FREE subscription
Subscribe for free to receive each issue of Semiconductor Today magazine and weekly news brief.




9 November 2009


JDSU returns to underlying profit

For its fiscal first-quarter 2010 (ended 3 October 2009), JDSU of Milpitas, CA, USA has reported revenue of $297.8m. This is down 21% from $377.2m a year ago but up 9% on $273.1m last quarter and at the high end of the guidance (given in August) of $283-300m. The Americas represented 51% of revenue, European 27% and Asia-Pacific 22%, with growth in all three regions.

“Results represent growth across all of our business segments, providing clear evidence of improving demand,” says president & CEO Tom Waechter.

Advanced Optical Technologies revenue was $54.1m (18% of total revenue), up 6.5% on last quarter and up 1.1% on a year ago. Communications Test & Measurement revenue was $143.4m (48% of total revenue), down 11.4% on a year ago but up 8.1% on last quarter (the second consecutive quarter of growth), although this was mainly due to $7.5m from the Storage Network Tools (SNT) business acquired in July.

Communications and Commercial Optical Products (CCOP) revenue was $101.1m (34% of total revenue), down 38% on $162m a year ago but up 12% on last quarter’s $90.7m. Of this, Commercial Lasers revenue was $15.1m, down 30% on a year ago but up 32.4% on last quarter. Optical Communications revenue was $86m (64% from transport; 36% from transmission, boosted by datacom products). This is down 38.8% on $140.6m a year ago but up 8.6% on last quarter’s $79.2m (as eight out of 11 product lines grew sequentially, particularly transmission products such as pluggable transceivers, tunables, and modulators). However, revenue for reconfigurable optical add-drop multiplexer (ROADMs) continued to fall (to less than 20% of optical communications revenue), as a major customer continued to burn off excess inventory.

“The leverage in our operating model and balance sheet will become increasingly evident as our top line grows,” says Waechter.

Non-GAAP gross margin has risen from 42.2% last quarter to 44% (improving in each business segment). This is due to continued benefits from lean initiatives and the transition to a variable-cost manufacturing model in the CommTest and CCOP segments (e.g. the transfer of JDSU’s optical communications assembly & test plant in Shenzhen, China to contract manufacturer Sanmina-SCI Corp in April).

In particular, optical communications gross margin was 19.7%, up on last quarter’s 17%. This is due mainly to the favorable product mix (led by the pluggables, tunables and amplifier product lines), as well as April’s closure of the ex-Picolight fab in Louisville, CO and consolidation of its GaAs chip manufacturing under one roof in JDSU’s GaAs and InP fab in San Jose, CA, plus closure of the firm’s submarine product assembly plant in San Jose by transferring its operations to Shenzhen).

Operating expenses have hence been cut by about $20m from a year ago. Including about 100 new staff from the SNT acquisition, headcount is 3982 (cut from 6714 before April's consolidation). Operating loss for CCOP in particular has been cut from $7.8m last quarter to $1.5m. Overall operating loss has risen from $16.2m to $27.5m.

On a non-GAAP basis, overall operating margin was 3%, down on 6% a year ago a year ago but an improvement on an operating loss of 1% last quarter.

Non-GAAP net income was $9m, still down on net income of $23.9m a year ago but an improvement on net loss of $1.6m last quarter. Free cash flow was $11.2m.

Fiscal Q1 was the first time in the last five quarters that JDSU’s book-to-bill ratio for optical communications was greater than one. In particular, the firm believes that the decline in its ROADM revenue has bottomed, as orders rose more than 30% on last quarter (with shipments expected to start in the December quarter).

Also, in September JDSU’s tunable XFP product (the first tunable available in an XFP form factor, it is claimed) was released into production. To date, the firm has engaged with 20 customers, up from 12 customers last quarter. In addition, the unique architecture of JDSU’s new Super Transport Blade provides substantial footprint savings, it is claimed, and is hence generating traction with network equipment manufacturer (NEM) customers (with significant orders already received from one customer — for production volumes in the December quarter — while JDSU is also working with most remaining customers). Total revenue from products less than two years old rose to about 30% in fiscal Q1, but JDSU aims to boost this to more than 50% over the next three years.

For its fiscal second-quarter 2010 (ending 2 January), JDSU expects revenue to rise to $320-345m and non-GAAP operating margin to rise to 5-8%. The full benefit of closing the San Jose plant won’t be realized until the March quarter, says chief financial officer Dave Vellequette. The near-term optical communications goal is for sustainable gross margin of 25-30%. “We believe we can operate in this range by the end of fiscal 2010,” he adds. For example, the recovery in ROADMs should boost gross margin, and JDSU is beta sampling next-generation 50GHz ROADMs for qualification at eight customers, with production volumes in fiscal Q3 expected to boost ROADM market share.

JDSU believes that the CCOP operating model supports an overall operating margin of 10-15% and gross margin of 46% at quarterly revenue of $150m for CCOP and $375-385m overall.

See related items:

JDSU sees component inventory levels burning off

JDSU consolidating VCSEL fab into San Jose to cut costs

JDSU sales decline accelerating

Search: JDSU Optical communications