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October 31, 1999

JDS Uniphase Juggernaught Rolls On

By CBR Staff Writer

JDS Uniphase Corp, the US-Canadian fiber optic component giant, posted a 121% rise in first-quarter net income from operations to exceed Wall Street earnings expectations by four cents a share. San Jose, California-based JDS Uniphase, created from the merger of Ottawa-based JDS Fitel and Uniphase Corp of California on June 30, reported net income of $51m, or 29 cents a share, compared to $23m in the year-ago period. Sales for the quarter to September 30 were $230m, up 104% from $113m in the corresponding 1998 period. Revenue was 20% higher than combined sales of $129m for Uniphase Corp and JDS Fitel in the preceding quarter to June 30. This outpaced sequential growth rates for competing firms, such as E-TEK Dynamics Inc (17%), Corning Inc (7%) and SDL, Inc (10%), even though JDS Uniphase is four times the size of its closest rival.

The main driver of revenue was a demand shift to its higher- margin module business, a vindication, said the firm, of its strategy of integrating its transmitters, couplers, semiconductor lasers and multiplexors into the modules. OEMs like Lucent Technologies Inc and Nortel Networks Corp are increasingly demanding more-complete solutions from suppliers as they rush to complete orders for easier-to-install networks from telecommunications carriers trying to meet booming demand for high-bandwidth optical fiber cable. Lucent and Nortel accounted for 22% and 17% of sales in the quarter, respectively. Sales to Lucent grew 55% from a 17% proportion of sales in the preceding quarter, as the OEM ramped up production of its Wavestar 400G product. Nortel sales increased 125%, sequentially, reflecting explosive demand for the Canadian firm’s optical systems.

JDS Uniphase said it plans to double or triple production across its complete product range by the end of the year to meet robust demand. It will make the highest capacity increases for production of its lasers, Dense Wavelength Division Multiplexors (DWDMs) and optical switches.

The bullish earnings report on Thursday convinced analysts watching the firm to upgrade future earnings expectation for the firm. Brokerage firm, Warburg Dillon Read, LLC, said on Friday it was raising its fiscal 2000 and fiscal 2001 estimates to $1.27 and $1.67 net income per share, respectively, from previous estimates of $1.09 and $1.50. Meantime Credit Suisse First Boston said it was increasing its fiscal 2000 earnings estimate to $1.30 a share from $1.10, and increasing its revenue projection for the year by 10.4% to $1.1bn.. It pegged fiscal 2001 estimates at $1.80 net profit per share, on sales of $1.67bn.

JDS Uniphase boasted a healthy balance sheet with $959m in cash, equivalents and short-term investments, largely generated by the sale of 8.4 million shares in August. It is tipped to mount a major acquisition using these reserves at a near date.

Including merger-related and amortization costs, the firm reported a $114m loss for the quarter, equivalent to 68 cents a share. Results for the quarter included the post acquisition results of AFC Technologies, acquired on August 20 in a transaction accounted for as a purchase. á

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