JDS seen topping second-quarter profit forecasts|
Reuters Story - January 24, 2000 16:43
(All figures in U.S. dollars unless indicated)
By Susan Taylor
OTTAWA, Jan 24 (Reuters) - JDS Uniphase Corp., the world's biggest supplier of parts for fiber-optic equipment in phone networks, is set to post its second-quarter results on Wednesday and analysts are busy guessing by how much it will beat street estimates.
The consensus profit estimate from First Call/Thomson Financial, which tracks analyst predictions, is for 16 cents a share. But JDS Uniphase is widely expected to maintain its recent trend and better that number when it reports after the market's close.
Whisper estimates put the profit at 18 cents per share. "I fully expect them to hit or exceed the whisper number -- this is a company that is growing at a blistering rate," said Rob MacLellan, analyst at CT Securities in Toronto.
"They have yet to not -- in my recollection -- exceed expectations."
A key number to watch in the results is sequential revenue growth, which JDS Uniphase has regularly posted in the 20 percent range, said John Wilson, analyst at Bunting, Warburg Dillon Read in Toronto.
"We're into a relative game as to what is stellar anymore," he said.
"Everyone always says, 'Well they can't keep going that fast and it's going to slow down'...but I think it's fairly safe to say at this point they're going to grow faster than 20 percent again. Which will be another fantastic quarter."
The stock market appears to support that theory.
JDS Uniphase shares have gained 16 percent over the past week to trade on Monday at C$332.50 on the Toronto Stock Exchange. On Nasdaq, the issue has added 18 percent over the last week to trade at $231-3/8 on Monday.
The result of a June merger between JDS FITEL Inc., based in the Ottawa area, and San Jose, California's Uniphase Corp., JDS Uniphase has emerged as the world's biggest supplier of parts for fiber-optic network equipment. Those networks carry data on light wavelengths.
The merger brought together technologies that boost the capacity of optical networks. Analysts will watch the second-quarter results for signs of further growth in sales of modules that combine the FITEL and Uniphase equipment. They now account for about one-third of sales.
"It's a big part of their business, it's where they're having a lot of success and it's driving a lot of their growth," Wilson said.
"We'll watch closely the percent of business in the module side -- which has been ramping very fast. We'll try to get a better grip on just where that can go in terms of percent of business."
Blistering demand for JDS Uniphase products stems from rapid growth among key customers, including Lucent Technologies Inc. and Nortel Networks Corp.
Nortel is widely expected to ride growth in optical network sales to strong fourth quarter results when it reports on Tuesday. Lucent reported on January 20 that its first-quarter profits fell 23 percent because it failed to keep up with explosive demand for optical products.
"One of the reasons we like (JDS) is because it's so diversified from the point of view of its customer base," said MacLellan. "One company's problem -- assuming it's not an early indicator of a demand-driven problem -- usually benefits the other and has net-net little or no impact, or a positive impact on JDS."
JDS Uniphase's biggest challenge, analysts said, is keeping pace with demand.
In recent months the firm has been on a buying binge to boost its manufacturing capacity.
The $15-billion deal to buy competitor E-Tek Dynamics Inc. that it announced January 18 was the seventh acquisition JDS Uniphase has made since September.
While that deal led to some market jitters over monopoly concerns, analysts suggest the firm is far from controlling its market, which is divided among merchant and in-house suppliers.
"Part of the fear of this consolidation is that their customers may start to get worried about being captive to just one supplier with too much pricing power," said Emil Savov, analyst at Goepel McDermid Inc. in Vancouver.
On the heels of the E-Tek deal, JDS announced that it extended a supply contract with Lucent until December 2001.
"This contract is actually a reassurance that the biggest customers are not scared and are extending their relationship and are relying more on them," Savov said.