12 February 2013

JDSU reports quarterly revenue at high end of guidance

Optical networking and associated semiconductor technology firm JDSU of Milpitas, CA, USA has reported a modest improvement in sales performance during its fiscal second-quarter 2013 (ended 29 December 2012).

On a non-GAAP basis, net revenue was $429.4m (at the high end of guidance), with net income of $42.3m ($0.18 per share). Revenue was up 2% on the prior quarter’s $420.9m, with net income of $35m ($0.15 per share). It is also up 4.8% on $409.6m for fiscal Q2/2012 a year previously, with net income of $36.3m ($0.16 per share).

“JDSU delivered a strong fiscal Q2/2013, with revenue at the top of our guidance range and operating margins exceeding expectations across all three business segments,” commented president & CEO Tom Waechter. “We are pleased with the progress we’ve made in aligning our product portfolio with customer spending priorities, resulting in a high percentage of revenue from new products and a positive impact on financial results. We are well-positioned for growth opportunities in 2013.”

Sales of Communications Test & Measurement equipment for optical and RF networks accounted for nearly half (46%) of overall revenue, at $195.4m (at the high end of guidance, up 15% on last quarter). Sales of Optical Communications products were $155.6m (down 4.5% on last quarter, but up 12.7% on a year ago), while sales of Commercial Lasers of $30.2m were down 5.3% sequentially but up by 20.3% on a year ago; together, Communications and Commercial Optical Products (CCOP) totaled $185.8m, 43% of overall revenue. Sales of Optical Security and Performance (OSP) products were $48.2m, 12% of overall revenue.

Considering geographic performance, the Americas, EMEA (Europe, Middle-East and Africa) and Asia-Pacific accounted for 49.9%, 23.8% and 26.3%, respectively, of total revenue. Operating cash generation was $59.4m (the highest in eight quarters). Cash and investments totaled $740.2m at the end of the quarter.

JDSU has adjusted its current and historical consolidated statements of operations and segment financials to reflect the October 2012 sale of its holographic security business. This business’s adjusted results are reflected as discontinued operations for the periods reported.

Looking to fiscal third-quarter 2013 (to end-March), the firm expects net revenue to be similar to the latest performance, at $405-425m.

Conference comments

During the analysts’ conference, chief financial officer & executive VP Rex Jackson detailed some of the performance figures from the latest quarter’s trading as well as offering some analysis of market conditions: “Our CommTest division delivered revenue of $195.4m, at the high end of our guidance, driven by demand for Ethernet, mobility, 100G and cloud solution, all areas of high priority for our customers. Revenues from all three major geographic regions grew sequentially. Year-on-year revenue declined by less than 1%, as organic growth and recent acquisitions effectively offset [our] portfolio pruning and the lack of a year-end budget flush,” he added.

CommTest delivered gross margin of 64.4%, a record high reflecting a sequential increase of 2.3% and year-on-year improvement of 4.2 points. The gross margin improvement, combined with effective OpEx management, resulted in segment operating profit of $35.3m or 18.1% of revenue, the highest operating margin for the segment since December 2010.

CCOP (the Optical Communications and Lasers businesses) delivered revenue of $185.8m, a gross margin of 30.9% and operating margin of 11.4%. Within the segment, Optical Communications reported revenue of $155.6m, which represented a sequential decline of $7.6m. Total ROADM (reconfigurable optical add-drop multiplexer) revenue declined 23% sequentially to 20% of Optical revenue compared to 24% last quarter.

“These sequential declines reflect, as expected, the impact of the large optical customers’ transition to vendor-managed inventory, which grew to 46% of optical revenue from 40% last quarter, and to the timing of key customer programs,” said Jackson. Tunable XFP revenue was flat on absolute dollars sequentially and represented 14% of Optical revenue. “We recognized a small amount of tunable SFP+ revenue in the quarter,” he added.  

The Optical Communications division’s gross margin improved to 28.3% on lower revenue from 27.5% in the previous quarter, due primarily to cost improvements. “The sequential ASP [average selling price] decline in fiscal Q2 was 1.2%,” Jackson said. We expect the sequential ASP decline in fiscal Q3 to be approximately 5%, in line with recent beginning of calendar year ASP declines.”  

Regarding fiscal third-quarter guidance, Jackson commented, “Based on normal seasonality, particularly in CommTest, we would expect some decline in revenue from our fiscal second to fiscal third quarter. Furthermore, we expect our customers to begin releasing their capital budgets in earnest in March 2013 and thus expect a positive impact of increased network investments in our June quarter.

“With these factors in mind, in CommTest, we expect lighter revenue and corresponding impacts on gross margin and operating margin. In CCOP, we expect a flattish quarter with a slight increase in optical components being offset by a decline in lasers. And for OSP, we expect a slight increase in revenue and consistent performance on profitability.

On a sequential basis, JDSU expects CommTest revenue to be down by 6-10%, CCOP to be flat plus or minus 3%, and OSP to be up 2-6%. Operating expenses are expected to be flat to up $4m, primarily reflecting continuing investments in R&D and beginning of calendar year payroll impact.

See related item:

JDSU reports quarterly revenue up year-on-year

JDSU’s quarterly revenue rises 7.4%, driven by growth in North America

Tags: JDSU Optical communications

Visit: www.jdsu.com

Author: Matthew Peach, Contributing Editor