area growing faster than others?
A: All areas are growing fast.
Q: Impact of OCLI supply arrangement? Demand by end segments, undersea, long haul, metro?
A: JDS contributions to ETEK were less than 10M. On 100 and 200 ghz, we can build more product b/c of packaging. Interleaver can maximize output. (?) We can do 200, 100 and even 50 with hybrid designs.
Undersea ALA is largest customer. Longhaul, good growth, Corvis and Sycamore, LuxN, Zaffir, etc. A lot of new products. Design wins in new products. Combiner, interleaver, switch (didn’t catch all).
Q: Upside is it due to DWDM?
A: Yes, and more going forward. Mostly better manufacturing.
Q: On the passives, you plan to accelerate --- capital spending. Can you meet demand? Will 2X expansion be adequate?
A: 2X capacity expansion in 01 is not sufficient. That’s why we have a 4X plan. Capacity expansion is very very aggressive. Combined with productivity increases b/c of automation, we’re confident we’ll keep up with demand. Calls for global planning around DWDM capacity. That’s why we’re integrating ETEK and what’s in Ottawa. Removing capacity bottlenecks at OCLI, Santa Rosa, and Scotland. Plus productivity increases, we’ll keep up with demand. As for 40 gigs, we see design wins and believe they’re going into labs, and in 12 to 18 months will see first deployments.
Q: Competitive landscape?
A: Increased ability to provide products. Customers want to unlock value re: inside capabilities. LU ME has been providing a large percentage to some customers. NT, the same. We welcome this activity b/c it will provide support to customers and make industry grow faster. Capital budget is devoted to capacity expansion. Some for integration activities. Also automations and cost reductions.
Q: Internal growth rate, not counting ETEK?
A: 25%
Q: JDSU’s tunable lasers?
A: In lab in Holland. Several different approaches. Not deployed in next 12 mos. It’s R&D now. Will see in next 24 mos.
Q: LU sales figures? Was it networking or micro group? As you expand 4X can you talk about how you manage supply chain.
A: LU majority is around optical amplifiers. Single biggest part of LU business. Growing rapidly. As for supply chain, managing actively and aggressively. We have occasional bottlenecks. We have supply chain council across our businesses, we’ve largely gotten ahead of it.
Q: outsourcing partners. . .how quickly coming up to speed? Customer management vs. smaller accounts?
A: We have consummated Celistica around their traditional Mfg. Board-level mfg, box-level compentencies. Not at component tech level. Nor do we see them getting there in immediate future. Because tech there is sophisticated. Demand from customers. . . we serve them all, when in supply constraint situation, we spread whatever pain we have to spread in an equal basis across customer base.
Q: Furukawa shares? What’s view of tunable lasers?
A: They own about 128 or 129M shares. They’re considered an affiliate but are not insiders. They’re free to sell. Don’t know their plans. No reason to believe they’re selling. Don’t know of this now. Tunable filters, in all-optical networks it’s important to have ability to switch wavelengths around. Can do this with tunable filters. We have products in our portfolio and will strengthen this as time goes on. Just announced diamament gain (?) equalizer and is state-of-art and is being well received.
Q: Next year’s number.
A: 1.77B at 90% revenues. [Is that growth?]
Q: % JDS to ALA and ETEK to LU? [this must refer to passives, otherwise numbers don’t jive]
A: Both below 10% thresholds. Many automation programs are in passives. A lot underway in fiber assembly, in grid lense assembly, in positioning filters inside components in DWDM passives. Not as much in actives. Approximately ¼ way into it. Will increase four levels of automation in passives part of company.
Re customers, Josef, all I want are 15 10%-ers. We’ll be approaching several of those going forward.
Replay after 5:30 to midnight July 30
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