What’s new with JDSU in Ottawa?

Courtney
Courtney Symons
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Before JDSU became the giant it is today, JDS Optics was a successful Ottawa fibre-optic company founded in the early 1980s by a team of engineers from Bell-Northern Research Ltd.

JDSU chief executive Tom Waechter.

In a $6.1 billion stock deal in 1999, the local firm – then known as JDS Fitel following a merger with Fitel Inc. – joined forces with California-based Uniphase Corp.

The two firms had an overlap in customers, complementary technology and had worked together on several projects.

Although company headquarters are located south of the border, JDSU’s Ottawa office remains an important element of the company’s makeup, officials say.

OBJ sat down with JDSU’s CEO Tom Waechter during a recent site visit to the company’s local R&D facility in the South Merivale Business Park to discuss the impact of the firm’s Ottawa operations on the international company.

 

OBJ: What role does Ottawa play in the company?

TOM WAECHTER: The core of it is an R&D centre. We have a really good base of skilled engineers here. They’ve been instrumental in some of the new technologies we’ve released over the last couple of years that have differentiated us. At JDSU, we have three businesses. The two main revenue-generating businesses are basically around broadband. One is around the building blocks that go into the network and make it more agile, and the other part is test equipment that helps enable the network and reduce the cost of operations. This is the only site within the company that has those two groups together. I think the collaboration between those two groups is very important. It’s a nucleus and it continues to push the envelope for the technology in both of those groups.

 

OBJ: Can you give examples of technology developed in Ottawa?

WAECHTER: Some of the newer technology we’ve been working on are the ROADM (reconfigurable optical add-drop multiplexer) products, which are the building blocks that help improve the flexibility of the network. When a network requires change, instead of physically having to go and change the hardware, you can do it remotely through software. This office has been very instrumental in the ROADM business, and that’s a very important growth engine for JDSU. Now, they’ve come out with a next-generation we call TrueFlex ROADM, and the team here has been right in the middle of that. They keep moving that market forward for us.

 

OBJ: How many employees are at this location?

WAECHTER: It’s roughly 360, so it’s a good-sized staff. We do have some open requisitions right now, I think about a dozen or so. We have continued to look at some growth opportunities here because it’s an important part of what we’re doing. This area has a lot of the optical knowledge that we look for; it’s really ripe for that. In today’s environment, the fact that we’re hiring, even if it’s not huge numbers, I think it’s moving in the right direction. It’s better than the opposite direction.

 

OBJ: What opportunities do you see for JDSU in the future?

WAECHTER: The macroeconomic climate has not been easy for anybody, but our drivers for the business have remained strong. If you look at industry projections for number of devices that are going to be connected to the network, they’re saying that by 2020 there’s going to be 50 billion devices. This year, we’re going to have more devices than people on the planet. Think about that. The demands on the network are just exponentially growing, and I think we’re very well-aligned for helping the network operators to handle those demands cost-effectively. We’ll continue to grow no matter what happens to the macroenvironment. I mean, none of us are going to stop using our intelligent device. We’re more connected to it than ever, it’s probably the last thing we’d give up.

 

OBJ: Is Ottawa on your radar for potential acquisitions?

WAECHTER: There’s a lot of tech companies here. If you look at what we’ve done in the last three acquisitions, they’ve been smaller-sized with really strong technology and a good customer base, but because of their size it’s hard to expand the footprint globally that they need. There’s probably a number of companies around here that fit into that category.

 

OBJ: What do you see as being the biggest threat to the company?

WAECHTER: You always want to worry about the competitors and disruptive technologies they may come out with that you’re not aware of. That can happen, but I feel pretty secure on the technology side. Back in 2009, everyone suffered a pretty severe recession, but we continued to generate cash and we kept heavily investing into R&D because we believe that’s a time when you can get ahead of your competitors. I think the diversity of our businesses mean that we’re able to remain non-GAAP profitable, generate cash and continue to invest into our future.

 

OBJ: What is the most exciting thing going on for the company right now?

WAECHTER: The revenues from new products have been very exciting. We set a goal a couple of years ago for the two network divisions of the business to get 50 per cent of their revenues from new products, and we exceeded that goal. We have had quarters where we’ve gotten over 60 per cent of our revenues from new products. That is very exciting to me because you can benchmark that, and I don’t think you’ll find that much of anywhere.

 

OBJ: What will be the next big news we hear coming out of Ottawa?

WAECHTER: I can’t give any secrets out, so I don’t know what that might be. I think we’ll all be proud of what’s accomplished here and I think it will continue to be good news. The amount of revenue generated out of products designed here is significant for the company.

 

This interview was edited for length and clarity.

 

 

SIDEBAR: A LOOK AT THE BOOKS - Q2 2013

 

Net revenue of $429.4 million, up 2% from the previous quarter and 4.9% year-over-year.

Net income of $4.1 million, an increase of 135.3% from fiscal 2013’s first-quarter net loss

of $11.6 million, and up 140.2% year-over-year.

Communications test and measurement revenue of $195.4 million, an increase of 15.3% from the prior quarter and down 0.4% year-over-year.

Communications and commercial optical products revenue of $185.8 million, down 4.7% compared to the prior quarter and up 13.8% year-over-year.

Optical security and performance products revenue of $48.2 million, down 14.7% from the previous quarter and down 4% year-over-year.

Holding $740.2 million in cash and short-term investments as of Dec. 29 2012.

Generated $59.4 million of cash from operations for the most recent quarter.

JDSU expects revenues between $405 million and $425 million in its third quarter of

fiscal 2013.

STAFF COUNT:

The number of local employees working for JDSU has decreased significantly over the years. When JDS Fitel went public in 1996, it employed about 500 people locally. At the time of the merger with Uniphase Corp. in 1999, about 6,000 JDS Uniphase employees worked in the Ottawa area, with a plan to hire another 2,400 shortly after the companies joined forces. Today the firm has approximately 360 local employees.

 

JDSU PROFILE:

An optical networking company working in various markets including broadband, mobile and enterprise networks; anti-counterfeiting; aerospace and defence; gesture recognition; and lasers.

- Annual revenue of $1.7 billion (in fiscal 2012)

- Listed on the Nasdaq (JDSU) and TSX (JDU)

- 52-week trading range: $8.47 to $15.17

- Headquarters in Milpitas, Cali.

- 80 locations around the world

- 15 R&D facilities worldwide

- Global head count of 4,805

Organizations: JDS Fitel, Fitel, Uniphase Corp. JDS Uniphase TSX

Geographic location: Ottawa, South Merivale Business Park, Milpitas

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