JDS loss intensifies pain for telecoms

Stockpiles of telecoms kit are eating into profitability

US telecoms equipment maker JDS Uniphase is planning to get rid of 16,000 jobs after announcing what some observers believe is the worst annual loss in US corporate history.

The company posted a $50.6bn loss for the year to end of June, which is the result of sliding sales, huge inventory over-runs and a goodwill bill following acquisitions of $38.7bn.

JDS' record loss is just the latest blow to a sector already reeling from the sudden slump in sales to telecoms operators.

In the fourth quarter alone, JDS lost $7.9bn after exceptional items. The performance means it is pushing its job cut plans up by 11,000 from the 5,000 previously estimated.

"The company does not yet see any positive signs of a reversal in the downward trend in the industry... and is not currently providing guidance for the first quarter or for future periods," it said in a statement.

The news triggered a selloff of the company's shares. By 1410 (GMT), 40 minutes after the US market opened, JDS shares were down 9.7% to $8.55, having earlier fallen as much as 15.6%.

The stock's 52-week high is $140.50.

Sector-wide pain

JDS is not alone in experiencing problems.

Lucent Technologies, in its previous incarnation as Bell Labs, the pride of the US tech sector, has already announced cuts totalling well over a third of its total workforce, while Nortel Networks recently unveiled a quarterly loss of $19.4bn.

And even sector giant Cisco Systems has turned in quarterly losses for the first time in years.

The company does not yet see any positive signs of a reversal in the downward trend in the industry

JDS statement

Like its beleaguered peers, JDS blamed its problems on the economic contraction in the US and overseas, which has caused telecoms companies to slow down their network building to a crawl.

The spending freeze came just when the boom of the last couple of years had seen the equipment industry ramp up capacity, leaving the vendors with massive stockpiles of unwanted products.

"Carriers have adjusted their spending levels... we are seeing the effects of this in our order flow and we have yet to see signs of this reversing," Jozef Straus, the company's chief executive, told investors in a conference call.

Confounding expectations

Until recently, both analysts and some of the companies themselves were seeing a turnaround by the end of this year.

Cisco, for instance, has been insisting that the third or fourth quarter will see the sector touch bottom.

Now, however, JDS' figures - which confounded expectations of a slight fourth quarter profit - make that look increasingly unlikely.