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Date: Fri, 27 Oct 2000 02:19:00 -0700 (PDT)
From: fool@motleyfool.com
To: benjamin.rogers@enron.com
Subject: Breakfast With The Fool: JDS Uniphase's White-Hot Q1
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B R E A K F A S T W I T H T H E F O O L
Friday, October 27, 2000
benjamin.rogers@enron.com
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JDS UNIPHASE'S WHITE-HOT Q1
The optical networking component maker's fiscal Q1 earnings came
in looking strong. Will they be enough to reverse this week's
mass sell-off in the sector?
By Dave Marino-Nachison
An upbeat fiscal first-quarter earnings report from fiber optic
components leader JDS Uniphase (Nasdaq: JSDU) following last
night's bell perked up investors in after-hours trading, pumping
the stock 12%, after a 25% plummet on Wednesday. JDSU and other
fiber optics companies, such as Sycamore Networks (Nasdaq: SCMR)
and Ciena (Nasdaq: CIEN), have been capsized by the wake of
Nortel's (NYSE: NT) earnings report from earlier in the week.
(Nortel is a major customer of JDSU.)
Nortel's optical networking division didn't grow as quickly as
some analysts hoped, which compounded another recent
disappointment from Lucent (NYSE: LU). But Rule Maker JDSU's
results sparkled: Revenues rose 171% year-over-year and, at $785
million, overcame the projections of market watchers. Pro forma
net income rose 29% to $0.18 per share, beating Street forecasts
by two pennies.
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Now JDSU expects to earn $0.80 per share -- a dime better than
expected -- for the fiscal year, CFO Tony Muller reportedly said
on a conference call. He also pointed investors toward top-line
growth of between 115% and 120%. "Optical demand is good and
healthy," a Robertson Stephens analyst told Bloomberg.
"We believe demand remains strong,'' COO Charles Abbe was quoted
as saying. He maintains the company isn't seeing the inventory
channel grow fat at the expense of future sales: "We can't find
any meaningful evidence of an industry slowdown.'' Look for Q2
pro forma earnings of $0.19 or $0.20 per share, execs said,
compared with $0.17 as projected by Wall Street.
While short-term market movements are of little interest to
Fools, today's trading should prove interesting as investors
work to make sense of the recent rash of seemingly conflicting
indications. While some might say the fiber optic sector was
merely due for a "correction" of sorts, of greater importance
are clues about the sort of demand that lies ahead to justify or
confound even today's damaged -- but still extremely high --
valuations.
Demand for the components that speed data transmissions and
fatten networks to meet skyrocketing bandwidth needs isn't
expected to slow significantly for the next several years. For
more information, check out a column Richard McCaffery wrote
back in July.
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NEWS TO GO
Kellogg (NYSE: K) agreed to buy Keebler Foods (NYSE: KBL) for
$3.86 billion, or $42 a share, a 4.4% premium over Keebler's
$40.44 close yesterday. Kellogg will triple its debt load to
swallow Keebler, but buying the No. 2 cookie and cracker maker
helps it diversify its core breakfast cereals business, which
has seen no growth for a decade. Keebler and No. 1 snack maker
Nabisco Holdings Corp. (NYSE: NA) compete in a market growing at
4% a year. Philip Morris (NYSE: MO) will join its Kraft division
with its planned purchase of Nabisco Holdings, not to be
confused with Nabisco Group Holdings (NYSE: NGH), to be
purchased by R.J. Reynolds (NYSE: RJR).
Leading biopharmaceutical company Amgen (Nasdaq: AMGN) reported
a pro forma 12% increase in revenues and an 18% increase in
earnings for the quarter ending September 30. However, the
company forecasted slower sales for its two main revenue
producers, Epogen and Neupogen, and said that approval of its
Kineret rheumatoid arthritis treatment could be delayed until
the second half of next year. Amgen's shares dropped to $59.50
in after-market trading, from $68.50 at the day's close.
Big-shot hedge fund manager Jeffrey Vinik announced that he was
returning most of the $4.2 billion in assets of Vinik Asset
Management so he can spend more time with his family. Most
investors remember Vinik, 41, as the manager appointed to
replace legendary Peter Lynch at Fidelity's Magellan Fund. Vinik
Asset Management reportedly turned in a four-year 645% return to
investors, 440% after fees.
Beleaguered Belgian voice recognition software maker Lernout &
Hauspie Speech Products (Nasdaq: LHSP) announced it would
resolve confidentiality agreements and release to Securities and
Exchange Commission and European Easdaq exchange investigators
the names of 30 investors in closely held companies that Lernout
says are customers. These Belgian and Singaporean companies
figure prominently into accusations of impropriety concerning
Lernout's Asian divisions' revenues. The Wall Street Journal has
run several stories hitting the company hard for alleged
questionable accounting, but the company has maintained that its
practices are legal and common in Europe, but misunderstood by
Americans. The disclosure news sank the stock price another 35%.
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