JDS Uniphase down ahead of earnings

2 min read
Investors are sending shares of fiber-optic giant JDS Uniphase (Nasdaq: JDSU) down Thursday ahead of the company’s third quarter earnings report, to be released after market close.

The stock fell 5.69 to 65.31 in early trading Thursday.

Shares are responding to the fall of the optical networking sector as a whole. Yesterday’s carnage saw Ciena (Nasdaq: CIEN) drop 16 percent, and Nortel Networks (NYSE: NT) fall 26 percent on concerns about slowing growth in the sector. On Thursday, things didn't improve much as Ciena has plummeted 20 percent and Nortel slipped.

First Call Corp.’s estimate for JDS calls for a profit of 16 cents per share. According to analyst Tom Astle at Merrill Lynch, JDS is expected to report revenue of $750 million, up from $542 million a year ago. The growth will be aided by acquisitions, but Astle said he is looking for organic growth of 18 percent sequentially.

The problem for JDS is a possible slowdown in revenue growth. Two companies, Lucent (Nasdaq: LU) and Nortel, accounted for over 40 percent of JDS’ revenues last quarter. Lucent's just ousted its CEO and Nortel didn't pound the table about future growth prospects. Those two developments could ding JDS Uniphase.

Astle said the focus for investors is whether or not JDS can continue to grow its business outside of these two optical networking heavyweights.

One other point to watch is JDS' expansion plans. In prior quarters, JDS outlined plans to expand capacity by a multiple of four every 18 months. These plans may be viewed negatively if telcommunications companies cut back on spending. Astle maintained an “accumulate/buy” rating on JDS.

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