Bad News Piles Up as JDS Sets More Firings
JDS Uniphase (JDSU) Tuesday forecast a sharp fourth-quarter earnings and sales shortfall and said it would fire 5,000 workers, or 20% of its staff, in a cost-cutting move.
that it would shed 3,000 jobs, or 10% of its workforce, but at the time JDS remained confident that business would bounce back in due time. No more. JDS also said Tuesday that it may need to take massive writedowns to reduce the amount of acquisition-related goodwill on its balance sheet. But the firm couldn't offer a profit or sales outlook for fiscal 2002, as business-trend visibility continues to elude tech companies. The stock fell 9% in early Nasdaq trading.Feeling the Pinch
With cash-pinched phone and Internet companies buying less communications gear to build out their networks, suppliers such as Cisco (CSCO), Nortel (NT) and Lucent (LU) have been awash in inventory due to dramatically reduced sales. Companies like JDS and Corning (GLW), the suppliers to the network system sellers, are feeling the full force of a spending slowdown that has been battering their customers for two quarters now. Citing its customers' ambitious ordering of last fall and subsequent write-offs of surplus components, JDS executives said inventory adjustments could continue through the fall quarter. As a result, JDS is unable to forecast sales and profits beyond the current fourth quarter. And the company's outlook for the fiscal fourth quarter ending in June was grim. Earnings will fall to 5 cents per share, down from the 12 cents Wall Street expected and down from 14 cents a year earlier. Revenue will drop to $700 million, a 24% sequential decline. Wall Street had forecast revenue of $925 million, up from $524 million a year earlier.Meeting
JDS met twice-lowered expectations for its fiscal third quarter, reporting operating earnings of 14 cents a share on sales of $920 million. Including merger-related charges, the company lost a staggering $1.3 billion, or $1.13 per share. Some investors had anticipated that JDS would use its special early morning conference call Tuesday to announce a buy of Lucent's fiber optical cable business, which is on the block and expected to move in coming weeks for something in the area of $4 billion to $6 billion. JDS shares dropped as much as 20% after the market closed Monday amid rumors of such a deal. But Tuesday morning, JDS sounded like another deal was the last thing it wanted a part of. Executives on the conference call said they were enlisting the assistance of the staff of the Securities and Exchange Commission to advise on the possible writedown of the $56.2 billion in goodwill JDS has put on its balance sheet in making a series of high-priced stock-swap acquisitions. Assets including unamortized goodwill exceed JDS's market capitalization by $40 billion, the company noted in its press release. Saying that "downturns in telecommunications equipment and financial markets have created unique circumstances with regard to the assessment of goodwill," JDS said writedowns are likely and that it might restate third-quarter results to adjust how it handles the goodwill.>To order reprints of this article, click here: ReprintsTheStreet Premium Services For Personal Service: 877-471-2967
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