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Should be some good buying opportnities in the next few days. Should be down to the $3.55 to $3.65 range.
Cap Ex spending, as you are aware, fell off a cliff during last 2- 3 years. jds sales to telecom carriers down between 85 to 90%. Spending at the current low percentage of revenues (flat) would unlikely be made up by increased revenues. Lets say Bell South made 1,000 in 2003 and Capital Exp of 10%. If revenue went up 5% in 2004 , Cap Ex would go up $5. Let say revenues were flat but they incread Cap Exp by 5% of revenues that would result in an increase of cap ex by $50.
Althogh positive that jobs were created this month instead of a loss, the relative small number of jobs created did not impact the overall unemployment rate. This may eplain the cut back on the indexes on Friday. Caution. NT was up today with the rest of the market but collapsed later in the afternoon. Keep an eye on NT for the next couple of days. Hopefully it was just a minor correction . Fund managers were just locking in profits and not a leaked warning on the quarter ending Sept 30. Could be telling us something that may impact jds.
Jds price still has room to go down further. Recent announcement from Bell South that they intend to keep Cap EX spending "flat" from 13 to 15% of revenues for the next 3 years is not encouraging. Like SBC Bell
South seems to be focused on increasing thier dividend payouts and repurchasing stock rather than investing money back in their businees. If they lose out to the cable companies I have very little sympathyfor them. However, I think jds will drop in price once the market gets a grip on the fact that baby bells are reluctant to spend. The only way I see them pick up spending is if trhe competion gives them no choice but to spend. Not impressed with the baby bells right now.
link to report:
http://biz.yahoo.com/rf/030922/manufacturing_telecom_sp_1.html
I believe what is happening is that a lot people are saying the WORST may be over. This may explain why share prices of telecom GEAR makers are holding up. It sounds too familiar. Every time we say it can't get any WORSE it DOES. I did some techinal and fundamental analysis and did not come to the same conclusion. Both analyses showed that it is a risky time to buy in. Technical indicators are not looking good and fundamnentals for the remainder of this year are weak(I could use stronger words).
Verizon cut back in capital spending re-inforces my view. Should see buying opportunities at lower prices.
S&P report:
The spending slump may not bottom out until 2004, S&P said, considering that both BellSouth (NYSE:BLS - News) and SBC Communications (NYSE:SBC - News) have announced capital spending cuts for the rest of 2003.
Not happy about that news at all. Spending cuts for the rest of 2003 may result in poor guidance going forward for the jdsu in 2nd quarter. Market is hoping for positive guidance. Still think there is opportunity for adding to position on technical weakness. Just my humble opinion.
New CEO , Kevin Kennedy, purchased 72,500 shares yesterday at $3.45. A good sign when a CEO puts his own money in the company. Whether he is trying to make few bucks before taking over (Can't exactly buy the stock while hyping it) or just showing his confidence in the company and himself. Its all good. Being cynical myself I think he knows something that we don't.
Why is jds under $5. Simple. Jds has sales of $150 /quarter with a brek even cost structure of $200 /quarter. Without visible signs of increased telecom spending or significant cuts in costs we will be in the $3 trading range.
It would make a lot of people's week if it reached $4.00 :)!!
However, I think that after a few weeks after labor weekend we will get a sense if there is going to be pick up on telecom spending. Carriers are currently under budget for 2003 capital expenditures. Hopefully they will spend. Need news from the Carriers that they are spending to get jdsu back to the $4.00 level. I think all will be known by mid October on how 2003 will turn out. The next October conference call from the new CEO, Kevin Kenedy, will also be preety important. Hopefully he will making the return to profitability a priority and accelerate the time table for reducing the cost structure to 170 million.
Avanex buys Vitesse FO business to strengthen their modules/subsystem making abilities. JDS recently bought Altamar Fibre Optics from Ditech for the same reason. Hopefully this type of consolidation in the industry will pay off in the eventual telecom recovery. Not only will there be less competition but it will make it very dificult for new comers to get into the game. All three remaining manafactures of size (jds, Avanex, Bookham) have moved up the food chain by making their own modules/subsytems. Easier to make individual FO components than to make a series of components and then create the modules/ subsystem. Any comments?
Anouncement by the new Ceo that they are closing down the Canadian HQ. Combining CEO and COO into one postion. It's showing that jds is on track to reducing their cost structure. jds needs to jettison every bit of extra weight that isn't absolutely necessary right now. Would have prefered to have seen sales growth but cost reductions are also good :).
$3.30+ it is :). Not quite for the reasons I had in mind. Will be interested to see what the new CEO has in mind. In a press release there was a mention of an emphasis on Customer Focus by the new CEO Keneddy. One thing we do know they did eliminate one over paid position.
$3.30+ ... Maybe or maybe not. Who knows. I think we will be seeing these types of fluctuations in JDS, both on the up and down side, for the next while. I don't see this particlar mini rally as having any steam behind it as there is no substance. Until the sales orders start comming in from the Carriers for FO components, jdsu will be in this holding pattern. The market is in a "show me the money mood". However much I may like to see jds go up, I cán't see the share price hold up without sustainable sales growth. Just my opinion. Shares of companies will be based on individual comapny performance and not on the performance of the economy in general.
max2442 ... only so much emphasis can be placed on technical analysis. Fundamental Analysis and Due Diligence will always win out. As soon as telecom spending picks up and jds returns to prifatability all technical analysis indicators will go positve.
Once in while there is positive article. Broadband revenues will double in the next two years which is great news for the equipment makers such as JDSU.
http://biz.yahoo.com/djus/030812/1313001038_1.html
No suprise at the falling share price - until jds can demonstrate ability to return to profitability the share price will always be under pressure. We are still suffering from the negative forecast given on July 24, 2003. Market is extremly disappointed and rightly so. Hopefully jds will escalate thier realignment progam and get to the break even of 170 million a quarter sooner than the fiscal year end 2004.
To wahz
From news conferences I'm hearing that small orders are coming in for long haul that were not there 18 months ago. Granted they are minimal but still encouraging. I think that there should be a pick up in long haul within 2 years. Lets face it in 2 years time we will have be in a fibre optics depression for 5+ years. Something got to break or become obsolete. Nothing lasts for ever without maintenance. Also bandwith usage is going up about 100% a year which, over 5 years, should make a good dent in the bandwidth glut. Also in 2 years time, after massive FO industry consolidation, there will be more sales to be shared with less FO manufacturers.
Yes. Bookham is considered the #2 world player followed closely by the newly formed Avanex. Jds is a giant when compared to their competitors. It will be interesting to see what happens when Bookham's guaranteed Nortel contract comes to an end (June 2004). As Jds is lowering their breakeven from 200 million to 170 million by June 2004 I don't think they are making any assumptions they will get the business. I think they are following the stategy "Hope for the best, plan for the worst". As Martha Stewart would say "That is a good thing".
Bookham's (#2 FO palyer next to jdsu) quartely results :
"Cash and cash equivalents as of June 29 were GBP70.8 million ($117.5 million) compared with GBP87.7 million as at March 30. Cash burn for the second quarter was GBP16.9 million ($28.1 million), down 5% on the first quarter (GBP17.7 million), reflecting significantly improved operating cash flow offset by higher spending relating to restructuring activities."
Comment:
Bookham's war chest of $117 million is no match of for jdsu's 1.2 billion. In addition, 62% of Bookham's revenues came from a guaranteed Nortel supply agreement which will end June 30, 2004 (6 quarters from the start of this year). 82% of sales were made to 3 customers. Unlike jdsu Bookham is poorly diversified. In my opinion, if Nortel does not renew next year Bookham will be in serious problems. It should be noted that a few weeks ago Nortel dumped 50% of their holdings in Bookham.
Regards
To Cards16:
Where does jdsu fit into this Department of Defense project. Regardless of who wins will jdsu be supplying the components/modules ? My understanding is that jdsu supplies components to Lucent, Nortel, Ciena, etc.
Regards
I would say there will be major movement in JDSU (good or bad ) within one year based on the following:
1) The market thinks ahead 6 months. This time next year the market will be predicting Jan 2005. We should know if the Fibre optical components industry will survive by then.
2) Hopefully jdsu will have reduced their breakeven to 170 million a quarter (end of their 2004 fisal year - June 2004). All jdsu needs is a slight improvement in demand to show a small profit. With their leadership role I think they will command a minimum of $6 a share.
3) If, this time next year, the Fibre optics industry is still in a severe depression as it is today, jdsu will be the major benificairy (this is my gut feel) of picking up sales from their bankrupt competitors. Neither Avanex or Bookham (jdsu's 2 major world competitors) have the cash to survive 2 years. Both have cash reserves for a maximum of 6 quarters (I think their creditors will pull the plug on them way before they reach that point). Bookham has about 130 million dollars in free cash as so does Avanex (if you take away all the free cash that Avanex will use in consolidating their newly acquird businesses). Quite honestly if jdsu did not have 1.3 billion in cash and no debt I would not give this stock a second look.
With Vitesse closing the doors on their optical unit last week, along with the sale of Ditech's opical unit to jdsu for a pittance 1.5 million the week before... there are interesting times ahead of us. At the beginning of this year the general consensus was that the Fibre optic components players from positons 1 to 3 would do well. Right now I can see either Avanex or Bookham landing up in chapter 11.
To Max, Jimmy, Learning and all
Just curious if any of you were listening to JDSU conference call. The reason given for the drop in 2004 1st quarter guidance was the anticipation of a reduction in thin film product sales (special emphasis on display). JDS management indicated that they were revamping and it would take 2 quarters to gain traction. This appears to be a temporary problem and, if so, could the market be over reacting?
Also, did you recall the qustion from the Morgan Stanley Analyst about Vitesse exiting from the fiber optical module/subsytem. He was asking if jds was one of the potential buyers of the buiness. It will be intersting to see if JDS buys them for a pittance or Vitesses will just close their doors. It just shows how many companies are exiting the fiber optical business. IBM, Lucent, Agere, Alcatel, Nortel, Corning, Marconi, Diteck, Vitesse ... just to name a few of the big names. For large projects such as the network design phase in Japan, jds is now involved in the fibre optical end of it. My gut feel is that from here on end any large fibre optic network upgrades will involve jds. JDS competitors are too small and do not have finacial resources, depth of products or epertise to pull off the large projects. Interesting times ahead?
Disheartening and disappointing are words that first come to mind. You ask if anyone sees anything encourageing. Well, its encouraging that they are lowering thier breakeven to 170 million, its encouraging that they are moving up the food change into subsystems/modules (recent acquistion of Ditech optical business), its encouraging that they are increasing efforts towards penetrating growth markets (Asia/Europe), its encouring they are winning design awards that will help them in the future. However, what we wanted to hear was that the demand for jds products was stabilizing. Instead we heard demand was not stable and sales were going down. Not good. The only real consolation in this mess is that JDS Uniphase's major competitors, Bookham and Avnex, will be in serious financial problems within the next 9 months if someting doesn't drastically improve. JDS may well be the last man standing in Fibre Optics business. It's that bad.
oops error in calculation .. current annual telecom FO sales should be about $800 not $200 million. Forgot to mutliply the quarterly sales by 4 to get the annual sales.
"I question their acquisition at this time,in an economy as unstable as this, with the outstanding debt they have. "
As prevoulsy mentioned jds has $1.27 billion in cash, no debt. They got Altamar for a fire sale price of $1.6 million. As long as the purcahse enhances their market share and customer base, this is exactly what they should be doing. Most probably JDS got it for so little because no one else in the indusry has the cash or the ability to turn it around.
The increase in broker sell recommendations is based on the current valuation of jdsu and the lack of demand for Telecom Fibre Optics. The recent aquisition of Altamar, in itself, is very small and will have minimal effect on jdsu bottom line. What is worrysome is the number of companies exiting the FO business and how little Altamar was sold for ($1.6 million and some future paymnents if jds can make a go of it). My rough calcualtions is that FO business has dropped from a high of $8 to 9 billion in Telecom annual sales (2000) to current annual sales of 200 million. jds made $70 million in telecom sales last quarter (90 million in thin film sales). Jdsu has anywhere between 40 to 50% of world sales in Telecom Fibe Optics. Massive consolidation has taken place. Triquent bought Agere FO. Bookham bought Marconi and Nortel FO. Avnx bought Corning and Alcatel FO. Jds bought IBM FO and now Altamar FO. The list goes on and this is just recent history.
Until there is sustained turnaround in telecom spending I see the sell recommendations remaining
Here are some positives for JDSU:
- 1.27 billion in cash, no debt (strong financials - second to none in FO industry)
- Currently 60% of sales are out side the telecom industry (good diversification which will help them out in this downturn).
- Successfuly moved established operations to china (cheap labor)
- Successful global realignment program without loosing market share (29,000 employees to 6400, 40 sites to less than 10)
- Best of breed and broadest scope of Telecom FO products(long haul, metro, edge and enterprise. Closest in the industry to "one stop shopping".
- Massive consolidation in FO industry leaving few companies to enjoy the turnaround. Whenever that maybe :(.
-Increase of 100% in bandwith each year (reducing the glut)
-Favorable FCC rulings to encourage Carries to build out fibre otic networks. Baby bells recently issued RFP's.
-Competition has problems (Triquent screwed up the Agere purchase, Nortel dumped 50% of their shares in Bookham and only few quaters left on thier guaranteed supply agreemnent with Nortel, Avnx has major integration problems facing them -lots of their cash will be burned up on restructuring costs).