JDSU guides downward for start of FY2012

JDSU (NASDAQ:JDSU and TSX:JDU) finished its fiscal 2011 on a positive note, recording sequential revenue gains for the fourth quarter and the fiscal year. However, the good times aren’t expected to roll right into the start of fiscal year 2012.

JDSU (NASDAQ:JDSU and TSX:JDU) finished its fiscal 2011 on a positive note, recording sequential revenue gains for the fourth quarter and the fiscal year. However, the good times aren’t expected to roll right into the start of fiscal year 2012. The company guided first quarter 2012 non-GAAP net revenues in the range of $420 million to $450 million, well below the $472.3 million in non-GAAP net revenue it recorded in the fourth quarter of fiscal 2011.

On a GAAP basis, JDSU drew $471.8 million in net revenue and $9.3 million in net income, or $0.04 per share in its fiscal 2011 fourth quarter, which ended July 2, 2011. Revenue was up both sequentially ($454.0 million) and versus the year-ago quarter ($390.9 million), while net income declined sequentially ($38.6 million, $0.16 per share) but was up versus the same quarter in 2010 ($1.5 million, $0.01 per share).

Gross margins for the quarter stood at 43.3% GAAP and 46.7% non-GAAP.

For the year, JDSU reported GAAP net revenue of $1.8045 billion, up 32.3% from $1.3639 billion for fiscal 2010. Net income also improved during the year, coming in at $71.6 million, or $0.31 per share, versus a net loss of $61.8 million, or $0.28 per share, for fiscal 2010. GAAP gross margin for the year came in at 43.8%; Non-GAAP gross margin was 47.6%.

JDSU’s Communications Test and Measurement revenue led the way during the final quarter of fiscal 2011. It garnered revenues of $211.3 million, an increase of 11.7% sequentially and 13.5% compared to the fourth quarter of fiscal 2010. The group accounted for 44.8% of JDSU’s total net revenue in the quarter.

Not surprisingly, given results reported by such companies as Finisar, Oclaro, and Opnext, the Communications and Commercial Optical Products business didn’t fare as well. This operation saw revenues decrease 3.4% compared to the prior quarter. However, the $202.3 million in revenue did represent a year-on-year improvement of 28.6%. Within this group, Optical Communications revenue of $174.5 million decreased 5.5% sequentially, but increased 29.5% year-on-year.

During a call with analysts after the earnings announcement, CFO David Vellequette reported that while sales of LAN/SAN pluggables grew during the quarter, revenue for ROADMs, circuit packs and Tunable XFPs declined, primarily due to inventory corrections.

In a prepared statement, JDSU President and CEO Tom Waechter predicted tough sledding ahead, at least in the near term. "Currently we are seeing macro-economic challenges and inventory corrections which we believe will be short-term in nature as the end market drivers remain strong," he said.

Waechter elaborated on this comment during a call with analysts after the earnings announcement. “As we look ahead, there are several factors causing some short-term volatility for JDSU,” he said: “First, our general economic conditions and uncertainties; second, our inventory corrections by our Optical Communications customers; and finally, the September quarter seasonality for our CommTest business segment. We strongly believe that fundamental end-market drivers for our products remain strong for the long-term, but, as indicated by our guidance, we are not immune to the current macroeconomic challenges, optical inventory corrections or CommTest demand seasonality.

“We cannot predict exactly how long this downturn will last for us but we do believe it's a near-term issue,” he concluded.

Waechter also revealed that, in addition to the tunable SFP+ announced earlier this week (see "JDSU touts tunable SFP+ optical transceiver module"), the company plans to unveil higher-performing tunable XFPs aimed at two customers he declined to identify. The company also is working on ROADM subsystems based on liquid crystal on silicon (LCOS) technology. Waechter also expects the company to introduce modules for coherent-based 40-Gbps and 100-Gbps applications next year.

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