Monday, February 14, 2011

JDS Uniphase's Time Has Come ... Again

By Eric Jackson
RealMoney Contributor

2/14/2011 5:06 PM EST
Click here for more stories by Eric Jackson

Unless you've been out of it for the last month, you know that JDS Uniphase (JDSU - commentary - Trade Now) has been on a tear. Year to date, the stock is up 95%.

A week and a half ago, the company released its latest earnings reports, and all hell has broken loose. The stock jumped from a close of $17.93 pre-earnings to near $22 when it opened. On Friday, it closed at $28.16.

For the bubble-heads who can't stop complaining about the valuations being afforded to Facebook, Twitter and Zynga, this rally by JDS Uniphase is yet another sign that another dot-com bubble is upon us.

Back in 1999, there was perhaps no greater bubble stock than JDS Uniphase. Remember the need for fiber-optic cables that was cited back then? Stocks like Qwest Communications (Q -commentary - Trade Now) and Global Crossing(GLBC - commentary - Trade Now) jumped like mad, and they were laying cable on the floor of the oceans like it was fish food. Do you remember 360networks? This Vancouver startup was in the same business and managed to recruit Greg Maffei -- who was CFO at Microsoft (MSFT - commentary - Trade Now) at the time -- to be the CEO. The venture failed in a glut of overcapacity in the space, and Maffei is now John Malone's heir apparent at Liberty Media (LCAPA - commentary - Trade Now).

Amid the hubbub, JDS Uniphase was selling optical cable networking gear to all these companies. If you recall, the wizard behind the magical uptrend in the shares was a tiny Canadian guy with a funny-looking beard and an even funnier-looking hat. The guy's name was Jozef Straus. And he helped to build the company into a colossus. At its peak in 2000, JDS Uniphase had a market capitalization of $250 billion. The stock, even after its huge recent run, is still more than 97% below that level.

It might have seemed like an odd company to take over the world of tech, but it was simply in the right place at the right time, and it rode the wave like nobody's business. It was selling a lot of testing gear at the time (and it still does) to help telecom companies tweak and upgrade their networks, in addition to selling the actual gear. Telcos were also booming, along with the gear providers like Alcatel-Lucent (ALU -commentary - Trade Now), which was two companies at the time. (Had there not been a fiber glut, the world would probably never have had to endure Carly Fiorina as the Hewlett-Packard (HPQ - commentary - Trade Now) CEO.)


[*** This post is an excerpt of the full article, available by clicking here to go to Note: subscription required. ***]

Sphere: Related Content
blog comments powered by Disqus