JDSU 2Q15 revenues, 3Q15 guidance disappoint Wall Street

JDSU (NASDAQ: JDSU) fell short of Wall Street's consensus estimates for both revenues for the third quarter of fiscal 2015 and guidance for the current quarter. Company management blamed declining service provider demand for its test and measurement equipment for the miss. Nevertheless, the company said it remains on track to divide in two by the third quarter of this calendar year.

GAAP revenue of $437.1 million for 2Q15, which ended December 27, 2014, fell within JDSU's guidance of $433 million to $457 million and surpassed the previous quarter's $433.6 million. However, it missed consensus expectations of $444.4 million. It also paled versus the $447.6 million earned in 2Q14.

GAAP net loss for the quarter was $25.1 million ($0.11 per share), worse than the prior quarter's loss of $9.7 million ($0.04 per share) and the year-ago quarter's net income of $8.8 million ($0.04 per share).

On a non-GAAP basis, the company reported net income of $35.4 million ($0.15 per share), an improvement over the non-GAAP net income of $33.8 million ($0.14 per share) recorded in 1Q15. However, the number again fell short of last year's performance, when JDSU reported non-GAAP net income of $45.3 million ($0.19 per share). It also fell short of analysts' consensus expectation of $0.16 per share.

The Communications and Commercial Optical Products (CCOP) group, which JDSU plans to spin out this fall, accounted for $207.1 million in revenue, 47% of the company's 2Q15 total. This lagged the previous quarter's $209.3 million, with the Lasers business responsible for the shortfall. The figure did exceed 2Q14's $198.0 million, although revenues from Optical Communications products dropped $7.4 million on a year-to-year basis, thanks to a decline in the 3D sensing business that was too great for an uptick in datacom optical component and subsystem sales to overcome. The company reported several design wins for 100G CFP2 and CFP4 optical transceivers.

Network Enablement (NE) and Service Enablement combined to account for $179.4 million for the quarter, down sequentially (by $1.6 million) and year-on-year (by $15.6 million).

"The NE business segment was challenged by lower demand from North American carriers while growth in mobility and next generation service enablement products did not fully offset the decline from legacy assurance products," JDSU President and CEO Thomas Waechter told attendees on an analyst call January 29, according to a transcript provided by Seeking Alpha.

"The year-on-year revenue decline reflects a softer North American carrier spending environment that continues to be impacted by architectural planning and M&A distractions in our customer base," added Executive Vice President and CFO Rex Jackson, according to the same transcript.

While JDSU management lamented the lack of a calendar year-end budget flush traditional among service providers, it expects the usual first quarter doldrums will be in effect. Therefore, company executives expect revenues for fiscal third quarter of 2015 to move downward, to between $408 million and $424 million. They called for non-GAAP earnings per share to be $0.09, give or take $0.02.

Both figures missed Wall Street consensus -- $431.3 million and $0.14 per share, respectively – and the market pummeled JDSU's stock as a result. The company's shares finished trading January 30 at $12.15, down 8.34%.

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