Mixed Results in Optoelectronics for the Fourth Quarter Closely watched JDS Uniphase turned in a classic "good news/bad news" report for the December quarter. On the good news side, revenue more than doubled to $925 million from $354 million in the year-earlier period. Analysts had projected revenue of $916 million to $920 million. The company reported a substantial loss of $895 million, but again, that was what the analysts were expecting. If one were to exclude JDSU s substantial merger & acquisition-related costs, as well as other accounting items such as gains on investments and payroll taxes on stock options, the company would have reported profit of $208 million, more than double the "pro-forma" profit of $84 million in the year ago period. On the bad news side, JDSU said it expects its March earnings to be equal to or slightly better than the second quarter, with revenues 710% above the December quarter. This is a definite climb-down from a company that has been posting 2025% growth quarter after quarter. "This change in guidance from previous periods reflects uncertain near-term carrier capital spending plans, customer inventory adjustments and a somewhat lower level of near-term sales visibility than we and our customers had experienced in recent periods" JDS Uniphase chief financial officer Anthony Muller said in a conference call with analysts. President Jay Abbe said customers were working through inventories of components that are now more readily available. "We do not believe that this is a long-term trend or an across the board change," he said. "Our customers are in the process of finding the right inventory levels for each product and we may experience a temporary slowing in order flow for certain products until this adjustment is completed." Commenting on the long-term outlook, JDSU CEO Jozef Straus told Reuters "We still firmly believe that fiber optics is an ongoing growth business(carriers ) capital expenditures, according to our information, are going to be continuing at 40% (growth)." SDL SDL reported revenue of $175.6 million and earnings of $48.2 million for the December quarter. Nevertheless, the share price dropped, reflecting investors disappointment over the continued delay in the closing date for the JDSU/SDL merger (approval was granted as this issue went to presssee page 5). The revenue figure was three times higher than the year ago period, and 20% higher than the September quarter. Fiber optic communication products accounted for 92% of total revenue, with both the terrestrial (up 21%) and undersea (up 26%) sectors showing strong growth. The company recorded a net loss of $122.8 million, but pro-forma income (excluding merger expenses and other non-core accounting items) was $48.2 million, an increase of 20% over the September quarter. In a conference call with analysts SDL s management predicted $193 million to $202 million in revenue for the March quarter, and raised expectations about profit margins. They also indicated that SDL would hit the $1 billion mark in revenue in calendar year 2001. Alcatel Optronics Alcatel Optronics reported that sales in the December quarter increased 126% over the year ago period, to $137 million. Net income was $15.9 million, compared to $10.5 million for the year ago period. However, gross profit declined somewhat to 34.8%, due to a change in product mix as well as a higher depreciation charge related to capital expenditures for capacity expansion. "2000 has been a record year for Alcatel Optronics," said Jean-Christophe Giroux, CEO. "We set very high objectives and we have achieved them. Revenue and profitability have both grown significantly. We ve been successful in moving up the vertical chain into integrated subsystems and in entering the passive market. We have leveraged our presence within our external customer base, which now represents over 30% of our sales. Our capacity has ramped up substantially and we will continue this effort throughout the year. Looking forward, we are still seeing strong demand across all product lines, driven by sustained growth in terrestrial and submarine D-WDM systems and the widening acceptance of Raman technology, which was pioneered by Alcatel Optronics. Today, I have no reason to believe that we will not meet our 2001 targets of growing sales faster than the market to a range of 60 to 65% and of improving our profitability. The first quarter will be a bit slower than average, nevertheless, we are anticipating a growth in sales close to 100% over the corresponding period last year." Uniroyal Technology Uniroyal Technology Corporation reported net sales of $14.3 million for the December quarter, down slightly from the year-ago results. Increased investment spending at the company s Compound Semiconductor and Optoelectronics business segment resulted in a net loss from continuing operations, excluding intangible amortization and unusual/non-recurring items, of $3.1 million. The Compound Semiconductor division was formed through the acquisition of Sterling Semiconductor; the Optoelectronics business consists of a joint venture with Emcore for producing high brightness LEDs. Sales for the Compound Semiconductor and Optoelectronics business segment grew 90% versus the previous year, increasing to $1.2 million versus $614,000 last year. However, this segment generated a loss of $8.3 million for the quarter. AXT AXT reported revenue of $38.2 million, up 15% from the September quarter. 95% of this amount came from AXT s substrate division, with the remainder coming from the company s visible emitter division, which produces blue, green and cyan LEDs, and VCSEL wafers and chips. Production of 650nm laser diodes for laser pointers and other consumer-oriented applications was discontinued in the quarter. The company reported income from continuing operations of $16.4 million, but when adjustments for one-time occurrences are made, the result is a net income of $4.6 million. Still, this figure is more than double the net income gained in the year-ago quarter and is up 35% over the September quarter. "The fourth quarter and fiscal year results were the strongest in the company s history, even without the net benefit of the one-time events recorded in the quarter," said Morris Young, president and CEO. "We are very pleased with the growth in our substrate division, which is being driven by the market demand for 5-inch and 6-inch gallium arsenide substrates and 3-inch and 4-inch indium phosphide substrates." He went on to say that company s near and long-term outlook continues to be strong. "We expect our substrate division to continue its consistent growth throughout 2001, driven by the demand for higher performance wireless handsets and by the fiber-optic infrastructure build-out." In recent months AXT has been encouraging its substrate customers to make guaranteed long-term bookings with non-refundable advance paymentsa testament to the scarcity of III-V substrates. As a result, AXT has more than $91 million in substrate contracts on its books, and says that it will not be taking any new customers in 2001. AXT predicted that revenues for the March quarter would increase 79%, but would then accelerate so that revenue for the entire calendar year would exceed 2000 revenue by 5560%. Emcore Emcore reported revenue of $40.1 million for the December quarter, up 143% from the year ago quarter and up 18% over the September quarter. Gross profit was a record $16.5 million, although overall the company logged an operating loss of $3.6 million and a net loss of $6.3 million. Both of those figures are before charges for goodwill amortization are added in. Contributing to the losses were nearly $7 million selling, general and administrative costs and just over $13 million in R&D expenses. Commenting on the results, Reuben Richards, President and CEO, said "During the quarter, we moved ahead with our previously-announced plans for accelerated investment in research and development in response to customer demand for fiber optic products, and the company is seeing substantial interest from its customer base relating to new product prototypes. This R&D investment strategy promises to significantly expand our wireless and fiber optic product lines and, at the same time, add further strength to our long-term customer relationships." MOCVD equipment sales were up 126% and still dominate Emcore s sales, accounting for 66% of December quarter revenues. A breakdown of materials revenue by product type was not given, but the company did say that sales of electronic materials were up 172%, photovoltaics increased 251% and fiber optic sales grew 184% in comparison to the year-ago quarter (see ).