Today: JDS Uniphase announces plan to split in half, with one company focusing on core business and another looking for big growth in software-defined networking. Also: Apple rebounds as analysts cheer announcements, Twitter plans debt offering.
The Lead: JDSU plans to split in two
JDS Uniphase will split in half, the Milpitas company announced Wednesday, with its CEO taking over a company focused on next-generation networking while its core hardware business is spun off into a new entity, a move that provoked a late spike on Wall Street.
JDSU said it would separate its core business of optical-networking components into a new company led by Alan Lowe, an executive vice president who has led that division within JDSU since 2008. CEO Tom Waechter will remain in control of the other half of the company, with a focus on software-defined networking and other services along with a lucrative side business in anti-counterfeiting technology.
“Over the past five years, JDSU has invested heavily in innovation that is well aligned with the industry’s best growth opportunities, including cloud networking, data center expansion and software-defined networks,” Waechter said in Wednesday’s announcement, later adding, “We believe two fundamentally focused companies best position us to stay ahead of the accelerating pace of technology change and to compete even more effectively across the unique markets we serve today.”
In an email, a JDSU spokeswoman the current Milpitas headquarters would continue to be the “senior management hub” for both companies, and that jobs should remain the same for the majority of employees. JDSU is still contemplating what the two new companies will be named, and will discuss the changes in greater detail Thursday at its annual Analyst Day.
After zooming to a valuation of $125 billion in the heady days of the dot-com boom, JDSU plunged in the early 2000s and currently has a market valuation of less than $3 billion. The company believes software-defined networking, or SDN, and cloud architectures is an opportunity to capitalize on growing demand.
“If you went back 10 years ago, capacity was overbuilt, we got ahead of demand, the devices weren’t there yet,” Waechter told the Mercury News in a 2012 interview. “But now there are so many new devices and new apps that it’s very hard to actually build enough capacity for the network to meet demand.”
The move will effectively split the company in two in terms of revenues: the optical networking business brought in $794.1 million in the company’s just completed fiscal year, JDSU said, while the rest of the business accounted for $949.5 million. JDSU is the 43rd largest technology company in Silicon Valley in terms of revenues, with sales totaling $1.7 billion in the 2013 calendar year, and the fifth largest networking company in the region.
As Silicon Valley tech companies continue to aim for new markets in search of growth, spinoffs have become a way to provide investor growth while keeping mission statements from getting too jumbled. Agilent — which was spun off from Hewlett-Packard — announced it was splitting into two companies last September, with its Keysight Technologies spinoff beginning operations in the North Bay last month ahead of a full separation planned for later this year. VMware, which is majority owned by EMC, announced a spinoff called Pivotal last year that will combine business units from both companies into a new, jointly owned entity.
The move tends to make investors happy, as they receive shares in two companies, and has been a focus of some activist investors such as Carl Icahn, who agitated for eBay to spin off its PayPal payments company earlier this year. JDSU shares jumped in late trading following Wednesday’s announcement, topping $13.50 after closing with a 3.4 percent increase at $12.10.
SV150 market report: Apple leads tech stocks to strong gains
Wall Street managed a gain Wednesday thanks to a strong showing from Apple, which bounced back from recent declines after analysts cheered the company’s new offerings.
After Apple’s introduction of two new iPhones and a smartwatch during Tuesday’s big event in Cupertino, financial experts responded warmly, with special smiles at the company’s mobile-payments offering. Piper Jaffray analyst Gene Munster called Apple Pay “the most important Internet service introduced by Apple since iTunes,” while Chris Caso of Susquehanna Financial Group wrote, “Payments represent a significant innovation, another factor to drive the Apple ecosystem.” As he said was likely last week, Pacific Crest Securities analyst Andy Hargreaves downgraded Apple stock, going against the grain and writing, “We were impressed by the new iPhone 6 and 6 Plus, but believe the potential from these devices is largely priced into Apple at current levels.” Apple shares gained 3.1 percent to $101.
Twitter jumped 4.5 percent to $52.91 after UBS analyst Eric Sheridan upgraded the stock to “Buy,” but shares sank back toward $52 in after-hours action following the San Francisco company’s announcement that it would raise $1.3 billion or more in a debt offering, an odd move less than a year after Twitter raised nearly $2 billion in an initial public offering. Google didn’t suffer after reports of millions of Gmail addresses and passwords leaked on the Web, gaining 0.2 percent to $593.42 while acquiring a biotech startup. eBay fell 3.1 percent to $51.10 amid continuing worries about Apple Pay’s effects on PayPal, though the San Jose company’s Braintree payments arm noted that it would integrate with Apple Pay for customers. Netflix added 1.1 percent to $484.39 while participating in a net neutrality protest and Palo Alto Networks jumped 10.6 percent to $98.75 after releasing its earnings report.
Up: GoPro, Twitter, Apple, Gilead, Yelp, VMware, Salesforce, Juniper, Zynga, Intuit, Pandora, Netflix
Down: eBay, Applied Materials, SunPower, Adobe, SanDisk
The SV150 index of Silicon Valley’s largest tech companies: Up 20.4, or 1.27 percent, to 1,630
The tech-heavy Nasdaq composite index: Up 34.24, or 0.75 percent, to 4,586.52
The blue chip Dow Jones industrial average: Up 54.84, or 0.32 percent, to 17,068.71
And the widely watched Standard & Poor’s 500 index: Up 7.25, or 0.36 percent, to 1,995.69
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