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JDS Uniphase Corp. F2Q10 (Qtr End 01/02/10) Earnings Call Transcript

by:Top-In     2020-08-01
JDS single-phase company. (JDSU)
F2Q10 earnings Phone: February 2,205: 00 PM etexecuestom Waechter-
Chief executive weilquette-
Michelle Levin, chief financial officer
Su-Director of Investor Relations analysis-
RBC Capital Market
Kevin deninian, sunford Bernstein
Ben Paul bonnvante
Todd Kaufman, Morgan Keegan
Raymond jernovis
Sun City Stock Exchange
Thomas Wesley partner Dave KangB.
RileyJoel Achramowicz-
Ladies and gentlemen, today is Blaylock Robert VanOperatorGood day. welcome to the 2010 JDSU earnings conference call in the second quarter.
My name is Luisa. I will be your operator today.
At this time, all the participants were listening. only mode.
We will ask a question. and-
The closing session of the conference. (
Operator instructions)
I want to transfer the phone to Ms now.
Michelle Levin, director of investor relations; please proceed.
Thank you to carrier Michelle LevineThank for your participation in the JDSU Fiscal 2010 Second Quarter Financial Performance conference call.
I am on the phone today with Tom Waechter, chief executive;
And Chief Financial Officer Dave weileckett.
I would like to remind you that this call will most likely include forwarding-
Outlook on the company\'s future financial performance. Forward-
The outlook statements are subject to risks and uncertainties that may lead to significant differences in actual results from management\'s current expectations.
We encourage you to review the company\'s recent submission to SEC, in particular the risk factors section of our report on Form 10
K submitted on August 24, 2009, 10-
Q submitted on November 12, 2009. The forward-
Forward-looking statements, including guidance provided during this call, are valid only today and JDSU is not obliged to update them throughout our quarter.
Please note that all numbers are not
GAAP unless otherwise stated.
Check in detail
GAAP results and our GAAP results and discussions about their usefulness and limitations are included in a press release released today that publishes our results and is available on our websitejdsu. com.
In addition, our current and historical financial tables are posted in the investor section of our website at www. jdsu.
Com \\ investors under the Financial Information section.
Finally, remind that this call is being recorded and can be replayed in the investor section of our website.
I want to transfer the phone to Tom now.
Thank you, Michelle. Good afternoon.
First of all, I would like to briefly summarize our fiscal performance for the second quarter.
JDSU\'s revenue is $343.
8 million and operating profit 8.
In our guidance, 2% people entered the high end.
These results reflect the increased customer demand and the leverage of our operating model. Our book-to-
The bill for the quarter exceeded 1.
Our balance sheet and working capital structure continue to strengthen.
In the second quarter, we generated more than $27 million of free cash flow compared to the first quarter, and our inventory decreased by $11 million, resulting in more than six times the inventory, this is historically the highest level for the company, and our day sales have dropped to £ 60.
These results show that we continue to work on improving our operating model.
Now, let\'s get into every area of our business.
First, revenue in the second quarter of the communications testing and measurement sector increased by 23% compared to the previous quarterto-
Bill is older than him.
As we continue to see improvements in customer demand, this is the third consecutive quarter of growth.
Quarterly growth in all regionsover-
In the first quarter, there were special advantages in North America and EMEA.
We did the strongest fiber testing in North America, the second quarter was T-
BERD 6000, one of our modular field optical test solutions.
Other areas of advantage in the area include wireless backhaul, 100 shows, 40 shows and cable TV.
Compared with the first quarter, Europe grew by more than 45%, and in the first quarter, Western Europe is recovering.
Asia\'s economy grew by more than 10% as demand grew in Asia.
We see strength in Hong Kong, Japan, Malaysia, South Korea, Australia, the Philippines and India.
Using the fiber plant for transport, FTTx continues to provide good opportunities throughout the region.
Our growth in bookings in China and India reflects positive economic growth in both countries.
As you can see, we continue to strengthen our leading market position in testing and measurement in all addressable markets. On a year-over-
Over the past year, JDSU has grown faster than the market, with special strength in North America, our testing and measurement business maintains the world\'s leading field testing market position in the field of Ethernet, fiber, DSL and cable network markets, as well as storage network testing in the laboratory and production markets.
JDSU won the Frost & Sullivan 2009 global growth strategy award this quarter as our Gigabit Ethernet test equipment portfolio received the highest annual compound growth rate in the last three years.
Our portfolio provides the industry\'s most in-depth testing capabilities and end-to-end testing capabilities. to-
Terminal Testing for Carrier Ethernet, products and services, including laboratory and service validation, development and production, installation and maintenance, trouble shooting, and overall service assurance.
JDSU continues to support our customers through a combination of technologies that align with key market trends.
For example, we experienced strong growth in Ethernet backhaul and monitoring testing for wireless service providers this quarter.
I mentioned earlier that our T-
BERD 6000, in fact, a large part of it is used for Ethernet backhaul applications.
Tier 1 North American operator\'s Ethernet backhaul booking was particularly strong this quarter.
The growing demand for mobile services and improved network efficiency is driving wireless operators to migrate to Ethernet services for mobile backhaul.
Third-party research shows that global investment in mobile return devices jumped more than 50% in 2009 to nearly $6 billion, and the market is expected to increase more than double from $11 in 2008.
2013 3 billion.
Operators not only need to transition from TDM to Ethernet, but also need to make a quick transition to be able to efficiently deliver and manage services using the existing workforce.
JDSU understands the needs of operators, not only through the right products and systems, but also through expertise and services to provide a complete solution transition to Ethernet to effectively transition with current employees, consulting services and outlining the methods and procedures for deploying Ethernet and managing Ethernet throughout the lifecycle.
In another example that demonstrates JDSU\'s technology leadership, we continue to lead the market in 100 Gig labs and production testing.
The JDSU was the first demo to test the transmission without error 100 Gig.
This quarter, we shipped 100 Gig systems to six customers across all geographic regions.
Our leading position in managing fiber optic network technology is also reflected in the continued growth in demand for our ONMS or optical network management systems in the second quarter.
ONMS improves customer productivity through fiber optic remote testing and documentation, and simplifies fiber optic network management with fewer technicians.
Finally, JDSU continues to lead 40 Gig testing in global demand growth in the laboratory and on-site services.
Next is our communications and commercial optical products division, where revenue from our optical communications business grew by 11% in the second quarter --over-
Quarterly and booksto-
Bill said it again.
We continue to gain market share as we see an increase in demand not only for our ROADM and 300 pin adjustable, but also for our new products, such as Super transport blades, mini 50 ghz ROADM and tuned XFP.
Growth by Regionover-
Driven by Huawei, we have made record revenues in China.
As I have pointed out, our road needs are clearly recovering.
Compared with the previous quarter, ROADM revenue increased by more than 50% in the second quarter, far exceeding 20% of total optical revenue.
ROADM bookings continue to be strong through a bookto-
Bill is bigger than one.
In addition, we have started shipping our next generation of 50 kHz highways.
Production is increasing in the third quarter.
Revenue segments between transport and transmission were 60% and 40%, respectively.
The trends we see in terms of transmission include our adjustable XFP interrupting the 10 Gig market, as well as more demand for 10 Gig transceivers and vcsel for wireless backhaul and data center applications.
For shipping, we continue to work closely with our customers on 40 Gig and 100 Gig solutions.
In one example, we offer our products to a key customer, including our next generation of 50 ghz ROADM and the modulator in the network carrying live 100gig traffic.
In fact, we are the first and only one offering with 100-
Gig traffic in the deployed network.
Our focus on technology-leading, cost-leading and feature-integrated strategies allows us to continue to stand out in a competitive market.
As you know, we have launched a number of highly integrated platforms, which have been well received by customers.
The tuned XFP is the first adjustable XFP available in an XFP form factor and is a 10-to-10-for fixed-wavelength XFPs and 300 pins-
Market for Gig adjustable transponder.
The product was put into production in September and
We approached 26 customers and shipped products to 13 customers.
The unique architecture of our super transport blades saves a lot of floor space for our customers.
We received a lot of production orders.
Starting with two customers, each customer has multiple designs and we are designed to be a third customer.
We are currently working with most other customers who are excited about the super shipping blades, which gives them the opportunity to take full advantage of the smaller footprint and open up valuable real estate on the chassis.
The current revenue for new products less than two years old is about 40%, compared with 30% in the previous quarter, in part because of the above-mentioned new products.
Our laser business continues to grow by more than 10%.
At present, the recovery is mainly focused on several key customers in North America and Japan.
We see our solid strength.
National lasers and gas lasers mainly in the semiconductor and micro-processing industries.
We also continue to make progress on the Lean program, with the laser gross margin up by 6 percentage points.
Finally, we have entered the field of advanced optical technology.
Revenue rose 1% in the second quarter compared with the previous quarter.
We have a strong custom optical business, including 3-D products.
Our currency business is relatively stable and we see continued weakness in trading card business as new credit card issuance remains sluggish. Book-to-
Bill is about 1%.
Positive trends in this area include customers looking for more complex integrated design features, using a variety of JDSU security technologies to combat counterfeiting, 3-
The development of aerospace.
Finally, JDSU and SICPA signed a new long-term agreement to expand the relationship that already exists
Our counter-clause agreement
Fake products.
In terms of our corporate priorities, we continue to take advantage of positive long-term growth opportunities in the market.
JDSU will continue to focus on four priorities.
These priorities will enable us to stand out further, improve our leadership in the markets we serve, and further improve our financial model.
First, we focus on market-based profitable innovation.
As you know, we have taken quite a few steps to reduce our cost structure and improve our financial model.
As our top business continues to grow, our profitability will benefit from leverage in our model.
JDSU\'s innovation engine is the driving force for long-term top-level growth and profitability.
We will continue to work with our customers and invest in market-based profitable innovation to drive growth in market share and revenue growth.
Our goal is to increase the proportion of product revenue in less than two years to more than 50% in the next three years.
Highlights of innovation and future revenue opportunities include the following.
In the past year, the optical communication business has developed a large number of new products.
In the second quarter alone, we started shipping the following new products.
First of all, our next generation of 980 nm pumps, the new pump lasers are designed to help network equipment manufacturers reduce costs and power consumption within optical networks.
Second, we are providing the next generation of adjustable laser components or ITLA to the market, which has also been incorporated into our 310 transponder.
The product provides the market with lower power and lower cost options optimized for all the flexibility required for agile optical networks.
Finally, as mentioned earlier, we are starting to ship our next generation Mini 50 kHz wss roadm, and currently, the company has won multiple wins among nine customers, our adjustable XFP and super transport blades have gained good traction in the market, both of which are in mass production
In the field of AOT, JDSU is currently conducting customer testing on HoloFuse certification technology.
HoloFuse technology is a new highly integrated product that helps protect government-issued identity documents such as passports, national identity documents and driver\'s licenses against forgery and tampering.
Partially transparent and customized holographic images within the Polycarbonate membrane include open, concealed, and forensic safety features.
HoloFuse has been recognized by industry peers and has won multiple industry awards, most notably the SESAME award of 2009 and the holographic Excellence Award of the International Association of holographic manufacturers.
3-optical coating technology has also been developed in AOT fieldD solutions.
Since the launch of the film beowov in 2007, JDSU has provided an all-spectrum color wheel that captures light from digital movie projectors to deliver premium 3-D images.
Recently, the color wheel technology has been provided by JDSU, and 3-
D glasses with JDSU Optical Coating for viewing the current popular movie Avatar.
Looking ahead, we expect 3-
D. continue to be a growth opportunity for JDSU, with the current focus on video viewing in cinemas and large venues.
The AOT Department and the optical communications business have been working together to develop technologies for gesture recognition, a new market for JDSU.
We are all familiar with home games and TV remotes, what if you can control these electronics with human gestures without using the device?
This is exactly what gesture recognition technology can do.
JDSU has developed a solution for gesture recognition applications with the unique advantages of providing two of the most critical system components-filters and diode lasers.
JDSU will start shipping to a major home game provider in the third quarter and we are having discussions with other potential customers.
With the development of new applications such as car control, lighting control and home safety, this new market represents future growth opportunities.
AOT and optical communications have also been working together to develop centralized photovoltaic cells for the solar market for large-scale commercial and utility-scale installations.
In the coming quarters, we will update you on our progress.
For our laser business, our product development focuses on advanced solid-state and fiber-optic laser platforms.
By the end of this fiscal year, these new products are expected to more than triple the available market for our services, in our communications testing and measurement section, BT Group has chosen HST for our industry leader-
3000 handheld tester supporting triple play and FTTx testing.
BP has chosen JDSU for our collaboration and the development of new features for our products.
JDSU is in a good position for DOCSIS 3 to support our cable customers.
0 introduce technology through hardware and software upgrades to support our market-leading DSAM and PathTrak customers to install new stand-alone products.
Our second priority is to expand the global market.
We pay more attention to expanding our market penetration and gaining a fair share of our business outside the traditionally strong North American and Western European markets.
We continue to see the emphasis paid off.
Latin America\'s quarterly revenue growth exceeded 38%over-
Quarterly, with special strength in the Test and Measurement section.
Our optical communications Asia bookings for the second quarter were the highest in a year.
Lean is our third priority.
Much of the heavy work to reduce costs and improve the financial model has been done, and with the improvement of the top business, we see evidence of the model work.
Lean is part of the JDSU culture and we will continue to improve our cost structure.
Finally, to maximize the use of our assets, we are focusing on leveraging our assets to maximize shareholder value, as evidenced by the improvement of our DSO and inventory turnover
Our priority for cash remains to generate cash and strategic value-added acquisitions in our core or adjacent markets.
As I conclude my formal statement, I would like to thank our employees as we begin to realize the benefits of their hard work and dedication in the recession, as evidenced by our improved business model.
I would also like to thank our customers, partners, suppliers and long-term shareholders for their continued support to JDSU.
With this, I will hand over the phone to Dave, who will take you through the details of our financial performance for the second quarter and discuss our outlook for the third quarter.
Thank you, Tom.
Before I start, please note that all the numbers are not
GAAP unless I specify otherwise.
Revenue for the second quarter was $343.
8 million rose by 15.
1% month on month, down 2 month on month.
The second quarter of fiscal 9% was 2009.
Revenue is growing in each of our business units.
In the second fiscal year, our testing and measurement component contributed 51% of total revenue.
Our CCOP division contributed 33% of total revenue and our AOT division contributed 16% of total revenue.
Gross profit margin 44 in the second quarter.
6% compared with the previous quarter gross profit margin of 44%, compared with the second quarter fiscal 2009 gross profit margin of 43. 5%.
This improvement is mainly due to a good revenue mix in the CCOP sector and an increase in profit margins.
Operating expenses for the second quarter of this fiscal year were $125.
3 million increased by $121 over the previous quarters.
2 million, down $9.
It was 6 million higher than operating expenses of $134 in the second quarter of last year. 9 million.
The continuous growth was mainly due to increased revenue, selective strategic R & D investment, increased revenue and increased gross margin, and our operating income for the quarter was $28, partially recovering employee benefits. 1 million, or 8.
2% of revenue, while operating income is $10. 2 million, or 3.
4% of revenue last quarter.
Net income for the second quarter was $26.
6 million, or $0.
$12 per share, compared with net income of $9 million, or $0, in the previous quarter.
04 per share, our non
Our GAAP results are available in today\'s press release.
Our second quarter
The GAAP results do not include $23, among other items.
2 million of technology, intangible assets and estimated amortization of non-assets acquired
Cash interest on convertible debt, $12 million related to stock compensation and $8.
7 million cost of restructuring and non-restructuring
GAAP\'s net loss narrowed to $19 in fiscal 2010 in the second quarter, including recurring spending on the above items.
5 million, or loss of $0.
09 per share, GAAP net loss of $31 over the previous quarter.
9 million, or loss of $0. 15 per share.
In terms of regional income, the United States earned $173.
6 million was 50% of total revenue, up $21.
Growth of 9 million over the previous quarter.
This increase includes approximately $10 million from service providers, sufficient budget and growing demand from service providers in Latin America.
Latin America\'s quarterly revenue growth exceeded 38%over-quarter.
EMEA\'s revenue is $94.
8 million was 28% of total revenue, up $14.
8 million, as demand for CommTest and CCOP products rebounded from seasonal low Q1 levels. Asia-
Pac revenue is $75.
$8, 4 million.
Up 5 million from the previous quarter, accounting for 22% of total revenue. Asia-
Pac revenue has increased across all three business units.
In the testing and measurement department, revenue for the second quarter was $176.
9 million rose by 23.
It was up 4% from $143 in the previous quarter.
4 million, up 2.
3% more than the $0. 173 billion in the previous year.
As mentioned earlier, the calendar year and budget of North American service providers have increased by about $10 million.
From a product point of view, our on-site testing revenue grew by 16%.
Compared with the previous quarter, lab and production revenue increased by 70% and service security increased by 8%.
Geographic Revenues in all regions increased in turn. Book-to-
The bill for the quarter exceeded 1.
The second quarter gross profit margin tested and measured fell by 56% compared with the previous quarter.
The decline in gross margin percentage is mainly due to the decrease in inventory
Transition costs related to our shift to contract manufacturers.
The total cost is about $4.
3 million this quarter.
Due to higher revenues, operating profit for the second quarter was $31 tested and measured.
5 million, or 17.
Revenue was 8%, up 75% from operating profit of $18 million in the previous quarter, or 12. 6% of revenue.
In terms of testing and measurement, we continue to make progress in the transition to contract manufacturing.
We have completed the transition of the Indianapolis product line, and it is expected that by the end of fiscal 2010, our transition in Maryland, Germany will be basically completed.
Once we have completed this shift, more than 70% of our CommTest product revenue will be manufactured by the contract manufacturer.
We believe that the above-mentioned initiative provides a structure to support Gross margin in the range of 57% to 61%, as well as sustainable operating profit margins between 20% and 23%, with quarterly revenue levels of $0. 175 billion or more
Now going to our CCOP section, the breakthrough of the key indicators of optical communication and laser is as follows.
Revenue for optical communications in the second fiscal quarter was $95.
6 million, up 11.
Revenue fell 2% from $86 million in the previous quarter.
Compared to $ 7% in the previous year, it was 109. 5 million.
Gross profit margin for the quarter was 22.
5%, the gross profit margin of 19 in the previous quarter. 7%.
The increase in gross margin is due to a reduction in manufacturing costs, an increase in utilization of our fab and a more favorable product portfolio. Book-to-
The bill for the quarter exceeded 1.
ASP fell in the historical quarter range of 2% to 4%.
Our data communications and telecom product lines are growing strongly in terms of product lines, including our highways, circuit packs, plug-in devices and tuned devices.
For example, ROADM revenue grew more than 50% in a row and demand continued to grow in the third quarter.
With the completion of our optical Fab integration, our gross margin improvement program is now focused on increasing plant utilization.
Our goal is to achieve sustainable profits in the range of 25% to 30%.
We believe that by the end of fiscal 2010 we can operate within that scope.
Our second-quarter revenue for the laser business was $16.
7 million rose by 10.
Compared with the previous quarter, the gross profit margin for the quarter increased to 32 at 6%. 4%. Book-to-
Bill is more than one person.
At the overall segment level, CCOP\'s operating income was $3 due to increased revenue and increased gross profit margin.
2 million, compared to the operating loss of $1.
Last quarter was 5 million.
We believe that the CCOP operating model supports a revenue level of $ 10% or higher per quarter, with operating margins of 15% to 0. 15 billion.
For advanced optical technology or the AOT sector, the fiscal revenue for the second quarter was $54. 6 million up 0.
Compared with the previous quarter, growth of 9% and 2.
Compared with the previous year, 8%.
Our team of custom optical and certified solutions achieved continuous growth of 10% and 15% respectively.
The currency is relatively flat, and the customized color products decline month on month. AOT book-to-
Bill is about a quarter.
The fiscal Gross margin for the second quarter of our AOT division was 50%, down from the previous quarter.
The decline in profit was due to the decline in plant utilization as we carried out our inventory reduction plan.
AOT operating profit for the quarter was $19.
6 million, down from $20 last quarter. 6 million.
Operating profit margin 35.
9% is within our target sustainable operating profit range of 34% to 37%.
Turning to the balance sheet for fiscal 2010, the company reduced its inventory level by $11 million and reduced its outstanding sales for the day by more than three days.
As a result, the company received free cash flow of $27.
This quarter was 1 million.
The number as at January 2 was 3,944.
Turning to our operating model, we believe that our cost structure allows us to continuously achieve an operating profit margin of 10% when quarterly revenue is between $0. 375 billion and $0. 385 billion and gross profit margin is 46%.
Now, according to our guidance for the third quarter, when you think about our financial performance for the next few quarters, there are some issues to consider first.
The lead time for our parts suppliers has increased and may affect revenue for the quarter.
In the second quarter, due to tight supply, we were unable to ship $8 million in customer demand of $10 million.
The test and measurement revenue is historically seasonally low in the third quarter, and since quarterly revenue in December includes the calendar year-end budget, the budgets of operators and operators are generally not published at the beginning of the third quarter.
As pricing negotiations have just been completed, the decline in optical communication ASP is expected to exceed our quarterly range of 2% to 4%.
As we increase our investment in the AOT sector, the total operating costs are expected to increase.
The employer payroll tax increases with the new calendar year and we will not close the company-wide in the third quarter.
It is estimated that operating expenses in the third fiscal quarter increased between $4 million and $5 million.
Finally, we expect our quarterly taxes to be between $2 million and $4 million.
Taking into account the above factors and based on our current visibility, we expect revenue for the third quarter to be between $0. 325 billion and $0. 35 billion; and non-
The operating profit margin of GAAP is between 5% and 7. 5%.
Operator, let\'s answer the question now. Question-and-
Answer session operator (
Operator instructions)
Your first question is from Mark Sue.
RBC Capital MarketMark Sue -
Taking into account the different seasonality of each segment, the test and measurement book with bills greater than 1, should gross margin be maintained continuously in the short term?
Is there still enough action left, such as increasing utilization and other things you are doing, to help raise Gross margin further from here?
Then just on the optics, does the sale of optical components increase confidence, and we will not have another ROADM inventory like we did a few quarters ago?
Dave VellequetteOn on the issue of gross margin, we do not give guidance on gross margin;
We just give it at the level of operating profit.
As a result, we consider the fact that the test and measurement revenue usually has a lower seasonality.
So the scope we give takes this into account.
As Dave mentioned in the discussion, Tom wedchit, manufacturing outsourcing, believes that we are still in the process of completing the communications business transition in Germantown, Maryland.
Also, in terms of gross margin, what I would say is that we have some additional supply chain opportunities to reduce costs.
I think in terms of sales
Through optical elements, we do not think there is any stock accumulation in the supply chain at this point.
Your next question is from Jeff?
Burnstein, SandfordJeff Evenson -
Sandford Burnstein was wondering if you could give us more color on your expected ASP drop.
What field are they in?
Why do you feel stressed, a little lower than the price you have been doing?
Dave vellequetteasp declined and when I made those points I noticed our optical communications group because, in the quarter of December, we negotiated quarterly
Both annual and annual contracts are signed.
Historically, we have noticed that we expect ASP declines to generally be greater in the third quarter.
We did see this two years ago.
We didn\'t happen to see this last year, but historically we did see it because, in fact, you are negotiating all supply agreements for optical customers at the same time.
Your next question is from Kevin denyon. Citi. Kevin Dennean -
I just want to talk about CommTest;
In my opinion, you exceed your target, or the $0. 175 billion range of the target model.
I know there is a gross profit of the impact.
If we add the impact of about $4 million to the gross margin, it looks like the operating margin is about 20%, which I think will put you at the low end of the target.
What are the suggestions and needs in achieving your operating model and maintaining its sustainability in the field?
Tom WaechterIn from CommTest division, which has a lot to do with what we do on outsourcing and manufacturing gross margin line, good
Adjust this as we have done a lot of heavy work over the last few quarters to outsource most of our manufacturing.
It\'s a good question now.
Adjust this to get more cost from the supply chain and then significantly continue to be below gross margin and continue to control our operating expenses. Kevin Dennean -
Citi, Tom, how much upward pressure can you put on the gross margin line from here, where is the income level? It sounds like;
You have talked about most of the heavy work of restructuring.
I just want to know where we are going in the future.
Tom WaechterI believes the new product portfolio is part of it.
So, as I talked about in my previous discussion, innovation, the portfolio of products will definitely help us because we usually get higher gross margin from these new products.
Sales continue to grow in less than two years.
I noticed that our goal is to reach 50% or more for the company.
I think CommTest has launched a lot of new products in the past year and has achieved great success.
Therefore, this will also help us in the combination of new products.
Your next question is from Paul bonnvante. Morgan Keegan. Paul bonnvante
Morgan kegenny wants to know if you have some idea of the common expectations for the fourth quarter, if any, which reflects catch-up spending after the fourth quarter budget growth, and your thoughts on sustainability after the third quarter.
Just a matter of housekeeping, you talked about the increase in lead time, the shortage of goods you can ship is $8 million to $10 million compared to demand.
Is this unique to the optical communication department?
Dave VellequetteFirst, grab-
Spending has increased, and the budget surge that took place in December is at the low end of what we\'re talking about.
For example, when we see at & t and Verizon, the two big carriers, Verizon\'s forecast for capital expenditure is flat, if you take the midpoint of the range they gave this year as an example --over-year.
AT&T actually said they would spend more money.
So if we look at these two data points as positive points for testing and measuring the business.
Also, the problems you see in some wireless areas such as backhaul and people who are having problems, so we see that our Ethernet backhaul is fine there.
So when we came up with the scope of the second half of what we provided, the guidance considered all of this . . . . . . Tom wedchett Paul, can you repeat the question for us for the second half? Paul bonnvante
Morgan kigans
I think you talked about the lead time increase in your supply chain, resulting in a shortage of 8 million to $10 million in products that you can ship this quarter.
What I want to ask is whether this is specific to the field of optical communication.
Dave VellequetteNo, which spans multiple sections.
This is really the availability of some integrated circuits in an industry-wide shortage.
So, this is mainly a result. for us, it spans multiple business areas.
The next question is from Todd Kaufman. Raymond James. Todd Koffman -
Raymond James is just a clarification, and when you call this book Bill, I think you called it out for a bigger market segment, communications and measurement, and advanced optics,, when you get into your communication and commercial optics, I think you only called one sub
The first part is the book of optical communication.
Did I disappoint you?
Dave VellequetteBook is bigger than one for bill.
So, if I only mention one, no, I say to Bill, the book of Las is also better than that.
Therefore, it is greater than 1 in both laser and optical communication. Todd Koffman -
Raymond James is just a follower.
So basically, most of your business has, and most of your business is a book bill of more than 1.
The advanced optics you\'re talking about is almost one.
The booking you receive will be shipped according to what schedule, as your guidance does not reflect a continuous rise in the booking --to-
Would Bill suggest?
How far is your booking?
The best way for Dave vellequetso is that when we enter a quarter, insurance usually accounts for less than half of the revenue we end up shipping in that quarter.
That\'s how we see this and how we judge guidance.
Usually in the optical field, we look at specific bookings for no more than 12 months, as do lasers.
In terms of testing and measurement, this is a fast growing business and we focus on orders shipped in the next 120 days. Todd Koffman -
Raymond Jamestown is just the last follower.
Irrelevant questions.
In your field of optical communications, the industry has done some integration around you.
You are no longer a guerrilla a few years ago.
How does this affect you?
Is this beneficial or are you talking about some pricing pressure and you have some loss when you work overtime? Thank you.
Tom WaechterI believes that in general, the integration of suppliers has helped the industry because the customer base has also been consolidated.
So they need to keep up to some extent.
So I think it would be more useful to rationalize than to take another path through these integrations.
So I believe this is mainly a benefit.
Dave VellequetteAlso, when you talk about the scale of our revenue and positioning, as we have already pointed out, our focus is on innovation and continue to focus on products with higher levels of integration
Therefore, we believe that this gives us a better place in the portfolio of sales.
If you remember, more than a year ago, we removed some products from our portfolio that provided revenue but did not provide profitability.
Therefore, we are more selective in product portfolio selection.
The next question is from Michael Genovese-
Sun Securities.
Michael jernovis
I missed a few numbers.
In fact, I missed some key numbers when I was writing notes.
Can you give me the gross margin, CCOP gross margin and AOT Gross margin for the first quarter?
The gross profit margin of optical communication is 22. 5%.
The laser is 32. 4%.
We do not offer CCOP gross margin, but we give you the revenue and gross margin for each item.
So I\'m sure you can figure it out.
What are the other things?
Michael jernovis
Advanced Optical Gross margin?
50% Dave weileckett
Michael jernovis
Soleil SecuritiesSo $8 million to $10 million, where you are restricted to component input, is it all expected to ship in fiscal 3Q?
Dave VellequetteYes, this will be shipped mainly this quarter.
Michael jernovis
Soleil SecuritiesI understands why testing and measuring profit looks slightly lower than target due to inventory writes
Apart from this, they will be at the low end of your target range, but why are advanced optical edges falling continuously?
Tom WaechterAs I think Dave mentioned that we have reduced our inventory levels based on some of the Lean projects we run, so some product lines in the department absorb lower, which has a negative impact on gross margin.
The next question comes from Ajit Pai-
Partner Thomas WesselAjit Pai -
There are two quick questions.
The first is to look at the effects of 40G and 100g.
You provide encouraging comments in prepared comments, but can you give us some color about your optical communication component business and testing and measuring business?
How important is its percentage of 40g and higher total revenue, does it exceed 5% of the total threshold, what do you expect the ramp to look like in the next two years, what will be the percentage of income?
Then the second question is to look at the environment of mergers and acquisitions. is this pipeline richer or flat, can we expect more activity in the next few quarters?
Tom wedchtree thinks that in 40-gig and 100-
As far as the CommTest product line is concerned, as we mentioned, we ship gig to six different customers 100-
The Gig solution doesn\'t come in large numbers for a while, but it gives us early access to these customers and helps them develop their products, and then our plan is to deploy to the site, over the next few years, we look forward to more on-site solutions.
So, from a technical point of view, this is an important win for us to engage with key customers as early as possible, but this is not a big part of our income today. 40-
Gig is still a reasonable part of our total CommTest revenue as we see about 40-
Test solution for the show.
I think as far as the optics are concerned, we\'re just starting to see 100-
The Gig components are also very small volumes and 40-
At a reasonable level.
So we believe
As we look to the next few quarters and next year, a year and a half and 100-
The performance concluded.
Due to capacity constraints in the network, if these restrictions continue to remain at today\'s level, 100-
Gigabit product line. Ajit Pai -
Then the acquisition?
Tom WaechterWe continues to focus actively on the market in all of our business units.
We believe there is an opportunity in the market and continue to drive our key priorities there, namely immediate growth, good gross margin, good profitability of the company.
The next question is Dave Kang-B. Riley. Dave Kang -B.
First, these supply chain issues.
So, do you think the shortage will improve in the third quarter, because I have heard that the shortage may not be alleviated in the current quarter, that is, the third quarter?
Tom WaechterWe believes the shortage will continue in the third quarter.
This is a fairly common problem.
It\'s hard to say they were good or bad in the first quarter.
We believe they did start improving after the third quarter because IC manufacturers were able to increase their capacity and restore it to a more normal level. Dave Kang -B.
Just a follower.
With ASP falling this quarter, I \'ve heard that more and more customers are asking for a year of price negotiation instead of six months.
Did you see it from your side, too?
Dave VellequetteNo, depending on the product, some of our customers prefer to renegotiate every quarter and then some of them are six
Some of the months are Annual.
This is our experience and we have not yet seen any changes in this for us.
The last question comes from Joel achamovich.
Robert van.
Joel Achramowicz-
Blaylock Robert VanI would like to know if you can give us an update on the competitive situation inside and outside the product range, and perhaps give us an indication of which competitors you care most about in each industry?
Tom WaechterI believes that I will start first in terms of the CommTest product line.
As we mentioned, we believe we continue to do a good job in fiber testing and our market share there continues to grow.
We continue to see a fairly fragmented market with a considerable number of competitors.
There are probably two or three of the opportunities we see.
In terms of optical communications, there has been some integration in this area at the supplier level.
It is still a fierce competition for component levels.
We believe that we have begun to separate ourselves from the integrated product, the super transmission blade, and the tuned XFPs.
We are moving upstream of the food chain, we have been competing with us at the cutting edge of technology, and then separated from the competition in advanced optical technology, we have a large market share in many areas. as far as the market participants are concerned, it is very fragmented.
At this point, there are no other problems in our queue.
I want to transfer this call back to Mr.
Tom Waechter of any closing word.
Thank you, operator, Tom Wichter.
At the end of our call, I would like to reiterate some points.
First of all, our second-quarter results show improved customer demand and a 15% increase in quarterly revenue.
The improvement of our financial model in leverage is becoming more and more obvious.
In order to achieve long-term and sustainable growth, we will continue to focus on innovation.
We saw momentum in recent product introductions and saw new opportunities in the market such as gesture recognition and 3-D.
Finally, our employees carried out our strategy during the economic downturn, so we began to see the benefits of their hard work and dedication.
Thank you again for joining us today.
Thank you for taking the time and your interest in JDSU.
Have a good evening.
Thank you for attending today\'s meeting.
This is the end of the speech.
You can now disconnect and have a great day.
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