NEW YORK (TheStreet) -- JDS Uniphase (JDSU) was gaining 3.2% to $13.21 Wednesday following a report that activist hedge fund Sandell Asset Management is urging the company to sell its optical and laser business.

Sandell's plan is in addition to JDS Uniphase's previously announced plan to split into two separate companies, according to Bloomberg. The company said in September that it plans to split into two companies: one that focuses on optical components and commercial lasers, and another that focuses on selling network-testing equipment.

The activist investor reportedly also wants JDS Uniphase to extract tax benefits from its operating losses, which as estimates to be worth up to $10 a share, according to Bloomberg.

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TheStreet Ratings team rates JDS UNIPHASE CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate JDS UNIPHASE CORP (JDSU) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 6.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for JDS UNIPHASE CORP is rather high; currently it is at 53.63%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.66% is in-line with the industry average.
  • Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.93 is very high and demonstrates very strong liquidity.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 127.5% when compared to the same quarter one year ago, falling from $92.50 million to -$25.40 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, JDS UNIPHASE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: JDSU Ratings Report

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