5 February 2011

JDSU reports record revenue and profit margins

On a non-GAAP basis, for its fiscal second-quarter 2011 (ended 1 January), JDSU of Milpitas, CA, USA has reported net revenue of $477.2m, up 16% on $411.3m last quarter and up 38.8% on $343.8m a year ago (and well above the expected $425–450m). Of total net revenue, the Americas represented 51%, EMEA 26% and Asia-Pacific 23% (with all regions growing sequentially).

Advanced Optical Technologies (AOT) revenue was $54.7m (11.5% of total revenue), down 9.6% on $60.5m (15% of total revenue) last quarter. AOT gross margin was 48% (down from 50.4% last quarter) and operating margin was 32.4%.

Communications Test & Measurement revenue was $231.4m (48.5% of total revenue), up 26.6% on $182.8m (44% of total revenue) last quarter. CommTest gross margin was 60.9% (up slightly on last quarter) and operating margin was 19.4% (up from 11.9%, and above guidance).

Communications & Commercial Optical Products (CCOP) revenue was $191.1m (40% of total revenue), up 13.8% on $168m (41% of total revenue) last quarter and up 70.2% on $112m (just 33% of total revenue) a year ago. Within CCOP, Commercial Lasers revenue was $22.7m, down 9.2% after an atypically strong $25m last quarter (when customers replenished their inventories). However, Optical Communications revenue was $168.4m, up 17.8% on $143m last quarter and up 76.2% on $95.6m a year ago.

CCOP gross margin was 34.4% (including Commercial Lasers steady at 45.5%, and Optical Communications rising from 29.5% last quarter to 32.9%, driven by product mix, better factory utilization and cost-reduction activities). CCOP operating income was $34m (an operating margin of 17.8% of revenue), up from $24.2m last quarter and just $3.2m a year ago.

Overall company gross margin has risen from 44.6% a year ago and 47.4% last quarter to a record 48.8%, due mainly to the higher CommsTest revenue. Operating margin has risen from 8.2% a year ago and just 10.8% last quarter to a record 15.3%.

“JDSU reported record revenues, gross margin and operating margin, which exceeded our operating model target [of 11–14%],” says president & CEO Tom Waechter. “Our market drivers are strong, our innovation engine and pipeline for new products is robust, and we continue to increase our operating leverage,” he adds.

Net income has risen from $26.6m a year ago and $44.8m last quarter to $67m, driven by higher gross profit and operating expense leverage. After generating $60.7m of cash from operations (up from $35.7m last quarter) and following capital expenditure of $28.3m, during the quarter JDSU’s total cash and short-term investments hence rose from $620m to $655.3m.
For fiscal third-quarter 2011 (ending 2 April), JDSU expects AOT revenue to grow by 3% and CCOP revenue to grow by 6–10% (despite Optical Communications ASP decline expected to be slightly above JDSU’s quarterly sequential range of 2–4% due to just-completed annual pricing negotiations). However, for the March quarter CommTest revenue is historically seasonally lower as the December-quarter revenue includes calendar year-end budget flush spending from telecom carriers (a greater-than-expected $20m), and carrier budgets are typically released in the second half of the March quarter. Based on current visibility, JDSU hence expects CommTest revenue (after adjusting downwards for the budget flush) to fall by 6–12% sequentially.

JDSU therefore expects total net revenue to fall back slightly to $440–460m and operating margin to fall to 11–13% (including AOT falling to 29–32%, and CommTest to 13–16% due to lower revenue).

However, given current revenue levels, JDSU now targets operating margin of 16–20% for CCOP when the segment's revenue is above $190m. The firm also targets operating margins of 20–23% for CommTest and 32–35% for AOT. JDSU is hence also raising its targeted overall company operating margin from 11–14% to 14–17% when quarterly revenue is $460m or more and gross margin is 49%.

See related items:

JDSU grows revenue despite supply and capacity constraints

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

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

JDSU’s margin growth focused on new products

Tags: JDSU Optical communications

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