DRIP PORTFOLIO
Gigantic JDS Uniphase

JDS Uniphase is the next stop on our tour of major players in the fiber optic networking sector, a tour that is part of our high-growth investment study. Through a series of acquisitions and its business execution, JDS Uniphase has established itself as a dominating force in the optical components field and boasts the most expansive product portfolio in the industry.

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By Vince Hanks
November 2, 2000

So, you're sitting at the breakfast table this morning and decide that it might be fun to build a fiber optic network in your spare time. As good a hobby as any other, you figure. But, where to start? You wonder if they'll have everything you'd need at Wal-Mart? That place seems to have everything.

Er... probably not.

Fear not, fine Fool. Your dream of transmitting the entire informational content of the Library of Congress to your Aunt Mildred in less than a second is not over just yet. JDS Uniphase (Nasdaq: JDSU) wants to be your one-stop shopping center for optical networking equipment, and it's well on its way to becoming just that.

Through an incredible series of mergers and acquisitions, JDS Uniphase has put together the largest portfolio of optical components in the industry. With no less than 11 acquisitions initiated since 1999, and one of the largest-ever technology mergers pending with SDL, Inc. (Nasdaq: SDLI), JDS Uniphase has significantly consolidated much of the optical components sector single-handedly.

The company itself is, in fact, the product of a merger. On June 30, 1999, JDS FITEL and Uniphase Corporation joined in holy matrimony to form JDS Uniphase. The honeymoon over the past 18 months has consisted of an $18-billion-plus shopping spree, mostly using its surging company stock, to nab any attractive company in sight that would expand its focussed product line or improve manufacturing efficiencies.

Then, JDS Uniphase decided to spend some serious money. Less than two weeks after closing out the acquisition of E-Tek Dynamics for $15 billion, JDS Uniphase and SDL agreed to terms on a $41 billion merger. The company expects the deal to be completed in December, provided it survives the antitrust scrutiny of the Justice Department.

Business Nitty-Gritty
JDS Uniphase manufactures and distributes fiber optic components and modules to telecommunication and cable systems providers worldwide. The company's products are grouped into four categories: active components, passive components, laser subsystems, and testing equipment.

Active components and modules (which are a combination of various components) utilize electrical signals within a network to modify or amplify the original light signal, as necessary, to prevent signal degradation (which would slow transmission). Examples of active products are source lasers, pump lasers, external modulators, wavelength stabilizing modules, and integrated laser modulator assemblies.

Passive components and modules route light signals without the aid or modification of electrical signals. Passive products include isolators, couplers, gratings, circulators, tunable filters, optical switches, add-drop multiplexer modules, and switching modules.

The laser subsystem group consists of argon gas laser subsystems that emit blue or green light, helium-neon laser subsystems that emit red or green light, and solid-state lasers that can emit infrared, blue, or green light. By transmitting light in differing colors, more information can travel along a single fiber at the same time.

The transmission and test instrument products include transmitters, transceivers, test instruments for optical components, and packaged optical devices for fiber-based data communications.

JDS Uniphase's many customers include Alcatel (NYSE: ALA), Ciena (Nasdaq: CIEN), Motorola (NYSE: MOT), Lucent Technologies (NYSE: LU), Nortel Networks (NYSE: NT), Scientific-Atlanta (NYSE: SFA), Tyco International (NYSE: TYC), and Siemens.

Vital Statistics
At a recent price of $78 per share, JDS Uniphase has a market value of $74 billion with 958 million shares outstanding. The stock is 35% owned by insiders and 43% by institutions. The company currently has roughly 19,000 employees and is based in San Jose, California and Nepean, Ontario.

(Quick Quiz Time: Free Fool.com ballcap to the first Fool who can tell me the name of the professional athlete who has an arena named after him in Nepean, Ontario. Send your answers to DripPortQuiz@aol.com.)

Annual revenues, excluding non-cash and acquisition-related charges, reached $1.43 billion in 2000. Including merger-related charges, purchased intangibles, amortization, and payroll taxes on stock options, the company recorded a loss of $905 million for the year.

Net margin for the first quarter 2001, on a pro forma basis, was 22.5% on sales of $786 million. Net income reached $177 million. The company has $1.4 billion in cash on its balance sheet and long-term debt of $51.6 million. JDS Uniphase has a five-year estimated annual earnings growth rate of 48%. The company does not pay a dividend.

We can begin to look more closely at JDS Uniphase next time. If you want a big head-start, the current issue of The Motley Fool Research Internet Report discusses optic hardware, focusing on JDSU and four other companies: Corning (NYSE: GLW), Nortel Networks, Lucent Technologies, and Avanex (Nasdaq: AVNX).

If you want to start discussing JDSU right now, visit us on the Drip Companies board, or visit the JDSU board (both linked above).

Drip on, Fools!

-- Vince Hanks, TMFElwood on the Fool discussion boards

Drip Portfolio


11/2/00 as of ~8:30:00 PM EST

Ticker Company Price
Change
Daily Price
% Change
Price
CPBCAMPBELL SOUPUnchg.Unchg.29.63
INTCINTEL CORP1.814.04%46.69
JNJJOHNSON & JOHNSON(0.63)(0.69%)90.38
MELMELLON FINANCIAL CORP0.501.07%47.25
PEPPEPSICO INC(0.94)(1.95%)47.06

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To Date
Since
7/28/1997
Annualized
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Trade Date # Shares Ticker Cost/Share Price Total % Ret
9/8/9748.4286INTC23.7646.6996.85%
10/7/9837.3159MEL34.7747.2537.37%
11/14/9715.694JNJ79.6990.3814.69%
7/28/005PEP48.0047.06(1.95%)
4/13/988.403CPB53.9829.63(43.56%)

Trade Date # Shares Ticker Total Cost Current Value Total Gain
9/8/9748.4286INTC1,150.432,261.011,114.18
10/7/9837.3159MEL1,297.431,763.18484.82
11/14/9715.694JNJ1,250.711,418.35183.70
7/28/005PEP240.00235.31(4.69)
4/13/988.403CPB453.61248.94(197.60)
 
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Total: 
Unchg.
5,926.78
 


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