My, how the tables have turned. After a 13% post-earnings dive, JDSU shares have lost half their value since I penned that last paean. Other than Oclaro, which richly deserves to be drawn and quartered in a public square thanks to questionable execution, the rest of the optical-networking industry has caught up to this seemingly unassailable leader.
JDSU’s fourth-quarter report shone a light on its weaknesses. Sales rose a healthy 18% year over year to $472 million, and non-GAAP earnings jumped 53% to $0.23 per share. Not bad, right? But the next quarter looks like a train wreck in the making: Management expects sales to land at about $412.5 million, for a roughly flat year-over-year comparison. By contrast, analysts were hoping for $470 million, or 14% growth.
Management places the blame on a collection of bugbears:
- Seasonality in the communications test-equipment market.
- Inventory corrections from optical networking customers.
- Of course, that ever-present specter of economic uncertainty. Don't start an earnings call without it!
"We cannot predict exactly how long this downturn will last for us," said CEO Tom Waechter, "but we do believe it's a near-term issue." He can back that theory up with favorable order-booking trends at the back half of the quarter, though that change shouldn't affect billed revenues until the December quarter.
So JDSU investors are in for a rough ride heading into the second half. It's a shame to see negative reports like this just as networking giant Cisco Systems