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February 28, 2005

JDS Uniphase!

Infectious Greed writes:

Infectious Greed: Worst Stock in the World: Okay, it's not really the worst stock in the world -- it didn't fall to zero, and the list is only of stocks that trade on the major U.S. exchanges -- but JDS Uniphase gets dishonorable mention in today's WSJ. It is named 'worst 5-year performer', which can't be thrilling for JDSU shareholders or management:

The Internet-stock craze of the 1990s spawned many bubbles. But few compare to the mania surrounding fiber-optic communications. And no company rode that mania more than JDS Uniphase Corp.

....In March 2000, JDS carried a market value of more than $100 billion, more than the combined total of Ford Motor Co. and McDonald's Corp. At the time, JDS had annual revenue of roughly $3 billion, and hadn't recorded an annual profit since 1996.

Then it all ended. Internet traffic grew, but not at the mind-boggling pace some had predicted. Network operators stopped buying new equipment. Equipment makers, JDS's customers, stopped buying components. Several of those customers, it later turned out, had fudged their financials to overstate their growth.

One statistic tells the story. In 2000, sales of telecom fiber-optic components totaled $15.5 billion, according to research and consulting firm RHK Inc. in South San Francisco, Calif. Last year, the total was $1.5 billion, down 90%.

That, more than anything else, explains why JDS was the worst-performing stock over the past five years among 1,000 companies in this year's Shareholder Scoreboard. The value of $1,000 invested in JDS at the end of 1999 had shrunk to just $39 on Dec. 31, 2004, compared with $890 for $1,000 invested in the Standard & Poor's 500-stock index. That's an average annual return of minus 47.7% for JDS, meaning that the shares lost roughly half their value each year for five years.

Remarkably, or maybe not, JDSU management has managed to find a silver lining, despite the stock having fallen another 41% in 2005:

'We are better positioned than some of our competitors to weather the ups and downs,' [CEO Kevin] Kennedy says.

Now there's optimism for you. That's sort of like someone being run over repeatedly by a truck, but then putting a brave face on it by arguing that at least they know what they're in for if it happens again.

Truly a remarkable ride. The fact that we are still selling only $1.5 billion of fiber-optic components each year is amazing.

Posted by DeLong at February 28, 2005 11:19 AM