This story has been updated from 8:06 am EST with stock price update and analysts comments.
NEW YORK (TheStreet) -- Shares of JDS Uniphase (JDSU) surged 11% to $13.45 , after the company disclosed in a filing Wednesday that it plans to separate into two publicly traded companies, and following pressure by hedge fund Sandell Asset Management to split up, sources told Bloomberg.
The company said it create a separate company from its optical components and commercial lasers manufacturing unit, and another selling network-testing equipment. JDS Uniphase has a market capitalization of $2.78 billion.
More than 23 million shares of JDS Uniphase had changed hands on Thursday -- more than five times its three-month daily average trading volume.
Sandell, which has built up a stake of about 2% in JDS Uniphase, had been pushing the company in recent months to split up, sources said. The optical equipment business may attract buyers such as Avago Technologies (AVGO) or Finisar Corp (FNSR) , sources added, according to Bloomberg.
RBC Capital upgraded JDS Uniphase to "outperform" from "sector perform" and raised its price target by $7 to $18.
"It's an important step for JDSU and a significant new start for an industry defined by high innovation, but low price premiums. Splitting the business in two creates more attractive assets following different innovation paths with different end-customer applications. With early steps in place to unlock value, we're upgrading the stock," RBC Capital analyst Mark Sue writes in a note, who sees long-term potential for the stock to rise to $40.