Gross Margins Improve

San Jose, California, February 1, 2006 – JDSU today reported fiscal 2006 second quarter results, for the quarter ended December 31, 2005. 

Net revenue for the second quarter was $312.9 million, and GAAP net loss was $(42.1) million, or $(0.03) per share.   This compares to net revenue of $258.3 million and a GAAP net loss of $(67.0) million, or $(0.04) per share, reported for the first quarter of fiscal 2006, and to net revenue of $180.5 million and a GAAP net loss of $(41.0) million, or $(0.03) per share, for the second quarter of fiscal 2005.

On a non-GAAP basis, net loss for the second quarter was $(3.7) million, or $(0.00) per share, as compared to a non-GAAP net loss of $(15.4) million, or $(0.01) per share, for the first quarter of fiscal 2006, and to a non-GAAP net loss of $(28.6) million, or $(0.02) per share, for the second quarter of fiscal 2005. 

On a non-GAAP EBITDA basis (non-GAAP earnings before interest, taxes, depreciation and amortization), the Company earned $7.9 million for the quarter ended December 31, 2005, as compared to a loss of $(4.3) million for the first quarter of fiscal 2006, and a loss of $(25.7) million for the second quarter of fiscal 2005.

“JDSU’s second quarter results represent our strongest revenue and earnings performance in more than four years, highlighting our continued commitment to innovation and expansion in concert with an aggressive cost reduction program,” said Kevin Kennedy, Chief Executive Officer of JDSU.  “With our achievement of non-GAAP EBITDA positive results, JDSU has reached an important milestone on the path to desirable profitability metrics.”

Financial Overview – Fiscal 2006 Second Quarter Ended December 31, 2005

• On a non-GAAP basis, net revenue of $315.0 million increased 22% from the previous quarter and 75% from the fiscal 2005 second quarter.   Fiscal 2006 second quarter results included the first full quarter contribution from the Communications Test and Measurement business, acquired in August 2005.
• Optical Communications net revenue was $109.6 million, and represented 35% of total non-GAAP net revenue. 
• Communications Test and Measurement net revenue was $146.0 million, or 46% of total non-GAAP net revenue. 
• Commercial and Consumer net revenue was $59.4 million, or 19% of total non-GAAP net revenue. 
• North American customers represented 62% of net revenue. European and Asia-Pacific customers represented 24% and 14% of net revenue, respectively.
• GAAP gross margin improved from 20.0% last quarter to 33.3% of net revenue.   On a non-GAAP basis, gross margin improved from 31.6% last quarter to 36.3% of net revenue.
• GAAP operating expenses were $156.0 million, and non-GAAP operating expenses were $120.1 million.
• The Company held $843.9 million in cash, cash equivalents, short-term investments and restricted cash at the end of the second quarter.  
• Non-GAAP results exclude all stock-based compensation expense including expense associated with restricted stock.   Year-to-date non-GAAP results have been adjusted to exclude restricted stock grants which amounted to $0.8 million in the fiscal 2006 first quarter.

Business Outlook

For the quarter ending March 31, 2006, the Company expects revenue to be in the range of $304 to $321 million.

Conference Call

The Company will discuss these results and other related matters at 2:00 p.m. PST on February 1, 2006 in a live webcast, which will also be archived for replay on the Company's website at www.jdsu.com/investors.  This press release is being furnished as a Current Report on Form 8-K with the Securities and Exchange Commission, and will be available at http://www.sec.gov/.

About JDSU

JDSU (NASDAQ: JDSU; and TSX: JDU) is committed to enabling broadband & optical innovation in the communications, commercial and consumer markets. JDSU is a leading provider of communications test and measurement solutions and optical products for telecommunications service providers, cable operators, and network equipment manufacturers.  Furthermore, JDSU is a leading provider of innovative optical solutions for medical/environmental instrumentation, semiconductor processing, display, brand authentication, aerospace and defense applications, and decorative.  More information is available at http://www.jdsu.com/.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include: (i) any anticipation or guidance as to the amount of future revenue or the likelihood, timing or amount of expected cost savings or profitability improvements; and (ii) the Company's beliefs regarding the purpose, usefulness and efficacy of non-GAAP results and the measures and items the Company includes in the same, as well as any benefits to investors the Company believes its non-GAAP measures provide.   These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, including, without limitation, the following:   (i) the Company's ability to predict future financial performance continues to be difficult, as among other things, visibility remains limited, we are experiencing significant quarter over quarter fluctuations in product mix, average selling prices continue to decline across our traditional Communications and Commercial and Consumer product portfolio, we continue to experience execution challenges which limit our revenue and impair our profitability, and we are experiencing declining, but variable, benefits from certain transient items, such as the release of previously accrued reserves and the use of previously written-off inventory;   (ii) the Company’s cost improvement efforts may not be successful in achieving their expected benefits (including, among other things, cost structure, gross margin and other profitability improvements), due to, among other things, shifts in product mix, selling price pressures, costs and delays related to product transfers to lower cost manufacturing locations and associated facility closures, costs and delays associated with facility and asset divestitures, and execution concerns; and (iii) ongoing efforts to design and introduce products that meet customers' future needs and to manufacture such products at competitive costs, and with acceptable quality and profitability, may not be successful.

For more information on these and other risks affecting the Company's business, please refer to the “Risk Factors” section included in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed with the Securities and Exchange Commission, as well as in other filings on Forms 10-Q and 10-K. The forward-looking statements contained in this news release are made as of the date hereof and the Company does not assume any obligation to update the reasons why actual results could differ materially from those projected in the forward-looking statements.

Contact Information

Investors:   Jacquie Ross, 408-546-4445, investor.relations@jdsu.com
Press:   Kathleen Greene, 408-546-5852, kathleen.greene@jdsu.com

The following financial tables are presented in accordance with GAAP, unless otherwise specified.

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