OT? Memories of JDSU, a market darling

During the late 1990s optical communications was all the rage to the point that I even bought a book to learn about it. JDS Uniphase (JDSU) was the darling stock of the day that made our portfolios outperform like greased lightening. While the technology has only gotten better there are a lot of carcasses in its path. JDSU, Lucent, Corning (survived)

Corning: http://invest.kleinnet.com/bmw1/stats35/GLW.html

Stock[edit]
During the 1990s, JDS Uniphase stock was a high-flyer tech stock investor favorite. Its stock price doubled three times and three stock splits of 2:1 occurred roughly every 90 days during the last half of 1999 through early 2000, making millionaires of many employees who were stock option holders, and further enabling JDS Uniphase to go on an acquisition and merger binge. After the telecom downturn, JDS Uniphase announced in late July 2001 the largest (up to then) write-down of goodwill. Employment soon dropped as part of the Global Realignment Program from nearly 29,000 to approximately 5,300, many of its factories and facilities were closed around the world, and the stock price dropped from $153 per share to less than $2 per share.

On September 23, 2005, JDSU announced a reverse stock split one-to-eight.[15]

https://en.wikipedia.org/wiki/JDSU#History

Denny Schlesinger

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Don’t forget Nortel, Lucent, Sprint, T,. T remember when they were bought out by SBC and they *%$% all the investors? Yea that was a time fraught with excess.

Andy

1 Like

Ah the good old days! Today it might be NVDA

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<<<Ah the good old days! Today it might be NVDA>>>

I believe that comment is in error. JDSU crashed because the build out of fiber optics crashed.

The demand for graphics cards, autonomous driving, and AI is not going to die out and crash anymore than the demand for CPUs or operating systems for PCs died and crashed.

These markets (except for graphic cards for graphic sake) are at the very early stages of growth. The revenue is recurring each year, unlike JDSU that sold not a non-recurring revenue market. That is, once you built out the fiber optic network, you didn’t need to build another one. Whereas, with PCs, servers, cars, drones, fork lifts, trains, planes, etc., every year new such items are produced. Usually growing, but sometimes contracting.

In the end, perhaps NVDA is overvalued, perhaps it is presently undervalued. The market values as it sees fit. But NVDA’s business is nothing like the business of JDSU because JDSU never had a recurring business model, whereas NVDA does, and one proven by decades and in some markets a century of historical experience.

So no, NVDA is not the next JDSU. No one eclipsed JDSU in the marketplace, the market simply saturated, became commoditized, and was overhyped. NVDA’s market is not the same. But again, the market will value as it will value. But the business fundamentals are utterly different from JDSU.

Tinker

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I believe that comment is in error. JDSU crashed because the build out of fiber optics crashed.

I wasn’t thinking of NVDA when I started this thread but more of a company in JDSU’s line of business. In any case there is one thing that Jim Rogers gets right, the next crash is going to come from somewhere where we are not looking. The more volatile and changeable an industry is the more agile the investor has to be.

Denny Schlesinger

3 Likes

While I believe Tinker makes valid points about JDSU’s rise and fall, I believe he has overstated his case.

I was an early investor in JDSU (even in the Enphase days). My initial investment grew exponentially. Those were heady days indeed. It wasn’t just the fact that we were engaged in building a fiber backbone to make the Internet a reality, there was also phenomenal multiple expansion that propelled many a stock to stratospheric heights. Yeppers, it all ended badly.

However, that was two DECADES ago. Yes, indeedy, we installed a whole lotta long haul optical fiber back then. Lots and lots of “dark fiber” was installed at the same time by companies that anticipated an ever-growing demand. True, the business suffered a collapse when the initial growth spurt faded. But did the business die? Of course not! Long-haul fiber deployments settled down, but were supplanted with growth in metro, data centers, even “fiber to the premises”. In addition, of course, there is the growth of systems in frontier markets, emerging markets and even huge (but ever growing markets) such as China. The need for optical components (and ever faster components) remains every bit as strong as the need for semiconductor chips. I see no decline in the optical components sector only growth and more growth. Media content grows exponentially. Data generation and distribution grows exponentially. It’s a vibrant, ever-growing sector. There will be winners. There will be losers. Astute investors will try to understand the players and their relative prospects.

True story: As stated above, I was an early investor in JDSU. I forgot the size of my initial investment but I do remember this: It was June, 2000. My 1988 Honda Accord died an ignoble death after 180,000 miles of loyal service. I needed a new car immediately. I wandered over to my local Lexus dealer and test drove an RX300. Liked the car. Asked for a good price, stating I’ll pay cash on delivery. Shook hands. Came home and sold sufficient JDSU shares to cover the cost of the car (~$42,000). Wrote a check, picked up the car, came home and figured out those shares had only cost me $2,000 originally. I smiled.

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I believe that comment is in error. JDSU crashed because the build out of fiber optics crashed.

What I really meant was the great optimism that drove JDSU so high, not necessarily the crash. JDSU went a long way and made people a lot of money. I was one that almost bought enphase, but didn’t. I did hold JDSU for a while, but not as successfully as putnid. But maybe NVDA is seen as the next great thing with so many possibilities, and it will soar to ridiculous heights.

Oh, and there was Corning, barely made it through alive, but still here.

P.S. did everyone realize Lumentum (LITE)is a spin off from JDSU? Good strong growth stock right now, #2 in its group behind AAOI.

Rating
Composite Rating 98 Pass
EPS Rating 99 Pass
RS Rating 97 Pass
Group RS Rating A+ Pass
SMR Rating A Pass
Acc/Dis Rating B+ Pass

5 Likes