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To: Greg h2o who wrote (30085)	3/7/2001 10:42:03 AM
From: bob zagorin	Respond to of 42804

Source: Epoch Partners _______________________________________________________________________________ * JDS Uniphase lowered its revenue guidance for its third fiscal (March) quarter to approximately $925 million (flat with the fiscal second quarter) and expects fiscal fourth-quarter revenues and EPS to be sequentially flat to slightly higher, over the revised third quarter figure. * The company cited continued uncertainty in carrier capital spending prospects and customer inventory adjustments, in addition to reduced visibility, as reasons for lowering guidance. * The flat revenue guidance represents a sequential decline for JDS Uniphase’s core business, since we estimate a net positive contribution to revenue from the acquisition of SDL minus our estimates of intracompany sales and revenues from the divested Zurich pump laser facility. * Based on the revised outlook, we are reducing our 3Q01 revenue estimate to $925 million from $1.03 billion, our 4Q01 revenue estimate to $946 million from $1.2 billion. We are also reducing our fiscal-year 2001 revenue estimate to $3.6 billion from $3.9 billion. We now estimate 3Q01 and 4Q01 earnings per share (EPS) at $0.14 each quarter, versus our prior estimates of $0.17 and $0.18, respectively. Our fiscal 2001 EPS estimate is now $0.67 versus our prior estimate of $0.74. _______________________________________________________________________________ Revisions to Model We have taken a cautious stance in revising our model given the uncertainty regarding the timing of a pickup in carrier capital spending. Our model forecasts gross margins to dip slightly below the 50% level in the last two fiscal quarters of 2001 due to inventory corrections and to reach 50% again in the first quarter of fiscal 2002. We also forecast a one-time increase in selling, general, and administrative (SG&A) spending in the fiscal third quarter to account for the increased spending in the merger with SDL. Valuation Based on our revised calendar 2001 revenue estimate of $3.9 billion (versus $5.0 billion previously) and our C2001 EPS estimate of $0.57 (versus $0.72), JDS Uniphase shares trade at 8.6x calendar 2001E revenues and at a calendar 2001E P/E of 49.1x, based on their closing price of $28.00 on Tuesday, March 6. Outlook for JDS Uniphase Shares We think the ongoing issues in the communications equipment industry -- carrier spending concerns, inventory reductions, and lack of visibility -- are already priced in JDS Uniphase shares. We think it is just a matter of time before carriers resume a more aggressive spending posture, and JDS Uniphase remains one of the best-positioned companies to benefit when carrier spending resumes. We recommend investors use any near-term weakness in the stock as an opportunity to accumulate JDS Uniphase shares.