JDS Uniphase Corp., a leading maker of fiber optic components for the telecoms industry, warned of weaker third-quarter sales on Monday and forecast only a modest recovery in demand the following quarter.

Shares in the bellwether telecoms equipment firm fell more than 5 percent on the news, another blow for an industry wracked by huge losses and falling demand. 

JDS reiterated its lowered guidance for the second quarter ending Dec. 29, saying it expects sales of between $296.1 million and $279.7 million. This would be 10 percent to 15 percent lower than sales of $329 million in its first quarter. 

But the company, which is based in Ottawa and San Jose, California, warned sales could fall another 10 to 15 percent in the third quarter, which ends in March. 

``The company believes that the March quarter will represent the low point in sales for the current downturn, although the recovery rate is expected initially to be modest,'' JDS said in a statement. 

Company officials, who were traveling ahead of an investors day at its facilities in Windsor, Connecticut, on Tuesday, could not be reached for comment. 

``I didn't expect the company to formalize March guidance, but it doesn't surprise me that's the direction it's going,'' said Joseph Wolf, an analyst with UBS Warburg. 

``Our inventory model for the industry suggests...that March will be the low revenue quarter for the component companies. Hitting the trough and growing are two different stories.'' 

At the same time, Wolf maintained his ``buy'' recommendation on the stock with a $12 price target, based on the company's longer-term prospects as a technology sector play. 

STOCK TUMBLES 

The warning was just the latest in a series of negative news from JDS, which announced a loss of $50.6 billion for the fiscal year ended in June 2001 -- one of the largest losses in corporate history. 

The loss included the writedown of $38.7 billion in goodwill that accumulated on its balance sheet following a frenetic pace of acquisitions in the late 1990. 

Like many of its peers, JDS saw sales tumble in the last year as the global economic downturn sapped demand its products. Indeed, first quarter sales were less that half of the $786 million posted a year earlier. 

Yorkton Securities analyst Chris Umiastowski said his forecast for third-quarter sales had been $275 million, while many in the industry were predicting around $290 million. He said the latest JDS warning suggests sales will be from $238 million to $266 million. 

``I think it's going to be substantially below where most analysts' estimates were. I don't think it's a surprise to see the stock off,'' Umiastowski said. 

JDS shares closed down more than 5 percent, or 58 cents, at $9.95 on Nasdaq, on a volume of 49.3 million shares. In Toronto, the stock fell C$1.41, or 7 percent, to C$18.69 with 1.1 million shares traded. The company's stock has fallen more than 80 percent in the past year. 

POOR VISIBILITY 

Analysts said there was no assurance the January to March period would mark the lowest point for JDS, or the sector as a whole. 

``Visibility in the industry remains very poor. As a result it is very difficult to determine if the March quarter will in fact represent the bottom, but it is looking increasingly likely,'' said Tim Anderson, an analyst at Salomon Smith Barney in New York. 

The scenario may not improve much even if the industry hits a bottom in March, Anderson said, adding, ``There may very little growth off the bottom.'' 

($1-$1.58 Canadian)