JDS Uniphase: You Can Dress the Turkey, but It Still Can't Fly

No matter what anyone says about a rebound in fiber-optics sales, this stock could easily fall further.
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Bashing JDS Uniphase (JDSU) is becoming a cliche. Just last week The New Yorker seized on its $150 peak share price as the tech boom's zenith of impaired reasoning.

But even now, at the beaten-down price of $6.66 and after an earthshaking

$45 billion writedown of acquisition overpayments, the JDS Uniphase bubble may yet have some air waiting to be let out.

Two reasons: A new wave of

dramatic equipment-spending cuts are in the works for next year. And rival

Corning

(GLW) - Get Report

warned last week of sudden widespread cancellations of orders for new fiber-optic cable; the company said it would cut an additional 1,000 people from its ranks.

Granted, JDS

just told us a little more than a month ago that it doesn't see "signs of a reversal in the downward trend in the industry" and declined to offer any further financial projections for other periods. But as we have seen, a lot can happen in a month.

Though these developments should hardly be a surprise to anyone who has read even a portion of

TheStreet.com's

yearlong

spending slowdown coverage, it seems Wall Street's growth assumptions for the optical component maker are still a tad lofty.

To be sure, in the ebb and flow of networking, old systems will buckle under increased demand and new systems will need to be built. Eventually the tolls on that traffic in the form of service-provider revenues will one day flow back to JDS as phone companies buy new network parts like lasers and amplifiers again. In other words, long-term, JDS represents a fairly convincing story.

But it's the short term that investors should consider here. Not only did JDS customers buy more network parts than they could ever use, but many of those customers are or will soon be out of business. And the remaining customers, even those with cash at their disposal, are suddenly far less compelled to buy new optics now that the new Internet arms race is over.

Sure, everyone agrees there will eventually be a rebound in fiber optics. But who would have guessed JDS would trade in the mid-single digits just a year after it traded in the $120s? Don't be so sure you can't lose more money on this sucker.