Shares of JDS Uniphase Corp (JDSU) surged 14 percent in after-hours trade Wednesday, after the communications solutions provider said its board approved a plan to split itself into two publicly traded companies, with one business focusing on optical products and the other on networking. The decision, the company said, is part of efforts to gain greater leverage amid rapidly changing business conditions.
JDS expects to effect the spin-off through a tax-free structure, and the transaction is to close by the third calendar quarter of 2015.
JDS will split into an optical components and commercial lasers company ("CCOP") consisting of communications and commercial optical products segment; and a network and service enablement company ("NSE") consisting of network enablement, optical Security and performance Products (OSP) segments.
CCOP serves a $7.4 billion optical communications market expected to grow at a compounded rate of 11 percent over the next four years. It also addresses a near $2.5 billion commercial lasers market, growing at a projected 7 percent annually. In the full year 2014, CCOP had revenues of $794 million.
JDSU believes the separation will allow CCOP enhanced focus on its leading position in telecom, expand its position in the high-growth datacom market, and grow its commercial lasers and 3-D sensing businesses.
The NSE company will address a $7 billion network and service enablement market, expected to grow at 6-8 percent annually. This business will focus investments in higher growth markets, mainly software supporting virtualized and software-defined networks. The optical security business addresses an about $1.1 billion market growing at an expected 6-8 percent. The combined revenue for NSE and OSP in 2014 was $949.5 million.
The separation is expected to occur through a tax-free pro rata spin-off of CCOP to JDSU shareholders, though the structure is subject to change based upon various tax and regulatory factors, the company said in a statement.
The split-off would lead to combined cost reduction of $50 million, the company said.
JDS also reaffirmed its guidance for the first quarter, expecting adjusted earnings of $0.08 to $0.12 per share and adjusted revenues of $405 million to $425 million. Analysts polled by Thomson Reuters currently expect earning of $0.10 per share on revenues of $416.6 million for the quarter.
In August, JDS reported a fourth-quarter loss, hurt by negative operating margin even as revenues advanced on growth at network service and optical products businesses.
JDS Uniphase stock closed Wednesday at $12.10, up $0.39 or 3.37%, on a volume of about 7 million shares. In after hours, the stock gained $1.70 or 14.00%, at $13.80.
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