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Five Reasons JDS Uniphase Is Down and Out


Some thoughts on the company ahead of its first-quarter-earnings announcement.

Back in the day, I remember walking down Water Street in New York City and hearing two electricians about 10 feet off the ground on a ladder, in the cold, discussing JDS Uniphase (JDSU). They were betting each other how high the stock was going to go.

That's one small example of just how popular the company and the stock was. These days, however, the communications-equipment maker is about as popular as a soft-serve machine in a snowstorm.

However, just because the company is down, it certainly doesn't mean it's out. Or does it?

Here's my latest take on the California-based company ahead of its fiscal first-quarter-earnings announcement on November 5.

1. In spite of the wind that it's had at its back since the spring, I find it hard to like this company or to even think about establishing a position, given the paltry earnings that analysts are expecting the company to put up this year and in 2010. Seriously, I'm gonna pony up $6 and change for a company that's expected to put up just $0.16 this year and $0.32 next year? I don't think so.

2. The Street is looking for $0.02 in the company's first quarter. I have no idea if it will make that number, but even if it were to put up a nickel and blow out the expectation, I'd hardly be cheering because we'd still be talking about peanuts. With the absence of some hefty and consistent quarterly beats and some meaningful numbers on the bottom line, I don't see the company becoming the talk of the town again anytime soon.

On June 27, the company sported $685.2 million in cash/equivalents and short-term investments. That's more than $3 a share by my math. I like to believe that it could be a floor for the stock. And I'm hoping it will buy something with it that will add to earnings, or do something creative with all that flash that will drive the share price to the next level.

4. I want to hear more about how the company plans on driving its top line in a meaningful way going forward. Note that 2009 wasn't exactly its year. And before I were to bottom fish, I'd want to know that 2010 and 2011 both will be.

5. And I just love that tons of senior executives have been doling out piles of cash to buy the stock in the open market lately. Not. So what do you say, fellas? If you want investors to belly up, how about you guys do the same.

Long story short, there are simply too many questions at this point for me to want to jump in the mix. I'd rather take my $6 and change and go buy the number-three meal at McDonald's.

Hey, have a great day!

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No positions in stocks mentioned.

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