JDS Uniphase to Split Into 2 Companies

Updated, 7:11 p.m. | JDS Uniphase, a maker of fiber optic networking equipment whose share price has languished in recent years, said on Wednesday that it would split into two publicly traded companies in an effort to promote growth.

The company, which has a market capitalization of $2.8 billion, said it would undertake a tax-free spinoff of its optical components and commercial lasers division. The remaining company would focus more on software and services, with the goal of capitalizing on demand for so-called software-defined networks.

JDS estimated that the move would reduce costs by $50 million. And it said the spinoff would let the two independent companies sharpen their focus on their respective areas.

Founded in 1981, JDS Uniphase sells products for telecommunications companies and data centers, making it a way for investors to bet on trends like the expansion of mobile networks and cloud computing. Its chief executive, Thomas Waechter, took the top job in 2009 and has increased spending on research and development.

Although the company has entered new businesses, its financial performance has disappointed some analysts. Its stock price has fallen 7 percent this year.

The stock, which closed at $12.10 a share on Wednesday, rose about 12 percent after the market closed on news of the split.

“We believe two fundamentally focused companies best position us to stay ahead of the accelerating pace of technology change and to compete even more effectively across the unique markets we serve today,” Mr. Waechter said in a statement. “Now is the time to make this transition, giving these businesses the opportunity to maximize their success while providing shareholders with distinct investment opportunities in two growth markets.”

Mr. Waechter will remain chief executive of the main company, while Alan Lowe, the president of the components division, will be the chief executive of the spinoff business, JDS said.

The decision to split up came as at least one activist investor, the hedge fund Sandell Asset Management, emerged and began engaging with management, people briefed on the matter said on Wednesday. Though Sandell believes that the company should make further divestitures, these people said, its initial contact with the company was more general and did not involve specific recommendations.

That said, the hedge fund — which has a roughly 2 percent stake — thinks that the components division being spun off could be sold in a quicker process that would generate more value for shareholders, according to the people briefed on the matter. The investment firm also believes that at least one other JDS business could be sold, and that the company could better use tax assets like net operating losses that could help reduce its costs.

A spokesman for Sandell declined to comment.

The transaction is expected to be completed in the third quarter of next year. Centerview Partners and Goldman Sachs are providing advice.

Michael J. de la Merced contributed reporting.