JDS Uniphase issues 4Q profit warning

JDS Uniphase on Thursday issued a profit warning for fourth quarter 2001, revising its sales outlook downward as carriers and vendors tighten their belts in the face of the current economic slump. The announcement—coupled with an earnings warning from Nortel, one of JDSU’s major customers—caused shares of the company to plummet 20% today in morning trading.

For the quarter ending June 30, JDSU said its sales would be about $600 million, down 14% from its earlier projection of $700 million. In addition, the company projects its sales for the first quarter 2002 will drop to $450 million, down from analysts’ projections of $660 million.

The lowered sales forecasts will force the company to write down much of its inventory, which will bore into JDSU’s fourth quarter earnings, producing an estimated loss for the period of 6 cents to 8 cents per share, company officials said. The optical components manufacturer had been expected to report earnings of 5 cents per share, according to First Call/Thomson Financial.

“The business downturn has been rapid, steep and unprecedented, and the continuing lack of visibility from our customers suggests to us that a cautious outlook continues to be warranted for the short term,” JDSU President and CEO Jozef Straus said in a statement.

JDSU is succumbing to the domino effect rippling through telecom industry, according to a company spokesman.

“We’re at the bottom of the food chain in many ways,” he explained. “Last year there was such growth, there was a shortage of components. So companies started stockpiling to keep up. Their inventories were very high under the assumption growth would continue. As soon as it stopped, they stopped buying.”

Most of JDSU’s major customers are severely feeling the effects of current slump. Nortel today stunned Wall Street by reporting it would incur a $19.2 billion loss for second quarter 2001, as well as cut another 10,000 jobs, bringing the total number of jobs cut since April to 30,000. Alcatel—which accounts for about 10 percent of JDSU’s sales—recently warned of a $2.6 billion second quarter 2001 loss.

To cope, JDSU is reviewing its expenses to try to cut costs. One of the areas it will review in close detail is its staff, the spokesman said, but the company has made no decision yet whether to lay off more employees. Earlier this year Uniphase cut 8,000 jobs from its ranks, the equivalent of 20 percent of its workforce.

JDSU also pointed toward its balance sheet as a sure sign it can last a few quarters of economic hardship. The company has not recently raised funds through debt or equity financing and has $1.4 billion in cash on hand.

Analysts across the board downgraded Uniphase stock, causing JDSU shares to fall to $10.81 by mid morning. The stock partially recovered in the afternoon, trading at about $12 per share, 13% below yesterday’s closing price. The news also dragged down optical components competitor Corning, whose stock price dropped 10% in morning trading as confidence in the fiber optics sector eroded.