JDS Uniphase Reports Earnings Doubled in Second Quarter

Predicting faster sales growth in the coming months, stock-market darling JDS Uniphase (JDSU Quote - Cramer on JDSU - Stock Picks) reported late Wednesday that its earnings had more than doubled, exceeding Wall Street's expectations.

Shares of the fiber-optics telecommunications equipment maker, which have gained more than 1,300% as the company made a string of acquisitions over the last year, gained more than 4 points after the announcement to trade at 220 1/2 at 6 p.m., according to Instinet. They had fallen 15 1/16, or 6.5%, to 216 15/16 during the regular trading session as the Nasdaq and the telecommunications sector suffered.

For the second quarter ended Dec. 31, the San Jose, Calif.-based company posted earnings, excluding one-time charges, of $66 million, or 18 cents a diluted share, on revenue of $281.7 million. That compares with earnings of 8 cents a share, or $27 million, on revenue of $128.7 million, in the year-earlier quarter. Analysts polled by First Call/Thomson Financial had expected earnings of 15 cents a share in the latest quarter.

Because the company is a roll-up, assembled from a series of mergers and acquisitions, much of the discussion surrounding earnings reflects what analysts and investors have agreed to believe about the company's future.

For instance, the earnings numbers from last year are assembled from the performances of JDS Fitel and Uniphase, which merged last year to form the company. JDS Fitel's net income of $14.2 million and Uniphase's net income of $2.4 million only add up to $27 million after a $10.2 million adjustment is added and an $11.4 million adjustment is subtracted from operating expenses.

The second-quarter earnings, and analysts' predictions, exclude the costs of buying other companies. Including those charges, the company lost $131 million, or 38 cents a share, in the latest quarter.

Analysts who follow JDS Uniphase concentrate instead on its growth rates and how company officials appear to be managing that growth. In a conference call to discuss the announcement, analysts roundly congratulated the company.

On the conference call, company officials predicted 15% growth in the business and in its acquisitions and 25% sales growth for the third quarter. The former represents no change, but the latter is 3 percentage points higher than the growth rate in the previous quarter.

"Our challenge continues to be to expand capacity fast enough to meet our customers' demands," said Tony Muller, the company's chief financial officer.

The analysts' consensus for the quarter ended March 31, currently 17 cents a share, is low, Muller hinted on the call. But he stopped short of advising analysts to raise their estimates, asking that they "understand our fiscal conservatism."

JDS Uniphase, which has said it intends to split its stock 2 for 1, faces a raft of accounting quandaries due to its appetite for acquisitions. Company officials said they have stepped up internal audit procedures and completed accounting for so-called efficiencies, or reduced costs due to eliminating overlapping expenses after purchases.

The company's tax rate may grow to 34% from 33% because some acquisitions face higher tax rates.

Two customers -- Nortel (NT Quote - Cramer on NT - Stock Picks) and Lucent (LU Quote - Cramer on LU - Stock Picks) -- purchased a combined 46% of the goods JDS Uniphase sold in the quarter, the company said.