Thursday October 25, JDS Uniphase Plunges to Loss
By Ian Karleff
TORONTO (Reuters) - JDS Uniphase Corp. (JDU.TO) (Nasdaq:JDSU - news) reported steep losses in its first-quarter and said it expects sales to drop further as it completes a massive restructuring aimed at helping it survive a telecom industry wracked by huge losses and falling demand.
JDS, a maker of fiber optic components for the industry, said the prolonged industry downturn will see sales in the second-quarter fall a further 10 to 15 percent as customers clear out inventory. A rebound is not expected until at least the end of the second-quarter, and possibly the start of the third, said company executives.
``We are still in a downturn, although the rate of descent has moderated,'' said JDS chief financial officer, Anthony Muller on a conference call with investors.
JDS, which has more than halved its work force to keep pace with sliding demand, said it lost $260 million in the quarter ended Sept. 30, or 20 cents a share, compared with earnings of $177 million, or 18 cents a share, in the year-ago period.
``It looks like they are not losing market share and it's just a question of end-user demand not being there, and that is not a problem they can necessarily solve themselves,'' said Joseph Wolf, an analyst at UBS Warburg.
Customers of JDS such as Cisco Systems (Nasdaq:CSCO - news) and Nortel Networks (NYSE:NT - news) have reported massive losses in recent quarters because of shrinking demand, and have responded by writing off inventory, slashing employees and shuttering facilities.
Including all charges, the company reported a loss of $1.2 billion or 93 cents a share, which compares to losses of $1 billion or $1.07 in the corresponding quarter of 2001.
The first quarter figures follow on from a massive $50.6 billion loss recorded for fiscal 2001, which included the writing down of $38.7 billion in goodwill that had accumulated on its balance sheet following a frenetic pace of acquisitions in the late 1990s.
Revenues in the first quarter more than halved to $329 million from $786 million a year ago, falling below the $350 million in sales required on a quarterly basis for JDS to break even.
Research and development expenses are expected to dip to 15 percent in the next few quarters, from 19 percent in the first-quarter, as the company focuses on projects for top customers like Alcatel.(CGEP.PA)
``Fifteen percent is a fair number for what we are projecting in sales. We can't work for every customer because some of them may not be there, and it costs R&D dollars and we might not see the benefit,'' said JDS chief executive Jozef Straus in an interview with Reuters.
UBS Warburg's Wolf said the company is aligning its research and development projects with more realistic and profitable targets.
``If you look across the portfolio at things that have been shut down, some of them were science projects waiting for applications,'' said Wolf.
JDS said continued weak demand for optical components will see sales in the second-quarter drop a further 10 to 15 percent. Gross profit margins as a percentage of sales will not exceed 34 percent because of low utilization rates for its plants. Losses should range between one and two cents per share, excluding charges, in the second-quarter.
``The sales levels we are seeing now are depressed because of inventory liquidation by our customers. Sales can begin to grow again before inventory liquidation is complete at all of our customers,'' added Muller.
Analysts polled by Thomson Financial/First Call were expecting a loss of 3 cents a share excluding amortization of goodwill, and revenues of $322 million.
JDS said it has reduced its payroll by more than half to 13,000 and closed 17 sites at a total cost to date of about $778 million, including charges of $278 million recorded in the first quarter. JDS expects the total cost of the program to range between $900 million and $950 million.
The company has now stripped $600 million from its annual cost structure, and expects this to swell to $800 million when all restructuring is complete by the end of December.
JDS said continued weak demand for optical components will see sales in the second-quarter drop a further 10 to 15 percent. Gross profit margins as a percentage of sales will not exceed 34 percent because of low utilization rates for its plants. Losses should range between one and two cents per share, excluding charges, in the second-quarter.
Shares of JDS closed up C$1.01 at C$17.11 on the Toronto Stock Exchange on Thursday in a strong market for technology issues.
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Elantec Semiconductor Posts 4th-Quarter Loss
MILPITAS, Calif. (Reuters) - Elantec Semiconductor Inc. (Nasdaq:ELNT - news) on Thursday reported a fiscal fourth-quarter loss as the maker of analog semiconductors suffered from tumbling sales amid a crippling chip slump.
For the quarter ended Sept. 30, Milpitas, California-based Elantec said it had a loss of $7.5 million, or 33 cents a share, compared with net income of $8.09 million, or 33 cents, a year ago. Sales fell 44 percent, to $20.7 million from $36.9 million. Excluding charges of $14.8 million related to writing off excess inventory and assets related to its decision to outsource much of its chip production to a chip-making plant, Elantec said it had a profit of $2.2 million, or 9 cents a share.
The company also said it sees sales in its fiscal first quarter rising 3 percent to 5 percent from the fourth quarter and earnings of 9 cents to 10 cents per share. The sales forecast is in line with those of other chipmakers that have reported quarterly earnings this week, suggesting that a bottom in sales will be reached most likely in the fourth quarter.
Analysts had forecast the company, which makes integrated circuits for the video, optical storage, communication and power management markets, to earn 9 cents to 10 cents a share, with a mean estimate of 9 cents, according to four analysts surveyed by Thomson Financial/First Call.
Separately, Elantec also said it agreed to outsource bipolar wafer development to an undisclosed chip plant to expand its business in that product area.
Elantec did not name the foundry with which it is partnering, calling it only a ``major semiconductor manufacturer,'' but it did say the partner will be Elantec's primary foundry for future bipolar wafer process requirements.
Elantec said the deal will give it future access to leading edge Bipolar, BiCMOS, and possibly other advanced analog process technologies, which are different ways of making semiconductors.
Elantec said it will take a $15.4 million charge to account for the deal with the majority of that expense coming in the fourth quarter and the remainder in the first quarter of 2002.
Most of the charges account for retiring existing bipolar development tools, six-inch wafer fabrication tools, severance costs and obsolete inventory, the company said.
Shares of Elantec rose $1.49 to $35.64 on Nasdaq, before results were released, which came after the markets closed. The shares have plunged about 70 percent from a high of more than $120 reached in November, 2000, as sales began to slow industry-wide and the dot-com bubble burst.
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Thursday October 25, 8:15 pm Eastern Time
UPDATE-2 VeriSign beats operating estimates, posts net loss
(UPDATE: updates with analyst quotes)
By Elinor Mills Abreu
SAN FRANCISCO, Oct 25 (Reuters) - VeriSign Inc. (NasdaqNM:VRSN - news), which provides Web address and security services, on Thursday reported third-quarter operating results that beat expectations, citing strong demand from customers.
Excluding one-time charges, VeriSign posted a pro forma net income of $59.7 million, or 28 cents a share. In the year-earlier quarter the Mountain View, California-based company had net earnings excluding charges of $36 million, or 17 cents a share.
Including one-time charges, the company posted a net loss of $386.7 million, or $1.91 a share, compared to a net loss of $1.3 billion, or $6.78 a share, a year earlier.
Revenues for the quarter ended Sept. 30 were $255.2 million, up 47 percent from $173.1 million a year ago, according to the company, which sells Web addresses, known as domain names, as well as services that enable secure transactions and online payments.
Analysts polled by Thomson Financial/First Call predicted the company would post third-quarter earnings of 16 cents a share, excluding charges.
FOURTH QUARTER GUIDANCE RAISED ONE CENT
The company revised its guidance up for the fourth-quarter, with revenues expected to be between $270 million and $285 million with earnings of 19 cents per share, up one cent from prior estimates, Dane Evan, chief financial officer, said in a conference call with analysts.
Analysts are predicting fourth-quarter earnings of 18 cents per share on revenue of $285.58 million.
For 2002, Evan said the company is comfortable with analyst forecasts of earnings per share of $1.04 and is predicting revenue between $1.35 billion and $1.45 billion.
The estimates do not include results that will come from Illuminet Holdings, the provider of network connectivity and services to telecommunications carriers that VeriSign is acquiring, Evan said.
The attacks of Sept. 11 impacted third-quarter revenues by $5 million to $7 million, said Chief Executive Stratton Sclavos.
The company ended the quarter with cash and investments totaling $1.2 billion.
``It says a lot that this company was able to put up double-digit sequential revenue growth not only in the weakest quarter from a seasonal perspective, but also during one of the worst bear markets we've seen in a long time,'' said Stephen Sigmond of Dain Rauscher Wessels.
VeriSign's operating margin for the quarter of 17.1 percent beat the 15.5 percent Sigmond had expected, indicating the company is benefiting from its utility model, he said.
``There's a lot of recurring revenue and their costs are fixed, so what that means is as they're able to sell services to existing and new customers, additional revenue shows up as operating income,'' Sigmond said.
GROWTH ACROSS THE BOARD
``We saw substantial increases in revenue per customer across all the product lines,'' Sclavos said.
VeriSign's public key infrastructure unit, which sells authentication and encryption services for e-commerce, did particularly well, the company said in a statement. New customers included big players in the energy, insurance, healthcare and manufacturing sectors, the company said.
Despite the emergence of new domain names .biz and .info, the company continued to see demand for the .com and .net domains, said Sclavos.
About 2.6 million new domain names were added in the quarter, bringing the total of names in its database to more than 32 million, he said.
Also during the quarter, the company restructured its consulting business, acquiring Exault, a network security and consulting firm based in Chicago.
Shares of VeriSign closed the day up 7.87 percent, or $3.89, to $53.34. They fell in after hours trading to $48.32, after the earnings announcement and a separate announcement that the company filed to periodically sell up to $750 million worth of common stock. |
