Optical networking specialist JDS Uniphase (NASDAQ:JDSU) is reporting earnings Wednesday night. As always, the Fool is here to help you get a handle on expectations for this earnings release.

What analysts say:

  • Buy, sell, or waffle? A whopping 19 analysts follow JDS. Three of them recommend that you buy the stock, four advocate selling, and the remaining 11 are holding for now. It all amounts to a resounding, "We're not sure!"
  • Revenues. Sales are supposed to clock in at $314 million, 83% more than last year. Not too shabby!
  • Earnings. However, analysts expect the company to produce a third straight break-even quarter, up from a $0.02-per-share loss in the year-ago period.

What management says:
Last December, shareholders approved a reverse stock split of somewhere between eight and 10 existing shares for every post-split share. Management said at the time that it would move ahead with the maneuver once it felt that the operating environment had settled and that company was in a comfortable position going forward.

Management has been quiet on the subject ever since, but the mandate to follow through with the reverse split expires on Dec. 1. Now, stock splits usually don't rate a mention here in Fooldom, but for years now, JDS has been trading well below the $5-per-share price required by Nasdaq (NASDAQ:NDAQ). That plants the stock squarely in penny-stock territory, despite a respectable $4.5 billion market cap, and it's theoretically grounds for delisting from the Nasdaq board. A reverse split could make the stock look more respectable, and psychology does play a part in day-to-day market moves.

What management does:
Don't be fooled by the recent margin improvements -- operating expenses have skyrocketed, but that's masked by the even faster sales growth. Still, the end result is that the company gets closer to profitability, though the light of day on the bottom line is probably still years away at this rate.

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

26.4

23.6

22.5

22.7

27.4

31.8

Op.

(11.7)

(14.3)

(15.4)

(18.3)

(14.8)

(11.3)

Net

(14.9)

(19.2)

(36.7)

(37.7)

(32.3)

(23.8)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I'm willing to overlook the phantom margin improvements, if only because they're directly related to strong sales performances. It's also somewhat positive that JDS feels compelled to expand both its headcount and its research and development spending. All together, it looks like the company is spending money now to make more money later.

That's all right, and analysts are hoping for another stellar sales performance, albeit without much to show for it on the bottom line. With phone companies expanding their fiber-optic networks in anticipation of offering television services to consumers through those pipes, optical networking is in strong demand right now. Expect good news from JDS tomorrow night.

Customers:

  • Cisco (NASDAQ:CSCO)
  • McData
  • Verizon (NYSE:VZ)
  • Sun Microsystems (NASDAQ:SUNW)
  • Nortel (NYSE:NT)
  • Lucent (NYSE:LU)

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like. Foolish disclosure is always one step ahead.