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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: StockHawk who wrote (37205)	1/1/2001 4:55:27 PM
From: Judith Williams	Respond to of 54805

Stock-- Glad you found the JDSU report useful. I apologize for being so tardy in responding but the telephone system on Beacon Hill greeted the New Year by taking a two-day holiday. Your statement that "any misstep [will be] harshly punished by customers" may apply more to competitors than to JDSU. That, of course, is a major G&K advantage.... Without doubt. But the competitive landscape is still fluid. Avanex is coming on strong with the PowerMux modules, and we can anticipate further consolidation and/or partnering arrangements. JDSU's ability to capitalize on this "major G&K advantage" depends on its continued ability to deliver--both on the technological front, offering its customers more "complete" solutions in packaging, and in terms of manufacturing capacity. There is nothing to indicate that JDSU is not completely focused on both fronts. So far JDSU's management has executed almost flawlessly, but it must still face the enormous task of integrating its many acquisitions and there could be unforseen bumps in the road. with the SDLI acquisition getting closer and with JDSU getting close to 75% off its high, it's beginning to look more and more interesting The SDLI acquisition is almost a petrie dish for JDSU strategy. While the announced merger and the FUD concerning NG buildout sent the stock price into a tailspin, the move was tactically brilliant. For JDSU to maintain its lead in packaging, it needed SDLI's pumps--particularly the efficient, cheap and fast Raman pumps. The move was also a preemptive strike against GLW, effectively hampering its entry into the "package" market as GLW remains weak in actives without the SDLI product portfolio and with no substitute on the horizon. fleshing out those market share numbers, where available, will be valuable After the next round of quarterly conference calls, I will try to post a breakdown. Things should be a little clearer then, particularly on concessions required for the SDLI merger. It will be interesting to see whether JDSU must divest its Zurich 980 pump factory and, if so, who buys it. This quarter's results should point to where the slowdown is occurring and with which customers and where demand remains strong. All indications so far suggest continued strength in DWDM active components and modules (which have maintained high profit margins while passives have experienced some price erosion) with Sonet players suffering the most damage. It will be revealing to see if those projections play out. I will also be looking for some guidance on any progress toward optical integrated circuits (OICs) and the arrayed waveguide modules as well as where the NG systems providers like Sycamore are spending their dollars. Epoch Partners recently published a note on the SDLI merger. Key points were: JDSU Q1 '01: passive components--60% of sales; active, 29% Assuming SDLI acquisition, actives grow to 39% of sales. Total sales: projected to increase from $2.8b in calendar 2000 to $4.8b, more than double Epoch's estimate of GLW's photonics sales in 2001 ($1.9b) and also more than twice JDSU's other competitors' share ($1.8b combined from Alliance Fiber Optic Products, Bookham, Finisar, Luminent, New Focus, Oplink, OCPI, Stratos Lightwave). Part of JDSU's profitability growth is in the profit margins, not just top-line revenues: JDSU has gross margins of 51.0%, for example, while GLW's is 42.8%. Happy New Year! --Judith