News > Technology
JDS sets job cuts, warns
April 24, 2001: 1:22 p.m. ET

Biggest fiber-optic products maker plans to cut 5,000 jobs in restructuring
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NEW YORK (CNNfn) - JDS Uniphase Corp. reported quarterly earnings Tuesday that matched Wall Street forecasts, but the No. 1 supplier of components for fiber-optic networks warned its current quarter won't meet forecasts and said it was cutting 5,000 jobs, or 20 percent of its work force, in a bid to cut costs.

Despite the cost-cutting moves, the warning sent shares of JDS Uniphase (JDSU: down $2.80 to $21.38, Research, Estimates) tumbling about 9 percent Tuesday morning.

The company reported profits of 14 cents a share for its fiscal third quarter excluding goodwill and special charges. That matched analysts' forecasts, according to First Call, and was up from 11 cents a share a year earlier.

Sales rose to $920 million from $485 million a year earlier, but were down from $925 million in the prior quarter. They also missed the First Call forecast of $930.7 million for the latest period.

Ottawa-based JDS warned that earnings for its fourth quarter, ending June 30, will be 5 cents a share before restructuring charges, well below average forecasts of 12 cents a share. Only $700 million in sales is expected, badly missing the consensus forecast of $925.4 million. The company blamed the current business downturn for the revised outlook and said it can't make any forecasts about fiscal 2002.

"Is this the bottom of the industry downturn? We're not sure," chief financial officer Anthony Muller said in a conference call with analysts and investors. "Given the uncertainty in these factors, we have limited visibility on future sales. During the March quarter we experienced a very high number of cancellations. We believe that level of cancellations has either run its course or is close to having run its course."

JDS said it expects one-time costs of the job cuts and from closing plants and several operations to be between $375 million and $425 million.

The company said it will close 25 facilities as part of a consolidation of both product and operations, and it will move several of its manufacturing facilities to China as part of the global realignment program. It estimated it expects the moves to save the company more than $250 million a year. Most of the job cuts are to be completed by the end of September.

The company also said it is seeking U.S. Securities and Exchange Commission guidance on how to assess goodwill costs in the wake of the downturns in the telecom industry and financial markets. That guidance could result in additional charges, the company said.

The company said the loss in value of goodwill of companies it purchased will not reduce pro forma results, but could lead to a net loss of up to $40 billion for the period. Goodwill, the value of a purchased company above the value of its assets, can create a drag on earnings for a certain time period.

"It would be a rather startling set of numbers," Muller said. "But this is an issue you will see in many other companies."

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Much of Monday's drop came amid speculation that JDS will announce a deal to buy Lucent Technologies's (LU: Research, Estimates) fiber-optic cable business, but neither company said anything about such a deal in their announcements Tuesday morning.

Muller and CEO Jozef Straus said JDS has moved out of the period of rapid expansion and acquisition driven by high growth in past years to a time of consolidation and emphasis on cost control. Muller did not rule out additional purchases, but he suggested the company more likely will be eyeing smaller companies that now might be available at a bargain price.

"The price of anything we'd consider buying has come down substantially," he said. "Particularly for smaller companies, this downturn has given us some very attractive buying opportunities."

JDS has used acquisitions to grow rapidly in recent years, closing its biggest deal, the $14 billion stock purchase of SDL Inc., on Feb. 13. Higher stock prices had valued that deal at $41 billion at the time it was announced in July 2000. graphic