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JDSU reborn and set to grow
SR division expected to play key role in JDSU's shift to consumer products
JDSU's Derick Abbot inspects a medical panel at the company's Santa Rosa facility.
Crista Jeremiason/PDPublished: Sunday, February 21, 2010 at 4:03 a.m.
Last Modified: Sunday, February 21, 2010 at 4:03 a.m.
JDSU was a shooting star in high-tech's boom years, when its optical components sped traffic on the burgeoning Internet.
Sales grew nearly 30-fold as JDSU swallowed up other technology makers, including Santa Rosa's Optical Coating Laboratory Inc.
But JDSU — then called JDS Uniphase — flamed out when the tech boom ended in 2001. It lost more than $56 billion that year, the largest annual loss in U.S. corporate history.
In three years, JDSU shares plummeted from $335 to less than $2.
The company survived the crash, and today it's on the comeback trail, thanks in part to new products developed in Santa Rosa.
"It has morphed into a higher margin, higher quality, more defensible business," said Ajit Pai, a tech analyst at Thomas Weisel Partners, a San Francisco-based investment firm.
JDSU's share price has quadrupled over the past year, and analysts believe it's poised for future growth.
"I think the prospects are good," said Paul Bonenfant, an analyst with Morgan Keegan, an investment firm based in Memphis. "It's a fine example of a turnaround."
Based in Milpitas, JDSU posted $1.3 billion in sales last year.
Santa Rosa is headquarters for JDSU's smallest but most profitable division, Advanced Optical Technologies. The unit makes an array of products, from color-shifting pigments for printing currency to holographic images used to authenticate credit cards.
Last month, JDSU drew media attention for its 3-D glasses, which moviegoers are wearing to watch the blockbuster film "Avatar."
The division, which has about 540 employees in Santa Rosa, generates more than $200 million in sales a year. It will play a key role in the company's growth as JDSU shifts focus to consumer products, CEO Tom Waechter said.
"We're highlighting a number of our technologies that really impact people's lives," he said. "A lot of that is coming out of Advanced Optical Technologies."
The Santa Rosa division is working on next-generation photovoltaic cells for the solar energy market, Waechter said. "There are some optical capabilities we've added to the solar cell that we think will be unique in the market," Waechter said. "It could help with sun concentration and efficiency of the cell."
It's also pursuing the commercial applications of "gesture recognition," a way for people to control electronics by simply pointing or waving at them.
The technology employs JDSU's diode lasers and optical filters. JDSU will ship its first gesture recognition product to a home gaming customer later this year, Waechter said.
Gesture recognition could also be used for home security, the automotive market and defense. "It's pretty sophisticated technology," Waechter said. "We're excited because there are a number of applications."
The 3-D business also has growth potential, because electronics makers want to include the technology in next-generation TVs, he said.
JDSU is expanding in Santa Rosa, where it's trying to fill about two dozen positions, he said. "We think the capabilities to develop additional technologies are significant," Waechter said. "It's really important to make sure we have a technology roadmap that extends out into the future."
JDSU's comeback wasn't accomplished without pain. There were 1,720 employees in Santa Rosa when it bought the optical coating business from OCLI in 2000. Most of those jobs disappeared when JDSU moved production to China and Thailand to cut costs.
The Santa Rosa division also dropped several unprofitable product lines, including components for large-screen, rear-projection TVs.
JDSU was hit by shareholder lawsuits accusing its former executives of lying about its finances before the company crashed in 2001.
Those lawsuits failed, but former OCLI directors later paid $5 million to settle a suit alleging they misled shareholders about the sale to JDSU.
In 2007, JDSU sold its 64-acre Santa Rosa complex for $26 million and leased back about half of the space for continuing operations.
But the company has no plans to leave Santa Rosa, Waechter said, because workers here are experts in optical thin-film coating technology.
"We have a really interesting and unique skill set here," he said. "There's an experience and knowledge base in Santa Rosa that you don't find in a lot of parts of the world.
The division's products have their roots in OCLI, which pioneered thin-filming coating in the late 1940s, Waechter said. "It's a culture that builds over time," he said. "You don't quickly change or replace that."
Meanwhile, JDSU's two larger businesses, communications test and measurement and optical communications, are seeing improved results as AT&T, Verizon, Comcast and other telecommunications customers start spending again on broadband network upgrades.
Sales for the test division were up 23 percent last quarter, and optical communications revenue rose 11 percent over the prior period.
While JDSU still isn't in the black, it's been profitable based on adjusted income for six of the past eight quarters.
"We're starting to see a pretty strong rebound," Waechter said.
You can reach Staff Writer Steve Hart at 521-5205 or steve.hart@pressdemocrat.com.
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