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JDS Uniphase Kept at Neutral

Zacks Equity Research

JDS Uniphase Corporation (JDSU) is the leading provider of communications test and measurement solutions, and optical products to telecom carriers, cable operators, and network equipment manufacturers.

We believe Communications and Test Measurement division of JDS Unipahse will be immensely benefited from the massive growth of wireless backhaul and DOCSIS 3.0 networks. As wireless carriers are gradually increasing their backhaul capacity due to significant growth of mobile Internet traffic and multimedia applications, cable operators are quickly deploying DOCSIS 3.0 networks in order to remain competitive by means of providing faster data access speed.

Next-generation 4G Long-Term Evolution (:LTE) networks became another major growth driver for JDS Uniphase. The company offers an innovative LTE test solution, which encompasses end-to-end, real-time tracing, data assurance, and OSS to derive the maximum performance and revenue potential of LTE. Moreover, acquisition of QuantaSol and Network Solutions Division will further act as growth catalysts for the company going forward.

Despite such strong fundamentals coupled with solid financial results for the second quarter of fiscal 2012, management cited disappointing revenue projection for the ensuing second quarter of fiscal 2012 mainly driven by cyclical nature of the Optical component industry, huge margin pressure and intense competition from companies like Avago Technologies Limited (AVGO) and Finisar Corporation (FNSR).

Moreover, major telecom carriers are going through inventory correction, and this scenario is expected to negatively impact JDS Uniphase’s business by a huge margin.  We thus maintain our long-term Neutral recommendation for JDS Uniphase Corporation.

Currently, JDS Uniphase Corporation has a Zacks #4 Rank, implying a short-term Sell rating on the stock.

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Read the Full Research Report on AVGO

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