JDS Uniphase Corp. (JDSU) reported strong financial results for the fourth quarter of fiscal 2012, beating the Zacks Consensus Estimates. The company’s newly launched products accounted for 58% of its total revenue in core network market. Overall, book-to-bill ratio remains greater than 1.0 throughout the quarter.
Despite these positives, we remain concerned regarding the delay in carrier order due to a volatile global macroeconomy. Recently, consolidation trend in the optical gear manufacturing industry as well as in the telecom carrier industry may act as a spoiler for the optical component suppliers such as JDS Uniphase.
Nevertheless, the newly launched differentiated products of JDS Uniphase, which are gaining encouraging market traction coupled with its recent acquisition of Dyaptive and GenComm may become long-term positives for the company. We believe JDS Uniphase is currently fairly valued and thus reaffirm our Neutral recommendation.
Optical Networking component sector is highly competitive. The company competes fiercely with several players, such as Finisar Corp. (FNSR), Oplink Communications Inc. (OPLK), and Oclaro Inc. (OCLR), to name a few. Despite competitive threats and macro-economic headwinds, JDS Uniphase’s performance was quite commendable.
We believe Communications and Test Measurement division of JDS Unipahse will be immensely benefited from massive growth of wireless backhaul and DOCSIS 3.0 networks.
As the wireless carriers are gradually increasing their backhaul capacity due to significant growth of mobile Internet traffic and multimedia applications, the cable operators are quickly deploying DOCSIS 3.0 networks in order to remain competitive by means of providing faster data access speed. Several industry researchers have estimated that the market size for mobile backhaul Ethernet equipment may exceed $5 billion by 2014.
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