JDSU Fans Gobble Up Split

Recoveries from postbubble plunges are rare. One tech favorite that did it without resorting to a reverse split was Corning (GLW), which traded for as little as $1.10 in October 2002 but has since recovered to about $20. Even so, that's just a fraction of the stock's August 2000 peak of $108.66.

Others have found less success. Lucent (LU), with 4.4 billion shares stuck in the low $3 range, last year got the go-ahead from shareholders to roll out a reverse split. Nortel (NT) is in much the same situation, but hasn't proposed a so-called share consolidation.

Still other networking shops like Riverstone and Redback were ready for the reverse move. But Redback ended up in bankruptcy and Riverstone was delisted and now trades on the pink sheets for 67 cents. And that's the category of stocks most investors think of when the playbook is open to the reverse split.

In many cases, a reverse stock split is the last-ditch effort to keep a stock price above $1 mark and maintain a listing on the Nasdaq or NYSE. But as market observers note, the move is entirely cosmetic and has no bearing on the underlying business.

Some investors even warn that reverse splits can easily invite more stock declines. This is particularly true if the company's fundamentals are deteriorating and the new, higher price starts looking like a fat target for short-sellers who benefit from a stock's decline.

To be sure, JDSU has made a flurry of moves aimed at revitalizing its business and its image. Just this month it has dropped the JDS Uniphase name and acquired tunable laser maker Agility. Still, the company lost $261.3 million in its latest fiscal year on $712.2 million in sales, and nonacquisition-related growth continues to be hard to come by.  

In any case, this reverse move is no layup.

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