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JDS Uniphase Corporation Message Board

  • riverhigh22 riverhigh22 Dec 2, 2007 2:27 AM Flag

    Credit Suisse - Annual Technology Conference

    Preentation was the same old same old, however, the break out Q & A proved interesting.

    The Bad:

    - Fierce competition at the LOW end FO components (too much competition)
    - Price erosion of around 4% per quarter

    The in-between:

    Long term goal of moving the FO components gross margin from the 20-30% range to the 30 -40% range is on track. However, portion of the gross margin improvement relies on revenue growth that is outside the control of JDSU. JDSU long term break even is at $100m in revenues per quarter.

    The Good:

    - It's unlikely the trial had any impact on JDSU this quarter thanks to the lean iniatives started 12 months ago. Instead of 16 - 20 week lead times, its now 4 to 8 weeks. Neither JDSU nor the OEMs (Nortel, ALU, etc.)are holding significant inventories and, a result, are not in position to hold back on manufacturing. As long as the ultiamte customers (telecom carriers/ cable companies) have not slowed down their orders due to recent economic concerns, everything should be on track.

    - Another benefit of the lean iniatives is that closer relationships are now required between the FO Suppliers and OEM's. On the transport side there may be one or, at most, two FO Suppliers on the platform project. The lean iniative programs favor the vertically integrated Finisars and JDSU's of the world who can meet the new tight schedules
    - No mention or indication that jdsu would miss this qurter's projection
    - Re-stated that growth drivers are still in place
    - Re-iterated goal of adding 8 percentage points to the operating margin by Dec 2008. This would put them firmly into GAAP profitability territory
    - Paid down around $200m in debt over the last 9 months.

    IMHO we are still in the cross roads. It is still to be seen if jdsu, and the FO sector in general, can make money.

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    • Long term - as I said before - your presentation of numbers is IMO front and back inside covers of a book - where are your individual chapters -

      You said : nor would they have produced more revenues today than at the top of the bubble.

      But keep in Mind - the TM purchase - all the other new companies - organic growth - vs. growth though purchases -

      FO is only a 112 million dollar per qtr division - where I think you pointed out at it's lowest low was 50million per qtr.

      Sure a 100 percent increase - but FO has trended down now for the past 3 - 4 qtr's -

      In my opinion - you are using way to broad of a brush stroke (s) to paint this rosy picture - which when looked at chapter by chapter - is not a decent balance -

      Sure TM was to help balance the slowdown in other divisions at different times of the year - PLS SHOW ME WHERE THIS HAS HELP - in Terms of Shareholder value - Sure it has help the revenue growth - and margins -

      But when a 30% revenue generating division is causing 100% of the drag on the company - I define this as inept management - and agree with Nal - a blundering bunch of idiots -

    • Could it be we need an outside force - visionary - a BAIN Capital for example to come in - take these companies private and kick out the dead wood - do the much needed consolidation - bring in real leaders - shut down the dead divisions and repackage and present the new IPO's

    • There hasn't been a meaningful acquisition since FNSR bought Infineon...I agree...consolidation would be a Godsend...

      I also agree that the VI model gives JDSU and FNSR a distinct advantage when dealing with the lean manufacturing models and preserving margins. On that note, the strong move by JDSU into the high margin, T/M market segment will also shore up it's GM's. It's tough to be profitable given the competion, new product rollouts, R/D costs, etc etc...

      One thing though in the FO's favor is endmarket demand remains strong...for cable and telcos it's either compete or loose significant market share...all one has to do is watch the TV adds about who has the fastest speeds and most HD channels to get a clue. In addition the globalization of the FO's industry is critical, given the continued infrastructure growth, especially in EMEA, China Japan and India...CSCO is investing another 16B GL :-)

    • River,
      I am far from being an accountant, but can you explain what would have happened to the bottom line if instead of doing what KK did (Paid down around $200m in debt over the last 9 months.), that money would have been applied to the bottom line.
      Seems to me if I pay interest on what my business owes, and take earned cash and apply to bottom line, the business's earnings would go up. I think that's logical but some accounting is arcane. Also I am not suggesting the 200M shouldn't have been used that way, but the question is, could it have been, and then what would the bottom line look like today?
      Thanks for your response. (Those with an agenda here need not reply - you knnow who you are!)

      • 2 Replies to mngordo
      • jdsu were paying down their 0% coupon covertable debt due in 2008. As these were opportunistic buy backs one can assume that they paid lees than the coupon/face value(ie. they paid $95 for a $100 bond, Bond holder takes a hypothetical $5 loss). I doubt if they would go out of their way to buy back the bonds if they could earn more money leaving it in short term investments. There is also the savings in costs related to the redemption of the bonds. IMHO the significance of the reduction of debt was that it was financed out "free cash flow" which is a sign of healty company (they need less cash to run on).

    • Thks River -someone in the FO industry - needs to step up - have some sack and start the consolidation process -

      this industry is full of CEO's who are lacking real vision - leadership - and conviction -


    • RIVER -

      Whit the 4% decline of prices each qtr -

      Long term goal of moving the FO components gross margin from the 20-30% range to the 30 -40% range is on track. However, portion of the gross margin improvement relies on revenue growth that is outside the control of JDSU. JDSU long term break even is at $100m in revenues per quarter.

      Was anything mentioned about cutting expenses - i.e. count -

      Too bad we still can't get KK - to be specific and state exactly what they are doing - how - when - what time - become GAAP Positive - instead of throwing out these very non-committing numbers of break even at 100million per qtr -

      You are correct - same olde same olde - nothing new - tack on a few more 2 - 3 -4 qtr's of no profits

    • I think that Wall Street will bring it down to the 10-11 range once they see a light at the end of the tunnel, and that would be the final drop before a trend changing reversal. If the light at the end of the tunnel is not clearly seen, the price will continue to be range bound and linger where it is for a while. So, even if the coming Earning report meets expectations, the stock can potentially go down to mark the final drop. Now, if JDSU has some rabbits up their sleeves and extremely positive development starts to emerge then the market will re-price it accordingly to the up side. Obviously, growth is not seen yet; however, I think it will sooner or later, and this is when I would possibly buy and hold again.

      • 3 Replies to trade_on_ta
      • Trade_on_ta: I couldn't say it any better --you said in 2 paragraphs what it takes me 4. I am also sidelined--and well aware of that possible final drop to 10-11 before a reversal. That as you say unless they pull a rabbit out of the hat. I though still expect a medioca quarter report, for this quarter--and as timelines go I do not see Gaap+ for 3 or 4 quarters out, which includes this one--unless they trim a whole bunch of something.

      • Also, note that on monthly bases, the stock closed the month higher than it started from June to October; on the other hand November closed lower. Is that a beginning of a trend? No enough data to support it; and at this juncture it could go either way.

    • That is a more optimistic report than I have been expecting. If that turns out to be indicative of the final upshot of this quarter, I will be pleased.

      Initially, I was looking for a more profitable quarter -- but with all that has transpired and the economy shakedown from the sub-prime meltdown, a picture of continued growth if accompanied by profitability would be rather amazing.

      What seems to be a fairly consistent picture in many other companies is growth, but no increased profitability.

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