We reiterate our long-term Neutral recommendation on
JDS Uniphase Corp.
). The company posted mixed financial results for the first
quarter of fiscal 2013. Although the revenue fell below the Zacks
Consensus Estimate, net income topped the same. The company's
newly launched products accounted for 57% of its total revenue in
core network market. However, overall book-to-bill ratio remained
less than 1.0 throughout the quarter. We remain concerned
regarding the delay in carrier order due to a volatile global
Consolidation trend in the optical gear manufacturing industry
as well as in the telecom carrier industry may act as a spoiler
for the optical component suppliers, such as JDS Uniphase.
Nevertheless, its newly launched differentiated products, which
are gaining encouraging market traction coupled with acquisitions
of Dyaptive and GenComm may become long-term positives for the
Next-generation 4G Long-Term Evolution (LTE) networks became a
major growth driver for JDS Uniphase. The company offers an
innovative LTE test solution, which encompasses end-to-end,
real-time tracing, data assurance, and OSS to derive the
performance and revenue potential of LTE.
Meanwhile, the optical component industry is going through a
downtrend. Major telecom carriers are making inventory correction
and this scenario is expected to continue till the end of 2012.
The company's closest rivals, such as
) are all suffering from industry headwinds. Several industry
players estimated that demand from the largest emerging market of
China will not meet expectations. JDS Uniphase is highly
dependent on China since the developed western world is still
reeling under economic headwinds.
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