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.)

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TheDeal: Jackson to Launch Online Site

From TheDeal.com

by Michael Rudnick

Posted 05:39 EST, 23, Jan 2009

Eric Jackson, founder of upstart activist hedge fund Ironfire Capital LLC, may be a minnow in a big pond, but he knows how to navigate the backwaters.

The voluble activist, better known as the instigator of a broad, Internet-based campaign against Yahoo! Inc. in 2007, plans to attract small investors to a new online network and serve as a catalyst for activist campaigns against selected targets.

Jackson, 36, does not plan to recruit investors for his hedge fund. Rather the Web site, to launch sometime in June, is expected to funnel campaigns against more visible, large-cap companies, he said in an interview.

Jackson, whose year-old Naples, Fla., hedge fund manages less than $5 million, hopes to replicate the successful activist campaign he waged against Yahoo!. He may lack the deep pockets of larger activists, but he has a knack for grass-roots organizing using viral communication.

The yet unnamed site will be segmented into a number of campaigns Jackson will coordinate, he said. It will include a messaging component in which investors will share views about the target companies.

Interested parties must provide information about their holdings in the targeted companies.
The site will offer several features, such as a Wiki software component enabling visitors to create and edit alternative plans for the targeted companies. It will post links to third-party video sites where investors can create visual presentations discussing the targeted companies.

The site will allow users to vote on campaign proposals, and learn the how-to's from a tutorial section.

Jackson said he will take stakes in target companies and will serve as the "spokesman" for the shareholder groups pooled through the Web site.

Eventually, he hopes to pass the torch to other individual investors.

To help finance the launch, Jackson is in talks with a potential partner, though he said he is prepared to go it alone, if necessary. A partnership with online messaging networks is also under negotiation.

Before launching Ironfire in 2008, Jackson, a Toronto native, was president at Toronto-based Jackson Leadership Systems, a management consulting firm founded by his father, David Jackson. The firm specialized in corporate governance.

Before that, he was an executive at software company VoiceGenie Technologies Inc. — which Alcatel-Lucent acquired in 2006 — while he completed a Ph.D. at Columbia University Business School. While studying corporate governance, he met with activist Ralph Whitworth of Relational Investors LLC, who has been a strong influence ever since.

In 2007, Jackson pushed for the ouster of Motorola Inc. CEO Ed Zander. Though that campaign faltered, Jackson organized 131 investors because he believed management would not ultimately give in.

He had better luck in the Yahoo! effort: He stoked up an online campaign, dashing off blogs and drawing a steady stream of comments from other Yahoo! shareholders. His nine-point plan called for the ouster of then-chairman and CEO Terry Semel, pointing to numerous strategic failures that hurt the company's share price. He also called for the ouster of six other directors, among other demands.

At Yahoo!'s annual meeting in June 2007, more than 30% of its shareholders voted against the re-election of Semel to the board, due partly to pressure Jackson created.

"Something Eric Jackson is good at is getting media focus, which can have a viral effect among investors," said Bruce Goldfarb, CEO of New York-based proxy solicitor Okapi Partners LLC.
He added that his success at Yahoo! may be due to "picking the right target at the right time."

Typically in uncontested elections, about 90% of shareholders vote for the candidate, Jackson said. He confronted Semel at the meeting with his gripes. A week later Semel stepped down, and Jerry Yang replaced him.

Jackson's backing from shareholders was relatively small, but the sentiment was widely shared. "We had good ideas that resonated with other shareholders," Jackson said.

Many of the other shareholders were big institutional investors "who are not built to be activists," he added. Nonetheless, while those institutional shareholders did not formally join his group, Yahoo!'s largest institutional shareholders told him behind the scenes that it supported his efforts.

The online campaign against Yahoo! differed from a typical activist campaign "in that it was a community of people where the best ideas rose to the top," Jackson said.

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