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JDS Uniphase in Neutral Zone

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We reiterate our long-term Neutral recommendation on JDS Uniphase Corp. . The company reported disappointing financial results for the fourth quarter of fiscal 2013, missing both the top and the bottom lines of the Zacks Consensus Estimate. Lower-than-expected capital expenditure by telecom carriers was the main reason behind this disappointing performance. Management provided a soft financial outlook for the ensuing first quarter of fiscal 2014. JDS Uniphase currently has a Zacks Rank #4 (Sell).

Why Kept at Neutral?

Nevertheless, JDS Uniphase’s newly-launched products coupled with the acquisition of Arieso are the long-term positives for the company. In the last reported quarter, the newly-launched products generated 65% of the total network revenue.  As a leading supplier of optical components and modules used in 3G/4G high-speed communications networks, JDS Uniphase is benefiting from increasing Internet traffic and associated applications. We expect this trend to continue in the long run.

In the last quarter, each of the three segments of the company had book-to-bill ratio of 1.0. Both Communications test and Measurement and Communications and Commercial Optical Products units have generated the highest order bookings in the last 10 years. Orders were particularly strong for JDS Uniphase’s newly-launched products, such as laser diodes for gesture recognition, datacom pluggables, solutions for increased capacity and faster connectivity for fixed and mobile networks.

AT&T Inc. (T - Free Report) , Verizon Communications Inc. (VZ - Free Report) , Cisco Systems Inc. (CSCO - Free Report) and Time Warner Cable are some of the major clients of JDS Uniphase. They use the company’s instruments and test tools to optimize their respective communications equipment and broadband networks.

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