The rising tide in the telecom equipment sector lifted

JDS Uniphase

(JDSU)

Tuesday.

JDS, a downtrodden maker of optical components for communications networks, jumped 10% in Nasdaq-leading midday volume of 117 million shares as investors bid up their latest favorite from this once-ignored industry. Shares across the sector have risen 40% and more this year as Wall Street bets that 2004 will finally bring a thaw to the long-frozen network spending landscape.

A certain amount of speculation has naturally accompanied the all-out rally, which began early in the new year with positive comments from industry giants

Nokia

(NOK) - Get Report

and

Verizon

(VZ) - Get Report

. On Tuesday, a rumor was making the rounds that JDS could be a possible acquisition target at the hands of French telecom gear giant

Alcatel

(ALA)

.

Look Familiar?
JDS, Avanex surge

With the stock market's strong performance in recent months, attention in tech circles has naturally turned to the prospect of a revival in the long-dormant mergers-and-acquisitions arena. Adding to that chatter Tuesday was a report that wireless giant

Cingular

is making a bid for

AT&T Wireless

(AWE)

.

Skeptics of the JDS rumor would note, however, that last May Alcatel and U.S. rival

Corning

(GLW) - Get Report

effectively ditched their staggering optical businesses by

forking over cash and stock to entice aggregator

Avanex

(AVNX)

to take over those money-losing operations.

Meanwhile, JDS' business remains in a tight spot. The company has spent much of the last three years slashing jobs and losing billions of dollars as its revenue continues to slide. JDS said in October, when it last reported earnings, that it would

slash more jobs and further reduce revenue estimates. The company has already trimmed its staff by more than 80% from peak levels.

On Tuesday, Avanex slipped 27 cents to $7.12, while JDS surged 50 cents to $5.67.