Here is my transcript of Kevin Kennedy's presentation at the Annual
Meeting yesterday. It was presented in conjunction with slides
(which are on the company website) so it tends to read choppy without
the slides...:-) But, it does give a very clear picture of where
Kennedy thinks they are and where they are headed.

Cathi

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My goal today is to share with you an update on our progress against
our strategic plan. I think there are four walkaways from this
presentation. The first is that much of the heavy lifting of this
turnaround is behind us. You can see the numbers are beginning to
move in the right direction. And for the most part the majority of
the company is focused on growth and gross margin improvement. But,
growth.... that is a very different place than the company has been
in the last five years.

The second is that a financial model is emerging. Dave just showed
you an EBITDA as a percent of revenue that was achieved this quarter
of 3%.....while that is better than where we have been, let's be
clear that is not a model that you go home and you are proud about.
So we are probably about half way through the journey of finding that
new business model which is probably on the order of 15% E over R.

The third is that we have to move to a new chapter of the company
where it is not about the reconstruction of the asset; it is actually
about the improvements of the individual businesses. So watching our
laser business hit best in class gross margins....our test and
measurement seeing the kind of revenue growth that we think it is
capable of and the optical coms business getting both growth as well
as gross margin improvement. So as we begin to report publicly, we
will have a greater concentration of our words focused on how is each
individual business doing versus the asset at large.

And the final point is that the product portfolio has been crafted
almost by definition for growth and gross margin. As Dave mentioned
to you we took a fairly bold move which is hard thing to do for a
public company which is to jettison 100 million dollars a year of
revenue. That is not an easy thing to get your internal organization
to do, it's an even harder thing to explain to Wall Street. But, its
done...it is behind us...it has served us well in terms of helping us
increase our gross margins.

And so the product portfolio by definition was crafted for both
growth and gross margin capability. So, while perfunctory, it is
probably good to be clear on what our mission and vision is. The
mission is to create a viable, sustainable asset. To give you a
sense of the journey of JDSU, about three years ago this September
the nadir of the market and the nadir of this particular company was
reached. It was a run rate of about 530 million dollars a year --
down off of what was the peak of this company during the heyday of
about 4.1 billion dollars a year run rate. So basically a drop in
revenue of around 88%.

The way that you can metaphorically think about that is if you
decided to....you didn't like the way your body looked and so you cut
your head off and wanted to find a new body...what is the likelihood
that you would survive. It's very, very hard to take an asset that
has plunged and left only 12% and then reinvent it and that is really
what this team is doing. So profitability was the key.

Second piece is that as we walked around and talked to our investors,
in particular the institutions. During that period of time we tried
to make sure we understood why people were investing in us. And
without exception this was an investment in broadband. If you
believed that...broadband... DSL...video...VOIP....IPTV were going to
hit you needed an optical infrastructure to belie that and so this
did become an investment in the hope of broadband rollouts.

So that was really how we crafted the mission of the company and the
vision. With that the challenge that the company had is that
basically it had a market that had collapsed...as I said left to
about 12%. To give you a more specific way of thinking about it the
company was forged and known for long haul optics. At it's peak long
haul optics by itself was about 998 a million a quarter out of 1.05
billion a quarter of the company at it's peak. At it's nadir long
haul optics was about 15 million a quarter So with that we realized
we had too concentrated a customer base and we needed to expand our
portfolio to areas that would grow beyond long haul.

So we picked four simple beliefs. One was that our mission was to
participate in a broadband market.

The second is that different from the optics market of the past we
would focus on those things that we could be profitable and try to
grow, but profitability was the first priority.

Third is that we couldn't stay in a market that had only 8
customers. So we needed to expand into areas that had more
customers.

And last is that we had too much legacy. Another interesting fact is
that in around 2000-2001 roughly 90% of the employees of this company
were manufacturing employees and most of them were in North America.
There were very few high tech companies on that planet that would
have the kind of personality to it. So a lot of complexity for the
kind of operating leverage that was available.

Last year we placed and identified for you a number of
priorities...these five in particular. This is the same slide that we
used last year to show you the follow through. Where we are in
that, as Dave had mentioned, we have advanced the profitability of
the company...not satisfied with it yet, but is the best it has been
in five years.

We helped migrate the capital structure....the convertible debt and
the reverse are two things that have served us well I think with our
ability to continue to restructure and reinvent ourselves. The
manufacturing strategy both the savings as well as the....we
probably have in excess of 80% or more of the labor content of our
products now coming from outside the US; so moving to a lower cost
area. In terms of new product introductions we have a number of
areas that have been growing very very quickly.

We have coined the phrase of agile optical networks aon....when we
speak of that we think of products from our components division such
as reconfigurable optical add/drop multiplexers (ROADMS)or tunable
lasers. On the test and measurement side these are test and
measurement devices that support IPTV testing and other broadband
services rollout.

Some of these areas are growing at 100% per year while some of the
other areas -- the legacy products -- are flat or much lower growth
rate. But, the bottom line is a pretty good pipeline of these
products. And then we have made progress on integration with the
acquisition of Acterna. We have just hit the first quarter where we
have taken that division's North American operations and put them up
on Oracle. So we still have the rest of the world to do, but very,
very significant progress.

So, in general, the progress has been consistent with what we have
communicated to be our goals.

In terms of the journey so far you can see that if you go back
roughly two to three years our EBITDA as a percent of revenue was
around minus 16%. This quarter as Dave has mentioned we hit a number
on the order of 3% and my professional judgment for this asset is
that it can probably reach some place between 15 and 18. I don't
know how it goes beyond that in the markets that we serve right now.

So with that belief and the progress so far there is every reason to
believe the team can continue to improve it

On the other hand there is a lot of hard work....it is a lot of
concentration on gross margin improvement. The markets that we
serve....we have decided to be a porfolio company so we play in three
different markets totaling a market opportunity someplace between 5
and 10 billion dollars.

By definition we have chosen markets that we think will grow
someplace in the 5 to 15 percent year over year...in good years
obviously towards the the higher end of that.

In general we are number one or two in the markets that we serve and
I'd say in general I have tried to put down a sense of what is the
trend and how is our execution.

The trend on our optical components piece -- we have been fairly
internally focused so I think the execution has been good....a lot of
restructuring.

Probably what we should be most proud of is that we've got the agile
optical products so the portfolio is fresh.....roughly 50% of our
product portfolio is new in the last two and a half years.

On the coms test side...it's a great gross margin structure. I think
we have a great team and this is an area where the industry is
consolidating and so we will probably continue to look for areas
where we can be a consolidator of that particular industry. The
team's execution is very good.

On the commercial and consumer side this is a place where we have
done a lot of restructuring lately But the leadership -- and this
was the first quarter in I think four or five where we actually got a
positive contribution from this outfit as well.

The good news here is that this was the first quarter where all of
the businesses associated with these three markets were actually
contribution positive.

What I want to do is reflect that the company has a level of
complexity in terms of the businesses. I wanted you to understand
what the logic of the company is, what's driving it. So this is a
personal attempt at trying to help you relate to things you have seen
in the market to what we are doing. If you were to step back and
say, "Okay, I understand the notion that this is a company that is
focused on broadband, but so what?"

The logic of this was that at the end of the day there are only so
many rights of ways that are owned by carriers. And whether AT&T
merges with SBC and BellSouth -- at the end of the day there is a
fixed number of human beings in the world and just a finite number of
rights of way to get to those human beings. And so therefore in
order to view your market as a carrier market we needed to be able to
not only sell long haul products, but metro products, access
products, as well as things that went up the stack.

So, you will remember a period when Sprint broke away from AT&T in
terms of differentiating itself. AT&T had copper wires. Sprint
brought in an advertisement that you could hear a pin drop. And that
was all about Sprint being first with optical technology. And, in
fact their long distance calls did sound better because they had
fiber. I say that because I was on the AT&T side in that era.

During that period of time if you were in the long haul network there
was a very small amount of fiber. And the number of products we sell
are over here in the lower left hand corner. We sell those today...
passive devices... source lasers... modulators

The good news is that we got a lot of money for them...the bad news
was that it was a very limited market. As that era changed in 1996
to 2000, people did aggressively follow Sprint and begin to put more
fiber in the ground. In particular what happened was that Sprint was
an innovator and realized that they only had a limited amount of
rights of way and they needed to multiplex lambdas or light over
those fibers and so that is really where DWM technology came in. So
you can see the long haul networks while being migrated to fiber....
the 2 and a half gigs, so the speeds began to increase, but the rest
of the network was still a pretty slow network.

In that particular era, '96 to 2002 the products both in the long
haul metro as shown in terms of what JDS had shipped, as you can see
metro was very small and long haul was where we had the largest
portfolio and the ASPs for each were pretty good. As we continued to
hit the era of what I would call vigorous broadband build out you can
see that the trend was to light fiber not just in the long haul, not
just in the metro, but in the access arena as well. And the speeds
in technologies on the access began to drive up by orders of
magnitude.

Today and we have communicated this, the metro business is the single
largest piece of business for our optical coms piece and that was not
the case 3 years ago. So a very significant change for JDSU is it is
no longer a long haul company. It is really a metro company and most
of that work was really organically developed by R&D inside the
company. What we have to sell now is a much richer portfolio. It
extends across that right of way.

However, the real value is in speeding deployment and it was with
that recognition that we wanted to populate as many of the right of
ways with as much technology as we could that we decided to make the
acquisition of Acterna...which again as you think about test and
measurement is about speeding the deployment of optical or broadband
technology. So in red you can see where in the network we play and
this is a significant shift. This picture is really relevant to
North America...this is where AT&T... Verizon ... MCI are building
out. If it requires distance or capacity, you need fiber....that is
really the way to think of it. The radio access network whether it
is 2 and half, 3 g, wifi at the edge -- as the bandwidth goes up at
the access points you are going to continue to need fiber as the back
haul. So this is the portfolio we supply. As we supply that
portfolio we are not only selling to the ten network equipment
manufacturers, like Cisco, Nortel, Cienna; but we sell directly to
the carriers as well, many hundreds. And so our risk in any quarter
is lower than it was originally and we are continuing to diversify
our customer base.

The real point that I want you to understand here is not only the
logic, but the fact that this is a trend that has helped the company
in the last year from the point of view of revenue growth; but it
really is a North American phenomena. There will be a time sometime
over the next 18 to 24 months where this same phenomena will occur in
Europe and probably three years from now in Asia. So we are still in
the early innings of the build outs.

And so juxtaposing those three views you can see we had a very small
portfolio. We have successfully become a company focused on the
metro and more recently we have played not only in the optical layer
but in the service deployment layer

And so this was the logic of reinventing the company.

On the optical communications side a few words. Number one... market
share for nine quarters: In Sept 2003 our market share was around 9
percent. Today we are on the order of 14-15%; so a good comeback.
Probably high growth and that growth is really due to those products
I have mentioned to you... reconfigurable optical add/drop
multiplexers (ROADMS) and tunables which are probably growing
someplace between 50 and 100 per cent year over year.

On the communications test and measurement this particular team has
not only historically been number one in the wireline network
operators, but most in particular, has achieved a lot of renown for
IPTV and VOIP service tech. So we are thrilled and I think you will
hear more from that team over the next couple years

Whether you make a laser for telecom or commercial lasers there are a
number of things needed to make lasers better and one of those things
is coatings. So we have a world renowned capability up in Santa
Rosa. In the upper left our biggest customer is actually a customer
that makes inks for currency and we protect on the order of 90-95
currencies in the world; probably 60-75 per cent of the value of
money in the world. We have also taken that capability and are
beginning to put that on pharmaceuticals so we have about 40 brands
that we protect as well. This team is the one that has just turned
the corner, so the first time in a number of quarters for a positive
contribution and we think the gross margins will continue to expand.

On the commercial laser and photonic power you can think of the
commercial laser as not much different from a telecom laser in the
sense that we are making the transition from gas lasers to solid
state and once you get to solid state there is usually a laser diode,
coatings, electrons in and protons out and we are trying to leverage
the telecom packaging and telecom knowledge into the commercial laser
field.....good growth year over year of 26% and the key here will be
to continue to expand our gross margins.

All of that said -- that is the product side. As Dave has mentioned
we have successfully delivered against the commitments we have made
in terms of reducing our cost structure and manufacturing exits.
There is still more savings in the pipeline...typically at some
point...it is post getting out of buildings that you actually begin
to see the full P&L benefit...so we have provided some expectation to
the Street. The real point is that the P&L improvements will
continue to flow certainly for the rest of the fiscal year.

So the real message of this slide is as you begin to reinvent a
company like this you go through a set of steps. Each of these
businesses--as I started off this morning-- we are now at a point
where it gets less about the reconstruction of the company. I think
we have the foundation. It's about what is the progress of each of
the business that have best in class gross margins and best in class
revenue growth.

The real message here is John's business in coms test...it is a
mature business. It is going to continue to growand we will be
investing in it so it is the furthest here on the right.

The commercial lasers and optical communications is where we need the
greatest improvement in gross margins.. I think we have a plan in
place to do that. But it gives you a sense of now we are watching
the staging of the improvement of each of the individual businesses
and we will report as such in our quarterly calls.

So with that, just as Dave has his priorities, we have embraced six
for the company. Clearly the story here is to continue the
reinvention to find the business model that works. Profitability
improvement is key; to do that without revenue growth is a hard place
for a tech company. So we have got to get the revenue growth back.
We have embarked upon a lot of moves with our manufacturing
strategy. Most of them are initiated....a good number of them are
done, but we still have a lot of P&L benefit to extract from them

Continuing to improve the company integration and remove the risk:
We are basically reconstructing the company in terms of its
information systems -- so Oracle integration is a very, very key
piece to it.

And then 3% EBITDA as a percent of revenue...then get to 5 -- get to
10 -- get to 15. So that is really to make sure we make progress on
this target business model.

That is the outline.