Charles Abbe

A lucky few service providers and vendors focused on technologies such as metropolitan optical equipment are coming through the downturn relatively unscathed. JDS Uniphase is not.

At one time, JDSU was riding high, its share price soaring above many other telecom stocks. The company was buying up its competition with ease and quickly amassed a component powerhouse. But around the time JDSU faced tough regulatory scrutiny over its proposed merger with SDL, things started to sour.

With service providers slowing their orders to vendors and vendors slowing their orders for components, component developers suddenly fell off their pedestals. JDSU wasn't the only one — other companies such as Agere Systems and Corning also have suffered.

First JDSU cut jobs, restructured itself and adjusted its financial guidance. But that wouldn't be the only time. The company later had to restructure its restructuring, cutting additional jobs and closing facilities. It even plans to shut down its entire operation for one week to help reduce costs.

“There is no doubt the industry is in a bit of pause,” says Charles Abbe, president and chief operating officer at JDSU. “Triggered by the slowdown in the dotcoms, the carriers are more timid. They are being more conservative.”

That conservatism has been catastrophic to JDSU, with its stock hitting a 52-week high of $140.50 to a sinking to a low of $13.06.

But despite the negativity, Abbe is optimistic things will pick up. “Our customers continue to be bullish,” he says. “They give positive signals about the return of growth. Carriers will begin to spend in the second half of the year.”

Jay Patel, senior analyst at the Yankee Group, also sees the market turning around this year — but not quite so soon as JDS does. “We expect to see an upturn by the fourth quarter,” Patel says. “In the third quarter, things will probably stop getting worse, but it won't necessarily be a recovery.”

Although top customers of JDSU such as Nortel Networks thought spending would bounce back in January of this year, it didn't. And so far the outlook hasn't changed much as the second half of the year closes in.

To try to insulate the company from future blows, JDSU is concentrating on new product development. “We are doubling our efforts in next generation product development and will devote more energy to that,” Abbe says. “There is no time to rest.”