8 November 2011

JDSU’s quarterly revenue falls 10.8% to $421.1m

On a non-GAAP basis, for fiscal first-quarter 2012 (ended 1 October 2011) JDSU of Milpitas, CA, USA has reported net revenue of $421.1m, down 10.8% on $472.3m last quarter but up 2.4% on $411.3m a year ago and at the high end of the $400-425m guidance range.

Of total revenue, 50% came from the Americas, 24% from EMEA (Europe, Middle East and Africa) and 26% from Asia-Pacific.

Revenues declined slightly quarter on quarter in each business segment. Advanced Optical Technologies (AOT) revenue was $55.6m (13.2% of total revenue), down 5.3% on $58.7m last quarter and 8.1% on $60.5m a year ago. Communications Test & Measurement (CommTest) revenue was $185.2m (44% of total revenue), up 1.3% on $182.8m year ago but down 12.4% on $211.3m last quarter.

Communications & Commercial Optical Products (CCOP) revenue was $180.3m (42.8% of total revenue), down 10.9% on $202.3m last quarter but up 7.3% on $168m a year ago.

Within CCOP, Commercial Lasers revenue was $30.2m, up 8.6% on $27.8m last quarter and up 20.8% on $25m a year ago (the sector’s best quarter in at least two years), due to strength in Q series solid-state lasers, CPV solar cells, and the recently introduced 4kW fiber laser for macro-machining applications.

However, Optical Communications revenue was $150.1m, up 5% on a year ago but down 14% on $174.5m last quarter. More than half of the decline was due to gesture recognition products falling to less than 2% of total revenue, while ROADMs (reconfigurable optical add-drop multiplexers) and tunable XFP modules fell due to customer inventory correction. Nevertheless, of Optical Communications revenue, ROADMs still comprised 28% and tunable XFP 10%.

New-product revenue remains strong, with 67% of Optical Communications revenue and 56% of CommTest revenue being generated from products less than 2 years old.

Hence, although still down slightly from 47.4% a year ago, gross margin has risen from 46.7% last quarter to 47.3% (despite the lower revenue), due mainly to the segment mix as well as CommTest gross margin rising from 59.3% last quarter to 61.9% (above the targeted 57-61%). AOT gross margin was 47.1% (down from 49.4% last quarter). CCOP gross margin was 32.3% (down from last quarter’s 32.8%), including 28.8% for Optical Communications (down from last quarter’s 31.1% and below the targeted 30-35%) and 49.3% for Commercial Lasers (up from 43.4% due to growth in solid-state lasers).

Operating expenses have been cut from $162.3m last quarter to $152.9m, due mainly to lower headcount in CommTest (a direct result of restructuring activities). Operating margin has still fallen from 12.3% last quarter to 10.9%, but this is up slightly on 10.8% a year ago and exceeded the guidance range of 7.5-9.5%. This includes operating margin of 13% for CommTest (down from last quarter’s 14.4%, but above the expected 8.5-10%), 14.2% for CCOP (down from 15.9%), and 31.5% for AOT (down from 34.1%).

“Although revenue levels are being restricted by these global headwinds, the mix of our highly innovative and differentiated products continues to grow with a favorable impact on gross margin,” says president & CEO Tom Waechter. “This, combined with strong cost controls, allowed us to significantly exceed expectations for operating margins,” he adds.

Net income was $40.9m, down from $53.9m last quarter and $44.8m a year ago. JDSU generated $22.9m of cash from operations (down from $56m last quarter). Capital expenditure was cut from $30.9m to $21.2m. During the quarter, total cash and investments fell from $728.7m to $723.3m.

During fiscal Q1, CCOP customer inventory levels reduced to more targeted levels and bookings strengthened. In particular, for tunable XFP modules, bookings rose 70% on last quarter and the book-to-bill ratio was over 1. For ROADMs, bookings rose nearly 25% (the highest level in the last three quarters) and the book-to-bill was nearly 1 after three consecutive quarters below 1 due to the inventory build up.

However, due to complications from the flooding in south Thailand at contract manufacturer Fabrinet, lead times for Fabrinet-assembled products (which include ROADMs, tunable XFPs, some amplifiers, and some other low-volume products) will be extended (from the current 4-6 weeks) during fiscal Q2.

“All JDSU Thailand employees [at the Pinehurst facility of contract manufacturer Fabrinet] are safe from the flooding in southern Thailand, and we have added additional employees there to help meet our customer’s needs as best as possible under these difficult conditions,” says Waechter. Power to the facility has been restored, and JDSU’s equipment at Pinehurst is being readied for production. “We expect to have some level of production within the next week or two,” he adds. “We have been able to ship some existing finished goods to our customers.”

JDSU believes that, had the Thailand flooding not occurred, the September quarter would have been the low point of CCOP revenue for the fiscal year, and that Q2 CCOP revenue would have grown sequentially in the low to mid single-digit percent range.

Instead, due to uncertainty in the timing of the ramp back to full production in Thailand, for fiscal second-quarter 2012 (ending 31 December 2011) JDSU expects net revenue to be reduced by $35-45m to $375-405m, down 15-25% sequentially (with the upper figure assuming a slow return to production).

JDSU expects operating margins of 12.5-14.5% for CommTest and 30-32% for AOT (both roughly level with fiscal Q1) but just 3-7% for CCOP (due to the incremental costs being incurred to bring production back online). Total operating margin should hence fall to 5.5-8.5%.

Tags: JDSU Optical communications

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