MAY 1, 2009 By Stephen Hardy -- While the fiscal year 2009 third quarter numbers JDSU (search Lightwave for JDSU) issued on April 29 revealed a company that is no more immune from the current downturn than any other, the newly minted head of its Communications Test and Measurement Business Segment sees opportunities for his group in the near term. And he has a strategy for taking advantage of them.
Dave Holly's ascension to president of JDSU's T&M business -- a position he had assumed on an interim basis January 1 after his predecessor, Thomas Waechter, replaced the departed Kevin Kennedy as JDSU's president and CEO -- was announced on April 1. Holly has been in the T&M field for more than 17 years, which means he's already seen several booms and busts. In an interview early last week, Holly said his experience has enabled him to put the current downturn in perspective.
"In general, our customers' P&Ls are reasonably healthy," he offered. "They may not be healthy from a stock market perspectiveâ�¦but if you look at it from a balance sheet perspective, the operators, equipment manufacturers, and so forth, you may have an occasional business that's dealing with a Chapter 11 or a restructuring. But the difference between a Chapter 11 and a restructuring now versus the ones in the 2002-2003 timeframe is those companies didn't have revenues to sustain. So when they went through the restructurings, in many cases, they might have just been out of business. And, as we know, many of them just don't exist [now].
"Todayâ�¦they start buying the day after [filing] because they are going concerns. They do have revenue; they may have other balance sheet issues," he said.
Therefore, the market today isn't as stagnant as it was in the aftermath of the telecom meltdown earlier in the decade. "You do find customers that are looking to advance. They're looking to compete stronger with each other," Holly explained. "And while they may need to be prudent about how they do it -- they may need to be cautious, and if they have credit access issues that might slow some of their plans -- it doesn't stop them."
The amount of activity in the midst of the current recession bodes well for the future, Holly believes. "From my vantage point, all the macro conditions are there for '10, '11, and '12 and beyond for general health in the overall communications infrastructure and communications networks. So, as such, we're going to continue to put our energy into those areas and make sure we're well positioned as the market emerges," he said.
Holly's strategy to attain such positioning has three parts. The first involves keeping in close contact with his customers. And that means more than just ensuring the sales reps are doing their jobs. "From an overall perspective, I look to have the entire organization much more versed in our customer environment, not just the people that you would traditionally expect to be our there, like sales and marketing," he said. So he expects general-management-level executives -- including himself -- to get in front of customers on a regular basis in order to better understand their requirements and perspectives.
Continued R&D investment represents the second facet of Holly's approach. He declined to describe what percentage of revenues his group will devote to R&D this year, but he said that the downturn won't be used as an excuse to pull back on innovation, particularly in areas where he expects customers will spend money. "At a macro level, money is going to flow into higher speeds; FTTx across the board; DOCSIS within the cable environment; 10, 40, and 100G within the transport environments; [and] Ethernet across the board, both for the carrier and the wireless backhaul," he predicted, adding that customers will demand video-testing capabilities as part of their FTTx requirements.
JDSU's overall embrace of lean manufacturing practices provides the third leg of the strategy tripod. "Lean drives companies, obviously, to be more cost-effective. But it also drives them to be much easier to do business with and also drives them to higher levels of quality than industries typically have seen," he said. "Being lean always adds value, because it either improves product quality or improves process, which means improved experience for the customer."
In short, Holly is relatively satisfied with his unit's position, given the overall market conditions. "You want to be in an environment where you have a good strong leadership position in a number of markets, which we believe we have; that you have additional market opportunities which you can go out and get, which we believe we have. You have an environment where there is investment flowing," he concluded.
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