Mixed results for JDS Uniphase (JDSU)

JDS Uniphase Corporation (NASDAQ: JDSU), the optical components maker, reported 16% revenue growth last night and positive EPS for the fourth quarter in a row. Revenue came in at $351 million and EPS of $0.07 versus estimates of $338 million and $0.04, respectively.

The company provided guidance of $345 to $360 million in revenue for the current quarter, which is acceptable and could be a bit conservative.

Acquisitions in the test and measurement business are paying off as this was the business that drove a good portion of growth. However, its optical communications business, JDS's claim to fame, came in weak with operating margins of -8.2% vs -1.0% for the quarter. The weak operating performance was driven by poor factory utilization as it transitions to a new lean manufacturing model along changes with several of its largest customers which led to order slowness, the company claimed.

JDS, under the leadership of Cisco former top exec, Keven Kennedy, continues to push forward, but it appears more acquisitions and new products are needed to keep the momentum going. Despite claiming leadership in the better segments of the optical space, the products do not seem to have the ability to generate the margins investors would find attractive. Plus, the company still has some debt on its balance sheet that it would be nice to see cleaned up.

Goldman has put a $17 price target on the company, for 16% appreciation. With the recent broad- based drop in the stock market, investors might look elsewhere for better returns.