30 August 2010


JDSU grows 20% in June quarter, despite supply and capacity constraints

On a non-GAAP basis (including $15.7m from the acquisition of the Network Solutions Division from Agilent Technologies Inc at the beginning of May), for its full-year fiscal 2010 (ended 3 July) JDSU of Milpitas, CA, USA has reported revenue of $1373.4m, up 7% on fiscal 2009’s $1284.6m. Fiscal fourth-quarter revenue was $398.1m, up 19.6% on $332.9m last quarter and 45.2% on $274m a year ago.











“We continued to see robust demand across all of our segments,” says CEO Tom Waechter. “For the fifth quarter in the row, overall book-to-bill for the company was above 1. Each of our three segments also had a book-to-bill greater than 1, with particular strength in our Communications & Commercial Optical Products segment [especially for reconfigurable optical add-drop multiplexers],” he adds, as demand for optical products continue to outpace supply.

Advanced Optical Technologies revenue was $54.6m (13.7% of total revenue), down 6.8% on last quarter’s $58.6m but up 8% on $50.8m a year ago. Including the $15.7m from the Network Solutions Division, Communications Test & Measurement revenue was $186.2m (46.8% of total revenue), up 27.7% on last quarter’s $145.7m and 40.4% on $132.6m a year ago.

Communications & Commercial Optical Products (CCOP) revenue was $157.3m (39.5% of total revenue), up 22.3% on last quarter’s $128.6m and 74% on $90.7m a year ago. CCOP’s operating margin was 12.1% (now within the targeted range of 10–15%), based on operating income of $19.1m.

Within CCOP, Commercial Lasers revenue was $22.6m (up 20.7% on last quarter’s $18.7m and double the $11.4m a year ago), driven by growth in the semiconductor and microelectronic materials processing end-markets, with gross margin rising from 41.3% last quarter to 44.6% due to improved utilization.

Optical Communications revenue was $134.7m (up 22.6% on last quarter’s $109.9m and up 70% on $79.3m a year ago), despite supply and capacity constraints thwarting more than $10m of shipments. All geographic regions grew, including record sales in China for the fourth consecutive quarter. Ten out of 11 product lines grew sequentially, with reconfigurable optical add-drop multiplexers (ROADMs) growing 24% to more than 25% of Optical Communications revenue. Products less than 2 years old have grown to more than 50% of Optical Communications revenue. In particular, the next-generation 50GHz ROADM continues to ramp and more than doubled in revenue, while tunable XFP sales almost tripled (shipping to 32 customers and 43 design slots) and Super Transport Blade sales grew 50% sequentially. Gross margin rose from 26% last quarter to 28.5%, driven by favorable product mix and improved fab utilization, as well as continued optimization of the supply chain.

Fiscal 2010 was a year of accelerating revenue growth, driven by demand recovery in several key markets, and portfolio expansion for JDSU through innovative products in all the firm’s segments, says president & CEO Tom Waechter. “We completed two important acquisitions [including Finisar's Network Tools business in July 2009] and introduced a number of innovative products that resulted in higher market penetration,” he adds. “At the same time, we continued to execute against our stated strategic priorities, resulting in a more profitable operating model and sustained cash flow.”

Overall company gross margin has risen from 42.2% a year ago and 44.1% last quarter to 45.5% in fiscal Q4, with improvement in all three segments but driven by higher factory utilization in both the CCOP and AOT segments. Operating margin has improved from –1.2% a year ago and 6.6% last quarter to 9.3% (at the high end of guidance), based on the firm’s highest quarterly operating income since December 2007 ($37m).

On a non-GAAP basis, compared with net loss of $1.5m a year ago, net income has risen from $23.2m last quarter to $33.1m. For fiscal full-year 2010, net income has more than doubled to $91.9m from fiscal 2009’s $42.6m.

JDSU generated cash from operations of $119.2m for full-year fiscal 2010, including $46.9m in Q4. So, despite paying $165m for NDS, during Q4 total cash and investments only fell from $713.1m to $600.1m.

“We enter fiscal 2011 with order momentum and an industry-leading product portfolio,” says Waechter. For fiscal first-quarter 2011 (ending 2 October 2010), JDSU expects non-GAAP revenue of $410–425m (up 37.3–42.3% year-on-year and 3–6.8% quarter-to-quarter, as the material supply shortages subside) and non-GAAP operating margin of 8.5–10.5%.

JDSU’s operating model targets operating margin of 11–14% on revenue of $415–425m and gross margin of 46% by the end of calendar 2010, including CCOP operating margin of 10–15% on $150m of revenue. The firm believes that Optical Communications gross margin in particular can exceed 30% when quarterly that sector’s revenue reaches $150m.

JDSU says that, to meet increased demand, it has initiatives in place to boost production capacity by 33% in fiscal 2011, particularly in areas where it has significant product differentiation such as tunable XFPs, ROADMs, and Super Transport Blades as well as gesture recognition. “This capacity will be the result of the combination of improved utilization in yields and selective equipment purchases, while we maintain our current fabrication process footprint,” says Waechter. Capital expenditure is expected to be about 5% of revenue for the next several quarters while buying equipment for the NSD acquisition and investing to expand capacity for the CCOP and AOT segments.

See related items:

JDSU grows 15% quarter-to-quarter in Optical Communications

JDSU’s margin growth focused on new products

JDSU returns to underlying profit

JDSU sees component inventory levels burning off

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