JDS Uniphase eliminates 5,000 jobs

Company posts $1.3 billion loss for latest quarter BY JENNIFER FILES Mercury News

JDS Uniphase, the largest maker of parts for fiber-optic systems, will cut 5,000 more jobs and severely shrink its business because of the sharp decline in the communication equipment industry, executives said Tuesday.

The San Jose firm, which sells its products to companies like Nortel Networks, said demand will remain weak for at least the next few months.

JDS -- viewed as an up-and-comer among Silicon Valley networking companies -- is the latest victim of a shakeout that has hit virtually every business in its industry, from Cisco on down. But even after the cutbacks, JDS' standing as the largest company of its kind could help it emerge from the downturn in good shape.

``The diversity of their product line is going to make them a survivor,''said Arun Veerappan, who follows the company for Robertson Stephens.

Analysts had predicted restructuring, but some were surprised at the amount of cutbacks.

``Did I expect something this dramatic? No -- but I think it's the right thing to do,'' said Veerappan.

JDS reported a net loss of $1.29 billion, or $1.13 a share, for its fiscal third quarter, which ended March 31. Executives said they expect revenue to decline in the current three-month period.

And JDS said it may soon restate the third-quarter results to write off a staggering $40 billion in goodwill related to more than a dozen acquisitions, including its recent purchase of SDL. The merger would have been the largest in Silicon Valley history, based on stock prices when it was announced.

JDS' shares dropped $3.36 to $20.82 on the Nasdaq.

JDS, which makes lasers, amplifiers and other components that help transmit information over networks, grew rapidly through more than 20 acquisitions in recent years, as skyrocketing demand for better data networks spurred telephone companies and businesses to invest heavily. But when those customers dramatically cut back capital investments, the effect trickled down.

The job cuts amount to 20 percent of JDS' employee base and would include 900 local workers. They follow 3,000 layoffs that took place earlier this year.

To further save money, JDS will consolidate many business units, build more of its products in China, vacate more than 20 buildings around the country and write off the value of products it believes it won't sell within six months. Counting the layoffs, JDS said, the restructuring will cost $375 million to $425 million but save more than $250 million a year in ongoing expenses.

``During recent periods of extraordinary demand growth . . . we did everything we could to increase production. Now . . . we can concentrate on efficiency as well,'' chief executive officer Jozef Straus said in a conference call with analysts.

Chief financial officer Tony Muller said the restructuring doesn't mean JDS will stop making acquisitions.

``The price of anything we'd consider buying has come down dramatically,'' he said.

JDS sales for the quarter rose to $920.1 million from $394.6 million a year before. Not counting one-time items, the company earned $160 million, or 14 cents a share -- what analysts expected -- compared with profit of $108 million, or 11 cents, a year ago.

In the quarter ending in June, JDS said it will earn 5 cents a share, not counting several one-time items, on revenue of about $700 million.

The potential $40 billion write-off relates to goodwill, or intangible assets such as business relationships, that JDS acquired by buying SDL and other companies. Following accounting rules, JDS valued that goodwill based on its stock price when the deals were announced. But since, technology stocks have plunged. JDS says the acquisitions are worth much less, and that its balance sheet should be adjusted accordingly.

Executives are waiting for an evaluation from the Securities and Exchange Commission.

Large write-offs are common during downturns, as companies take the opportunity to clean up their financial statements, but the move JDS is proposing is unusual.

``I am not sure that there's an economic justification to write off $40 billion in goodwill,'' said Reuven Lehavy, professor of accounting at the Haas School of Business at the University of California, Berkeley. Goodwill should reflect actual business synergies, not just market prices, he said.

``What if the market turns around next year, are they going to want to write it up?''

http://www.siliconvalley.com/docs/news/svfront/jds042501.htm

-- Martin Thompson (mthom1927@aol.com), April 25, 2001