JDS insiders sold huge
amounts of stock
BY MATT MARSHALL
Mercury News
JDS Uniphase Corp. insiders suddenly began selling massive
amounts of the company's stock beginning in August, according to
Insiderscores.com, a Web site that tracks insider sales.
Insiders, consisting of current corporate officers and former
executives, sold $731 million in JDS Uniphase stock in August,
partly because it was the first month they were allowed to sell stock after a string of acquisitions.
The amount was also by far the most insider selling at any American company for the month of
August -- some three times more than the $230 million in sales at Sun Microsystems, Inc., which was
in second place. However, it was far from the record set this year by Microsoft, when insiders sold
$1.52 billion worth of stock in February.
The sales, which come at a time when the JDS Uniphase is negotiating a merger with SDL Inc., of
San Jose, might normally have raised red warning flags about insider concerns that the merger is
running into trouble. But analysts and company officials point to what they say are a number of other
more plausible reasons for the selling.
First, the company gobbled up 10 companies over the last 12 months alone, which restricted most
insiders from selling their stock during that time. Securities and Exchange Commission rules prohibit
insiders from selling when they know about a pending merger or acquisition, for fear they could
exploit inside knowledge for financial gain. August proved a brief hiatus in that merger activity, said
Alison Reynders, manager of investor relations at JDS Uniphase.
Second, when the company was formed by the merger of JDS Fitel Inc. of Ottawa and Uniphase
Corp. of San Jose, in June 30, 1999, many of the Canadian executives were awarded with large
option packages for the first time. Because of the merger activity, late July and August was the first
time for the Canadians to unload some of their new-found wealth.
For example, among the big-seller insiders tracked by Insiderscores.com were the following: Zita
Cobb, executive vice president of strategy and business development, who sold $76.5 million during
that time; Joseph Ip, senior vice president of product strategy, who sold $80.6 million; and Josef
Straus, the CEO and co-chairman, who sold $163 million but has since said he donated ``a majority''
of the proceeds to charity.
Also selling large amounts of stock were Dan Petitt, former senior vice president, and Kevin
Kalkhoven, former CEO. Kalkhoven, who retired and started a venture capital fund, sold $102.8
million worth of stock.
Finally, says Reynders, the company restricts insiders from selling during the two-month the period
surrounding the announcement of quarterly results, which runs from the final month of the quarter until
three days after quarterly results are reported. This, she says, effectively limits selling to about four
months of the year: February, May, August and November. The SDL transaction was announced in
mid-July, just before the opening of a major selling window, Reynders said. ``The two events are
unrelated,'' she said. ``It was coincidence.''
Analysts agreed that JDS Uniphase executives have seen their paper wealth go up, and that selling is
a sensible way to diversify their holdings and lock in gains. ``At some point, if you haven't already,
you've got to buy a house,'' said Jim Liang, analyst at W.R. Hambrecht + Co. in San Francisco.
Max Schuetz, analyst at Thomas Weisel Partners, says that the company's acquisition spree has
actually lasted two years, during which it has acquired 21 companies. This has effectively locked up
insider sales for most of that time. ``If you annualize the insider sales at JDS, they're the same as any
other company. Its just that there's only a brief window. The SEC rules really hammer you if you're
an officer. You can't manage your wealth.'' |
