JDS Uniphase Corporation (NASDAQ: JDSU) is soon to exist no more, at least not in its historic sense that investors have known about since and before the tech bubble burst in 2000 to 2001. The news would be discounted by many new investors today, but JDSU is one of those companies which has many legacy shareholders left over from years ago.
After the close of trading on Wednesday came word that JDSU will separate into public companies with different investment opportunities in distinct growth markets:
- One company will be an optical components and commercial lasers company. This is the current Communications and Commercial Optical Products segment. CCOP’s FY14 revenues were $794.1 million.
- The other company will be a network and service enablement outfit focused on software-defined networks and increased network, service and application visibility. This is the current Network Enablement, Service Enablement and Optical Security and Performance Products. The combined revenue for NSE and OSP in FY14 was $949.5 million.
The company also issued guidance along with this news. JDSU said that it was reaffirming fiscal first quarter of 2015 of non-GAAP net revenue in a range of $405 to $425 million and non-GAAP earnings of $0.08 to $0.12 per share. Thomson Reuters has estimates of $416.6 million in revenues and $0.10 in earnings per share.
While this will create a key investor event, one has to wonder what the company is thinking on the surface. JDSU said that it sees an expected combined expense reduction of approximately $50 million. It is also expected to be accomplished through a tax-free spinoff structure with separate corporate brand identities for each business (on a date T.B.A., but by the third calendar quarter of 2015).
The separation is subject to the satisfaction of closing conditions. These conditions include final approval from the JDSU Board of Directors, receipt of tax opinions, the effectiveness of an applicable registration statement with the Securities and Exchange Commission and satisfaction of foreign regulatory requirements.
Did someone know this move was coming? We would point out that it was just on Monday that OptionsMonster pointed out unusual call option trading activity — of 2,400 DEC $12 CALLS versus an open interest of 1,558 contracts.
Cash expenditures to obtain the cost savings are expected to be between $75 and $100 million. After closing at $12.10, JDSU’s 52-week range is $10.29 to $16.61 and its consensus price target from Thomson Reuters was listed as $13.38.