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

To: Dennis J Baltz who wrote (12302)	8/12/2000 12:21:05 AM
From: pat mudge	Read Replies (2) \| Respond to of 24042

I have a question for you. Why do you think JDSU has been so flat the past 5 months? Their sales and profits indicate they should be doing much better. Do yo think the SDLI merger with it's high PE cost could be a factor? JDSU is paying a hefty PE and/or PEG price for SDLI. Could this be what's depressing JDSU from climbing and could the merger's finalization escalate JDSU's PE ratio so much it would cause possible stock price drops down to JDSU's normal PE ratio? I've seen this happen to many other companies in the past. JDSU was weak compared to SDLI long before the merger was announced. For months it was assumed the ETEK acquisition was keeping a lid on price appreciation but when it closed on June 30 and the stock didn't rebound, I began to suspect there was more to the story than met the eye. Then when JDS announced they were merging with SDLI both companies said SDLI's expertise in advanced systems was one of the reasons. We all knew they needed SDL's 980nm pump lasers, but few knew JDS was behind on Raman and AWGs, two technologies needed for the higher channel-count, higher powered 10Gb/s and 40Gb/s systems. If you study the price action around the critical dates, you can see how the two companies differed. Look at the March drop and how SDLI rebounded but JDSU didn't. Then look at June 30 when ETEK closed and SDLI shot up like a rocket and JDSU stayed flat. Finally, look at July 10. JDSU dropped some but as soon as the news was absorbed it began to improve more significantly than it had in months. Take out the S&P bubble for a more accurate picture. If you study the charts, you'll see SDL started to move up in the last part of May based on the GLW rumors. quicken.com Significant dates: JDSU and ETEK merger announced, January 17, 2000: jdsunph.com I believe the extension of SDL's supply agreement with JDSU, May 30, 2000, was also a turning point: San Jose, California and Nepean, Ontario - May 30, 2000-- SDL, Inc. (Nasdaq: SDLI) and JDS Uniphase (Nasdaq: JDSU; TSE: JDU) announced an extension to their contract through 2001 under which SDL supplies grating-stabilized 980 nm pump lasers to JDS Uniphase for JDS Uniphase's high-performance erbium doped fiber amplifiers (EDFAs). The contract extension more than doubles the base quantities which were agreed upon in the previous contract. JDSU-ETEK close merger, June 30, 2000: jdsunph.com JDSU-SDLI merger announcement, July 10, 2000: jdsunph.com You asked what will happen to JDSU's price once the merger is complete. Of course there's no way to know, but since the merger will be accretive from day one, I doubt it will cause the price to decline. Market conditions may, but that's a separate issue. If you really want to understand SDLI, read their latest 10-Q: freeedgar.com <<< Revenue. Total revenue for the quarter ended June 30, 2000 increased 156 percent to $110.5 million compared to $43.2 million in the corresponding 1999 quarter. For the first half of 2000, total revenue increased 126 percent to $182.7 million from $80.8 million reported for the comparable period. The increase in revenue for the second quarter and first half of 2000 was driven by demand for the Company's dense wavelength division multiplexing (DWDM) products. Revenue generated from SDL's DWDM products, including 980nm undersea pump lasers and terrestrial pump modules, lithium niobate light modulators and drivers, light amplifiers, fiber gratings, receiver circuits, optical network monitoring products and arrayed waveguide gratings, increased 242 percent from the prior year quarter. Undersea DWDM revenue is up over 410 percent from that of the prior year quarter. Results of the second quarter include three full months of results from the Queensgate and Veritech acquisitions and four weeks of results from PIRI. Excluding these three acquired businesses, total revenue increased by 31 percent sequentially and by 116 percent over the prior year quarter, and fiber optic communications revenue grew by 36 percent sequentially and by 189 percent over the prior year quarter.. . . Gross Margin. Gross margin increased to 50 percent and 49 percent for the three and six months ended June 30, 2000 from 42 percent and 41 percent in comparable 1999 periods. Excluding non-cash stock compensation charges of $2.8 million, gross margin increased to 53 percent and 51 percent for the three and six months ended June 30, 2000 from 42 percent and 41 percent in comparable 1999 periods. The increase in gross margin was primarily due to the following: (i) a more favorable mix of higher margin DWDM revenue as compared to revenue derived from lower margin industrial laser and satellite communication revenue, (ii) reduction of costs due to increased yields and factory volume, and (iii) strong gross margins from our newly acquired businesses, Veritech and PIRI. These favorable factors were partially offset by higher employee benefit costs and higher warranty provisions on certain industrial laser products. >>>> Pat