Back to top

Analyst Blog

We downgrade our recommendation on JDS Uniphase Corp. (JDSU - Analyst Report) to Underperform.  Recent trend of the optical component industry is indicating a glut of inventory on the part of the telecom carriers. Major telecom carriers are making inventory correction and this scenario may continue till the end of 2011. Several industry players estimated that demand from the largest emerging market of China will not meet expectations. JDS Uniphase is highly dependent on China since the developed western world is yet to fully recover from recession. Furthermore, severe natural calamities in Japan may significantly disrupt the supply chain management system.

In the near future, we believe JDS Uniphase may face severe competitive pressure in some of its core growth areas. For the past one year, XFP tunable and the Super Transport blade were the two segments exclusive to JDS Uniphase. However, Oclaro Inc. (OCLR - Snapshot Report) and Finisar Corp. (FNSR - Snapshot Report) will launch XFP within next 6 months, while Oclaro and Sumitomo may become competitors for the Super Transport blade. Increasing competition may take a toll on the overall growth prospects of JDS Uniphase since these two businesses were driving revenue in the previous year. High-margin Test and Measurement division may also face growing competitive pressure.

The market for optical networking and test measurement is emerging rapidly in terms of technological innovation and demand. JDS uniphase’s product sales depend to a large degree on the market dynamics of the metropolitan and enterprise markets as well as on the long-haul fiber component market. Many of the company’s competitors have greater financial, technical and marketing capabilities, which may enable them to respond more effectively to the emerging technologies and changes in customer requirements.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%