By Jeff Karoub
Small Times Staff Writer
July 27, 2001 — JDS Uniphase Corp.’s steep earnings drop announced Thursday has led the optical network maker to write down by $40 billion the value of companies it has bought in the past two years. But the biggest reported loss in business history is still not enough to shake the company’s stake in small technology, analysts said.
“They have been buying up companies, left and right, and the market tanks. But from a MEMS standpoint, I really don’t see much impact,” said Marlene Bourne, senior MEMS analyst for Cahners In-Stat Group.
JDS, based in San Jose, Calif., and Ottawa, lost $7.9 billion during its fiscal fourth quarter that ended June 30, and $50.6 billion for the entire year.
The company, which has designed and built optical MEMS devices since it bought Cronos Integrated Microsystems Inc. last year, said it would cut 7,000 workers in addition to the 9,000 already laid off this year, and aims to reduce annual operating costs by $700 million, more than double its earlier estimate.
JDS is by no means alone in its monetary misery. The news is the latest in a string of announcements by companies, including those with small tech operations, to post big losses and announce cuts and layoffs.
They include Corning Inc., Nortel Networks, Lucent Technologies and Lucent’s Agere Systems. Agere this week said it lost $1.11 billion in its most recent quarter and is expected to be saddled with $2.5 billion in debt from its parent company when it is spun off into a separate company in about six months.
But like those larger companies, Bourne said, JDS’ financial interest in small tech is indeed small.
JDS bought Cronos for $750 million, compared with the billions it spent for several other companies, she said.
Bourne, who bought stock in JDS five years ago, said the woes experienced by JDS and other companies have come from those high-cost acquisitions, which were overvalued. Companies stopped spending because their customers stopped buying, but not before many suppliers got caught with enormous levels of inventory.
“All of this is now shaking out,” she said. “They don’t really have a choice.”
But MEMS, she said, has largely been protected, not only because the operations are small, but because such technology is expected to help restore profits once the market rebounds and the products are ready for market.
“MEMS, right now, is very well insulated from the broader market activities — even those in low-level productions. It’s a next-generation technology, and telecom is very much dependent on next-generation technology to burst and grow.”
Ken Gabriel, co-founder of the MEMS Industry Group, agreed with Bourne. But he said that protected status doesn’t mean that some of the stand-alone small-tech companies will be lone wolves for much longer.
“There will be consolidation in the MEMS optical switching start-up arena,” said Gabriel, whose group serves as a trade association for MEMS manufacturers, integrators and suppliers.
“You’ll find it happening, especially those that came out essentially during what (Federal Reserve chief) Alan Greenspan called the ‘irrational exuberance’ (period).”
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CONTACT THE AUTHOR:
Jeff Karoub at [email protected] or call 734-528-6291.