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6 February 2008


JDSU exceeds growth forecast

For its fiscal second-quarter 2008 (to 29 December 2007), JDSU of Milpitas, CA, USA has reported revenue of $399.2m (up 11.8% on the previous quarter’s $356.7m and 9 % on $366.3m a year ago, and up on October’s forecast of $372-394m).

Compared to last quarter, Communications Test and Measurement revenue was up 14% to $197.5m (49% of total revenue). Advanced Optical Technologies segment revenue was up 3.8% to $49.8m (12% of revenue).  Commercial Lasers business revenue was up 11.6% to $22.2m (6% of revenue).

Optical communications revenue was up 11.8% from $116m to $129.7m (33% of revenue), with particular strength in the agile optical network (AON) unit. The latter includes revenues for ROADMs (reconfigurable optical add/drop multiplexers) up 39%, via record shipments of 2500 units. (Analysts forecast that the ROADM market will grow at a compound annual growth rate of 33% over 2006-2009.) Revenue for 10Gb/s transceivers and transponders grew 32% sequentially. Gross margins for Optical Communications rose (due mainly to higher factory utlization, improved material costs, and favorable product mix), while the operating margin was positive for the first time in over a year (at 7.6%). Near-term targets for Optical Communications are gross margin of 20-30% and operating margin of 5-15%.

JDSU’s overall net income was $21.2m, an improvement on a net loss of $6.9m last quarter. On a non-GAAP basis, gross margin has grown from 40.6% a year ago and 41.3% last quarter to 46.3% (compared to the firm’s near-term goal of more than 40%). Operating margin rose from 2.2% last quarter to 11.4% (well above the firm’s near-term goal of 2-5%).

“In Q2 we achieved our near-term operating model goals, with evidence of progress towards longer-term targets” says CEO Kevin Kennedy. “Also, for the fourth consecutive quarter the company was free cash flow positive [generating more than $40m],” he adds. 

Kennedy says that JDSU is continuing to see favorable end-market indications for broadband services and network build-outs. He believes that broadband capacity will continue to expand as higher data rates are being delivered to the access edge accompanied by video applications.

In particular, after its new next-generation 8 and 10Gb/s SFP+ products continued to gain strong customer acceptance in fiscal Q2, JDSU expects to ship more than 100,000 units by the end of fiscal Q3/2008.

Kennedy also highlighted JDSU’s launch during fiscal Q2 of its avalanche photodetector (APD) chip for gigabit passive optical networks (GPONs) for fiber-to-the home (FTTH), its Integrated Laser Mach Zehnder (ILMZ) chip (which incorporates a tunable laser and optical modulator in a photonic integrated circuit), and its 10Gb/s widely tunable transmitter optical subassembly (TOSA), which uses the ILMZ chip . Such functional integration is a consequence of JDSU’s vertically integrated structure, and forms a key strategic prinicipal of the firm’s roadmap going forward, Kennedy says.

Overall for its fiscal third-quarter 2008 (to 29 March), JDSU expects revenue of $380-402m, but non-GAAP operating margin will fall to 4-7%, while gross margin will also fall, due to cycles in the product mix.

However, Kennedy believes that JDSU is now moving towards its long-term goal of sustainable gross margins of 43-47% and operating margin of 10% or more. While these figures were actually achieved in fiscal Q2, the firm expects to generally operate to these metrics by the end of calendar-year 2008. “Over time, we will evaluate the potential for operating to a more aggressive model,” he adds.

See related items:

JDSU’s profit margins boosted by agile products and cost cutting

JDSU invests in Mintera to partner on complete 40Gb/s solution

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