The Black Box

[Fletch]

Hey michale,
I'm still in it,
Fletch
..................Morningstar says.....

JDS Uniphase JDSU announced that it expects December-quarter revenue of $360-$365 million, well above our $345 million estimate and the company's prior guidance. All of the upside in the quarter was driven by the strong performance of the testing and network diagnostics business, which carries higher margins than the communications business and should lead to improved overall profitability for the company.

We believe we are in the early stages of a multiyear optical upgrade cycle, as telecom carriers upgrade their networks to the latest technologies in order to lower operating costs and push high-speed fiber connections closer to their customers. While the company has struggled through the past few years, it has rationalized its cost structure to a point where it will begin to post margin improvements over the next couple of years, in our opinion. As a component vendor to nearly every telecom equipment manufacturer participating in service providers' fiber buildouts, JDS should see an uptick in its communications business as carriers ramp up their fiber rollouts in earnest after a pause in the second half of 2006. Our fair value estimate is unchanged.