Piper Jaffray Gives Earnings Preview On JDS Uniphase

Piper Jaffray believes JDS Uniphase JDSU will report relatively inline FQ3 results, but an industry wide inventory correction and disruptions from Japan will likely prevent upside or overly upbeat guidance. JDSU has not addressed the inventory concerns publicly but data points from industry peers indicate trough demand levels have been reached and growth should re-accelerate in the 2H. Piper believes JDS Uniphase's FQ3 results will be better than competitors due to the company's diversified business model of optics, test and measurement, and industrial lasers. Piper continues to believe JDSU stands to benefit from a number of near and longer-term catalysts including the build out of next generation optical networks and LTE deployments. Microsoft MSFT announced they sold 2.4M Kinect units in Q1 after selling ~8M units during the 2010 holiday season. Piper Jaffray believes the 10.4M Kinect units sold to date represent ~21% of the Xbox 360 installed base. Piper estimates JDS Uniphase receives $3.50/unit and stands to realize additional incremental sales, particularly in 2H12 as 2011 holiday stocking orders begin. Piper Jaffray is reiterating its Overweight rating and $25 price target on JDSU JDSU closed Friday at $20.84