JDS Uniphase & Nortel & Lucent (keep away)

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08.03.01 12:46

20520 Postings, 7445 Tage Stox DudeJDS Uniphase & Nortel & Lucent (keep away)

The fiber optic sky is still falling -- at least short-term. Optical networking components maker JDS Uniphase reduced Q3 estimates again, this time to $0.14, and said that its Q4 would be flat to slightly higher than last year's. The world belongs to fiber and bandwidth, but someone has to pay for it. The deep pockets are empty right now.

To put that quote another way, if JDS Uniphase's (Nasdaq: JDSU) CEO Jozef Straus were to paraphrase Jane Austen: "It is a truth universally acknowledged that sellers need buyers." JDS Uniphase, the former, announced today that it has fewer of the latter.

In a filing with the SEC, the world's number-one fiber optic components maker reduced earnings guidance yet again -- for the third time in the new year, and the second time in three weeks. Shares dropped as much as 13% in after hours last night, after yesterday's $28 close, but were mixed this morning.              .

Some portfolios projected Q3 EPS of $0.14, a 27% increase over last year's $0.11, but below the previously forecast $0.17. The ceiling has been dropping since Jan. 25, when the company announced Q2 estimates that beat the Street but dropped sequential growth forecasts to 7% to 10% per quarter, down from a hot 15% to 20%.

Three weeks later, JDS Uniphase lowered Q3 revenue guidance to $1 billion and EPS to $0.17, from $0.21. The company then announced 3,000 layoffs on the passive components business side, though it said it would be hiring for its faster-growing active components business. Yesterday's further retreat also brought lower Q3 revenue guidance of $925 million and the statement that the company could provide no guidance for 2002. Uncle!

Analysts at both Lehman Brothers and ABN Amro -- to name a few -- downgraded JDS Uniphase this morning. Lehman Brothers cut FY 2001 EPS estimates to $0.65 from $0.72, and FY 2002 estimates to $0.55 from $0.74. ABN Amro cut its 2001 estimate to $0.63 from $0.70, and 2002 to $0.62 from $0.82. Check it out: Both project earnings declines from 2001 to 2002.

Who's buying fiber?
JDS Uniphase makes fiber optic networking components and subsystems that include such non-household names as tunable source lasers, L-band amplifiers, and Raman lasers, that are built in to systems and bought by companies constructing long haul, metro area, and "last mile" -- fiber to the business or home -- networks. Some call these networks the "fat pipe," high-speed networks that allow the stuffing of huge amounts of data through the medium. This is done primarily thanks to dense wave division multiplexing, or DWDM, an advance that allows digital information to be split into many colors that each travel through the fiber optic (glass) conduit, currently requiring electrical action at various pumps to keep going.

The fiber optic food chain looks like this: The biggest customers for fiber optic systems have been telecoms such as Verizon (NYSE: VZ) and AT&T (NYSE: T) that are upgrading their networks to provide high speed data capability. (AT&T also purchases equipment from Harmonic (Nasdaq: HLIT) to bolster its cable networks.) They buy their systems from vendors, including Ciena (Nasdaq: CIEN), Corvis (Nasdaq: CORV), Lucent Technologies (NYSE: LU) and Nortel Networks (NYSE: NT), which put components together into systems. JDS Uniphase, Corning (NYSE: GLW) and Lucent compete for advantage by trying to have their components and subsystems designed in to the systems. To do so, the components makers compete to have the broadest product lines at the lowest prices.

The sector is waning when?
It's no news that the telecom sector is bloody, beaten up, and nearly bankrupt, as traditional long-distance revenues curl up and die. George Runkle recently reviewed the ugly mess. AT&T's debt levels are driving a sell-off of its businesses, and Europe's telecoms are struggling either to pay for spectrum purchase for high-speed third generation (3G) wireless networks or to figure out how to do it.

Catching the fear, U.S. telecoms wonder how they will pay when the government figures out when and how to auction off U.S. 3G spectrum. In the long run, it may be true that 5, 10, or 15 years from now everything in the world will be connected by high-speed data networks enabled by fiber, but telecom spending waxes and wanes. It's waning -- oh, is it waning -- now.

And JDS Uniphase's two biggest customers are Nortel and Lucent, both of which have steadily cut estimates. Lucent's increasing tympani of management and accounting missteps deafen.


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