JDS Uniphase cutting 7,000 jobs after grim quarter

On the heels of rival Corning Inc.’s positive view of the future, optimistic investors bid up shares of fibre-optic maker JDS Uniphase Corp. prior to its fiscal fourth-quarter earnings announcement Thursday.

Their confidence was misplaced. The Nepean, Ont.-based company reported a loss of almost US$500 million for the quarter and wrote down $45 billion, an admission that it had paid too much for the companies it acquired during its rapid expansion. The news was even worse for JDS Uniphase employees, two-thirds of which will be laid off soon.

JDS Uniphase, which makes parts that go into the telephone networks, is at the bottom of the telecommunications food chain. The high-profile problems that started with voice and data carriers spread to system vendors and, as evidenced by JDS Uniphase’s performance, have now sunk to the component makers. When Nortel Networks Corp., JDS Uniphase’s largest customer, reported its own dismal quarter last week, everyone knew JDS Uniphase would have a tough quarter.

The world’s largest maker of fibre-optic components reported a loss of $477 million ($0.36 a share) for its fiscal fourth quarter ended June 30. The performance compares with a profit of $137 million ($0.14 a share) reported in the same quarter a year ago.

The sector’s troubles have weighed on investors. Although JDSU shares surged nearly eight per cent before earnings were released, investors quickly slammed it in after-hours trading. Shares fell more than 14 per cent in the late session to $8.11. Trading was halted during the regular session at the company’s request after a hacker broke into its system and saw the earnings before they were released.

The firm said that it would cut 16,000 jobs, including 9,000 to be shed during the current quarter. That amounts to nearly two-thirds of the company’s workforce. The company, which earlier this year employed about 25,000 employees, said the layoffs would help it break even on $350 million in quarterly sales. The cost of the restructuring is estimated at $900 million to $950 million, more than double the previously forecasted $425 million.

The most acquisitive company in its sector, JDS Uniphase also said that it would recognize $45 billion in acquisition-overpayment charges. Earlier this year, with a lofty valuation almost 10 times what it is today, the company snapped up rival SDL. It is now a victim of not just slowing demand for its product, but also Canadian accounting laws, which prohibit pooling-of-interest accounting. That accounting allows for the simple combining of balance sheets from acquisitions, without the creation of additional goodwill – the difference between the purchase price and tangible assets. Because of this, companies such as Nortel and JDSU have had to take significant write downs, where as U.S. companies such as Lucent and Cisco have had an easier time accounting for acquisitions.

JDS Uniphase can be found at http://www.jdsuniphase.com.

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