Don’t Buy JDS Uniphase Without Looking At These Stocks First

JDS Uniphase (Nasdaq: JDSU  ) has undergone quite a transformation over the past decade. As one of the most successful tech-boom shooting stars, JDSU shares peaked at more than $1,000 in March 2000 and lost 80% of their value within the next 12 months. In March 2009, JDSU hit rock bottom and sold for $2.21 a share. But the stock is up 88% over the past 12 months, as many investors are impressed with the retooling of JDS Uniphase from a jack-of-all-trades in fiberoptic technology into a portfolio of businesses that include new higher-margin consumer products.

A lot of the excitement is centered on JDSU's Advanced Optical Technologies business unit. New innovations from this group include advanced holographic and color-shifting technology (to do things like authenticate your credit card), as well as a cutting-edge gesture recognition system that will allow you to control your television, computer, and/or video game without a remote control or mouse.

In May, JDSU stumbled, and shares are down more than 20% after failing to meet analysts’ revenue expectations. Still, revenues were up 19% year-over-year, and CEO Tom Waechter trumpeted the company's highest quarterly bookings in two years. Will JDSU’s new technology businesses continue to drive its share price up, or are there other information technology companies that are in a better position to put more money in your pocket?

We asked our Motley Fool CAPS community to nominate two communications equipment industry peers that are likely to outperform JDSU Uniphase.

And the nominees are
Our 165,000-plus-member CAPS community views Sonus Networks (Nasdaq: SONS  ) as a better opportunity among similarly sized companies in communications equipment. Sonus provides switching technology for wireless and wireline VoIP carriers and is well-positioned to grow as more and more voice traffic transitions to IP networks. Sonus is a five-star stock, the highest rating given by our CAPS community, and JDSU currently stands as a three-star stock. CAPS member HOBBES5200 sees an exponential growth story in Sonus in this pitch from January:

This is the next [Cisco Systems]. They have been idle for 8 years but are still here slowly getting in with all big players. They will be huge. They have a chance to be a billion dollar company 5-10 years out. That would an appreciation of 5 fold at least.

Five-fold growth wouldn’t get Sonus Networks into Cisco’s neighborhood, but would make Sonus comparable in size to industry competitor Brocade Communications (Nasdaq: BRCD  ) . And while we’re looking for alternatives to JDSU, it’s worth noting that things are looking up at Brocade. The company has swung to a net profit from a net loss over the past year, is throwing off a lot of cash, has been rumored to be an acquisition target, and has seen a recent decline in its share price. All are events that make Brocade another interesting alternative to JDSU.

Make your vote count!
Do you agree that Sonus Networks or Brocade Communications may be better buys than JDS Uniphase? Click over to CAPS and let the rest of the community know what you think.

John Keeling doesn't own shares of any company mentioned. The Motley Fool has a disclosure policy.


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