(Reuters) - Network gear maker JDS Uniphase JDSU.O said it would split into two separate public companies as it looks to expand in the data communication market and strengthen its network business.
Shares of JDS Uniphase, worth $2.78 billion as of Wednesday’s close, rose about 12.5 percent in extended trading after the company also reaffirmed its current-quarter forecast.
The company said on Wednesday it would separate its communications and commercial optical products business through a tax-free spin-off to shareholders.
Sandell Asset Management, an activist hedge fund, urged JDS to hire advisers to explore its options before it announced the split, the Wall Street Journal said, citing people familiar with the matter.
In recent weeks, Sandell has taken a 2 percent stake in the company and was privately lobbying JDS to consider changes that included selling some assets, the Journal said.
Last year, Sandell asked Bob Evans Farms Inc BOBE.O to sell or spin-off its food products business and real estate. The activist hedge fund won four board seats at Bob Evans.
JDS Uniphase said the new standalone company would focus on commercial lasers and 3-D sensing applications.
The company said its network gear business would focus on products to keep up with the industry’s transition to software defined networking (SDN), while the optical security business would function as a separate unit within the broader company.
JDS Uniphase said Chief Executive Officer Tom Waechter would lead the standalone network company.
JDS Uniphase’s network service business, like that of other network gear makers, has been hurt by a delay in orders from telecom operators, its main customers, largely due to a spate of consolidation in the U.S. telecom and cable sectors.
The company said it expects to save $50 million in costs, adding that it expects cash expenses of between $75 million and $100 million to obtain the savings.
The separation, along with issuance of shares in the new communications company, is expected to close by the third quarter of 2015, JDS Uniphase said.
The company, which reported a 6.4 percent increase in fourth-quarter revenue, reaffirmed its first-quarter profit forecast of 8 to 12 cents per share and net revenue of $405 million to $425 million.
Analysts are expecting the company to earn 10 cents a share and revenue of $418.1 million, according to Thomson Reuters I/B/E/S.
Centerview Partners and Goldman, Sachs & Co are the company’s advisers on the separation.
JDS Uniphase’s shares rose $1.52 to $13.62 in after market trade on Wednesday. Up to Wednesday’s close the stock had risen 1.6 percent since it reported results on Aug. 12.
Reporting by Abhirup Roy, Anya George Tharakan and Subrat Patnaik in Bangalore; Editing by Savio D'Souza