Thursday, September 11, 2014

JDS Uniphase (JDSU) Post-Bubble Plunge Leads to Split

JDS Uniphase Corp.’s plan to break in two is designed to lift the value of a company that never recovered from the bursting of a 1990s bubble in Internet-related stocks.
The producer of fiber-optic components and networking equipment began as Uniphase Corp. and changed its name after buying JDS Fitel Inc. for $7.05 billion of stock in July 1999.
stock performance of JDS Uniphase since its initial public offering in November 1993.

Shares of JDS Uniphase jumped more than 600-fold from the IPO price through March 2000, when they peaked with the Nasdaq Composite Index, and plunged during the subsequent bear market. Although the Nasdaq closed yesterday within 10 percent of its record, the comparable gap for the Milpitas, California-based company’s stock was 99 percent.

Splitting the optical and networking units into separate, publicly traded companies, which JDS Uniphase proposed two days ago, may do relatively little to narrow the stock’s differential if analyst projections are any guide.

JDS Uniphase has “long-term potential” to reach $40 a share, Mark Sue, an analyst at RBC Capital Markets, wrote in a report yesterday. Sue increased his 12-month price estimate for the stock by 64 percent to $18, the highest among 14 analysts in a Bloomberg survey. The New York-based analyst also lifted his rating to the equivalent of buy from hold.

Even if JDS Uniphase advances to $40, the shares would be 97 percent below their peak. They changed hands for as much as $1,227.375 after adjusting for a 1-for-8 reverse stock split, completed in October 2006.

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