JDSU Fans Gobble Up Split

Updated from 7 a.m.

So far, so good for JDSU's (JDSU Quote - Cramer on JDSU - Stock Picks) split decision.

Investors cheered the fallen bubble-era favorite for the first time in a long while last week. The San Jose, Calif., optical networking company is asking shareholders to approve a reverse stock split that would boost the share price by reducing shares outstanding.

The company cited the need to attract institutional investors, many of whom are prohibited from buying stocks that trade for just a dollar or two. JDSU shares jumped 17% over five days, clearing $2 for the first time in six months.

But the recent run-up aside, investors boarding the JDSU bandwagon could be in for a bumpy ride. A look at recent reverse splits in tech and telecom shows that few companies flourish after the move. Of 11 stocks tracked by TheStreet.com, only four have gained since the reverse split took effect.

Of course, companies that do reverse splits tend to be in a tough spot, and JDSU is no exception. The stock fetched as much as $124 in the summer of 2000, at the tail end of the Internet building boom. But then customer orders went into a deep freeze and the company, then known as JDS Uniphase, endured a $50 billion write-off of acquisition overpayments as well as numerous rounds of layoffs. Its shares swiftly plunged into the single digits, where they have been stuck for more than four years.

Beyond its tattered business, the root of the JDSU mess lies in the stock-swap acquisition binge that first vaulted the company into the spotlight. In that regard, JDSU isn't alone. Lots of huge telecom and networking supply outfits, ranging from giant Cisco (CSCO Quote - Cramer on CSCO - Stock Picks) on down to tiny Ariba (ARBA Quote - Cramer on ARBA - Stock Picks), printed mountains of new stock during the Internet boom. The companies used the shares as currency to pay employees and for acquisitions. Since then, though, the market for tech stocks has tanked, and many onetime highfliers find themselves sitting on mounds of stagnant stock.

Going Bananas Most stocks stagger after reverse splits
Company	Split Date	Ratio	Recent Price	% Change*
GoAmerica (GOAM:Nasdaq)	10/4/2004	1-for-8	$4.44	57
ADC Telecom (ADCT:Nasdaq)	5/10/2005	1-for-7	22.99	43
Avici (AVCI:Nasdaq)	11/8/2002	1-for-4	4.48	32
Openwave (OPWV:Nasdaq)	10/22/2003	1-for-3	18.59	29
Agere (AGR:NYSE)	5/31/2005	1-for-10	10.42	-23
Broadwing** (BWNG:Nasdaq)	10/8/2004	1-for-10	4.98	-36
Bookham (BKHM:Nasdaq)	9/13/2004	1-for-10	4.69	-38
Ariba (ARBA:Nasdaq)	7/1/2004	1-for-6	5.71	-54
FiberNet*** (FTGX:Nasdaq)	5/12/2003	1-for-30	2.21	-86
Trinsic**** (TRNCD:Nasdaq)	12/2/2004	1-for-5	1.55	-92
Critical Path (CPTH:Nasdaq)	8/1/2003	1-for-4	0.45	-97
*Reflects percentage change in postsplit shares after the reverse split took effect. **Formerly Corvis ***Did a second reverse split, a 1-for-10, on May 25, 2005 ****Formerly Z-Tel

« Previous Page

1 2

Next Page »