JDS Uniphase to Shed 5,000 Jobs as Demand Shrinks
JDS Uniphase Corp. will cut 5,000 jobs, or 20% of its work force, as the biggest maker of parts used in fiber-optic equipment closes plants because of a continuing decline in customer demand.
The San Jose-based company lowered for the second time revenue and profit forecasts for the fourth quarter ending June 30, sending JDS’ shares down as much as 15%. JDS also said its third-quarter loss widened and it may restate the results to write down $40 billion of goodwill on its balance sheet from acquisitions.
“They’ve got to shed their skin and move into a smaller body,” said Bill Burt, a money manager at Eaton Vance Management Inc., which owns JDS shares. “Fewer people, fewer buildings, lower expectations.”
JDS is retrenching just two months after acquiring SDL Inc. for $13.5 billion to boost production after sales surged during the last three years. Telecommunications companies, which buy gear from JDS customers such as Nortel Networks Corp., have reduced spending because demand for their services hasn’t kept up with increases in network capacity.
JDS’ third-quarter loss widened to $1.29 billion, or $1.13 a share, from a loss of $240.9 million, or 32 cents, a year earlier. Sales more than doubled to $920.1 million from $394.6 million, JDS said.
JDS had “a very high level of [order] cancellations” in the third quarter, Chief Financial Officer Tony Muller said on a conference call with analysts.
The cost-cutting measures will save more than $250 million annually, the company said. JDS makes lasers, amplifiers, transmitters, filters and other devices used in equipment that helps run long-distance telephone networks and the Internet.
JDS shares fell $3.36 Tuesday to close at $20.82 on Nasdaq. The shares have lost half their value this year. In the five years before July, JDS shares rose to more than $140 from about 70 cents.
The company also said profit in the fourth quarter will be 5 cents a share, excluding merger-related charges, amortization of goodwill, stock-based compensation and other expenses, on revenue of about $700 million.
On that basis, the company was expected to earn 12 cents on revenue of $925.4 million, the average estimates of analysts polled by First Call/Thomson Financial.
In February, JDS said it would fire 3,000 people, or 10% of its work force. The company has already cut 2,200 jobs and will fire 800 more by the end of June, before the new round of 5,000 layoffs, spokesman Jeff Wild said.
Most of the job cuts will be completed by the end of September, Co-Chairman and Chief Executive Jozef Straus said.
The measures announced Tuesday will cost $375 million to $425 million. The company will shift some manufacturing to China to take advantage of lower costs while closing and vacating 25 buildings.
CFO Muller said JDS is in talks with the Securities and Exchange Commission to write down its goodwill by about $40 billion to make the company’s book value equal to its market value. Goodwill is created when a company buys an asset for more than its stated value. The resulting intangible asset usually is written off against earnings over a number of years.
Robert Willens, a managing director at Lehman Bros. Holdings Inc. in New York, said moves such as this aren’t unusual and are “getting more common,” as amortization of goodwill will end under an imminent proposal by the Financial Accounting Standards Board.
Though the SDL acquisition was valued at $13.5 billion, the company recorded the transaction at $41 billion based on the value of JDS stock for two weeks around the time the purchase was announced in July, a regulatory filing said.
Excluding merger-related costs, amortization of goodwill, stock-based compensation and other expenses, JDS earned $160 million, or 14 cents a share, in the third quarter. On that basis, earnings matched the average estimate of analysts in a First Call survey.
