& cplSiteName &

M&A Prospects in T&M 2017

Brian Santo
1/5/2017
50%
50%

Test and measurement companies have been involved in ongoing merger and acquisition (M&A) activity, though they've avoided the frenzy that the semiconductor and service provider segments have succumbed to in recent years. That might change in 2017.

Ixia (Nasdaq: XXIA) is exploring a sale, which might kick off a new wave of M&A activity in the sector, should other companies decide they need to keep up.

Ixia is not commenting on the subject. No other company has yet acknowledged it is kicking Ixia's tires, but the betting public favors Viavi Solutions Inc. as the most logical and likely acquirer. JPMorgan was among the first to voice this expectation, and Michael Genovese of MKM Partners this week shared with journalists a private analysis that makes the case that the pairing makes good financial sense. Keysite Technologies and EXFO Inc. (Nasdaq: EXFO; Toronto: EXF) have also been mentioned as possible suitors. (See Ixia's for Sale. Who Might Buy? )

Why might test companies combine? Again, the first impetus would be simply to keep up with the competition.

Also, T&M customers are combining to get larger and also sometimes to also hedge technological bets -- AT&T/DirecTV is the poster child for that philosophy. And big companies need to manage their suppliers and a great way to manage suppliers is to deal with fewer of them.

Converging technology also argues for consolidation among T&M companies. T&M vendors can no longer afford to specialize in a niche -- just cable, or just wireless. Wireline networks all seem to be converging on Ethernet. The virtual parts of different networks will be virtual in pretty much the same ways; a container is a container. As these trends progress, there will be fewer niches to specialize in and there will end up more companies in the T&M segment than necessary.

Which T&M companies might combine?

Among them, a fairly large percentage are privately held, making it a little more difficult to detect possible M&A activity. Big swings in stock valuation are often indicative of M&A rumors (lacking any other news, of course), as was the case with Ixia. There is no such activity among the more prominent public companies in the test space at the moment.

Nor is anyone showing the most obvious sign of distress -- a plunging stock price -- that often indicates a sale might be impending. It just so happens that most of the public T&M companies, including Exfo, Keysight, Advantest, Anritsu, Netscout, Sandvine and Spirent are currently trading near their 52-week highs.


Want to know more about the companies, people and organizations driving developments in the test, monitoring and assurance sector? Check out Testapedia, the most comprehensive online resource covering the telecom test and measurement industry.


But should Viavi consummate a merger with Ixia, rivals might feel compelled to respond, the same dynamic that has helped perpetuate the waves of M&A activity in the semiconductor and service provider sectors. Should Ixia go to someone other than Viavi, Viavi might then investigate other merger options.

Exfo is open to growing through acquisition. In October it dropped $8.25 million on Absolute Analysis, a company with expertise in optical, Ethernet and RF. Almost stereotypically Canadian, Exfo is simultaneously ambitious and judicious about inorganic growth, so it might therefore be less likely to get involved in a big deal unless it is convinced it has to.

Keysight in 2015 spent a little over $600 million on Anite, which it should have digested by now. The company is strong in traditional signal-analysis-type T&M, and could branch out into monitoring, assurance, verification, data analysis and security with minimal overlap of existing operations. (See Keysight to Buy UK's Anite for $611M)

Anritsu Corp. , also based in Japan, bought RF test specialist Azimuth Systems in September. Another Japanese vendor, Advantest Corp. , hasn't been involved in a deal since 2011, when it bought Verigy for $1.1 billion.

Privately-held VeEX Inc. is the one traditional T&M company that has exhibited little public interest in expanding into assurance/security/etc., but if it feels compelled to keep up with Viavi and Exfo, it won't hesitate to deal. The privately-held company pulled off a bit of a surprise when it bought Sunrise Telecomin 2013.

Other privately held companies include Accedian , Averna , Cobham Wireless , Guavus Inc. , IneoQuest Technologies Inc. , Netrounds and Rohde & Schwarz GmbH & Co. KG , and their intentions are likewise opaque. Most of them seem happy keeping their heads down and taking care of business, but any could become acquisition targets.

Thus far unmentioned is NetScout Systems Inc. (Nasdaq: NTCT), which is apt to stand pat after bridging traditional T&M and monitoring (etc.) when it bought Arbor Networks, Fluke and Tektronix operations from Danaher (and spun a few of them back out) in 2015. That does not rule out an opportunistic acquisition if one pops up. (See NetScout: We Won't Be a House of Brands.)

Semiconductor design tool companies are in a largely distinct category, but the acquisition of Mentor Graphics by Siemens shed new light on product lifecycle management (PLM), a discipline that dovetails with the way T&M is evolving into a process -- perhaps not seamless, but certainly continuous -- from product design to commercial implementation. (See Siemens Bolsters Mfg. Ops With Mentor Buy.)

While Siemens AG (NYSE: SI; Frankfurt: SIE)'s acquisition of Mentor Graphics Corp. was unexpected, it was an alert that PLM could develop into a significant trend, and if it does, it would behoove T&M companies to take a look at Mentor rivals such as Cadence Design Systems Inc. , Synopsys Inc. (Nasdaq: SNPS), LogicVision Inc. (Nasdaq: LGVN) and even automated test equipment (ATE) manufacturers like Teradyne Inc. (NYSE: TER).

— Brian Santo, Senior Editor, Components, T&M, Light Reading


CALLING ALL TEST, ASSURANCE AND MONITORING COMPANIES:
Make sure your company and services are listed free of charge at Testapedia, the comprehensive set of searchable databases covering the companies, products, industry organizations and people that are directly involved in defining and shaping the telecom test and measurement industry.



(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
inkstainedwretch
50%
50%
inkstainedwretch,
User Rank: Light Sabre
1/11/2017 | 12:33:36 PM
And NOT by the way...
...Radcom claims to have a unique niche in NFV service assurance that may make it an attractive M&A participant.

-- Brian Santo
microcaptechinvestor
50%
50%
microcaptechinvestor,
User Rank: Lightning
1/8/2017 | 9:07:57 PM
Re: Still no coverage of RADCOM?
@daniel, not sure if your reply was in regard to RADCOM specifically, or those private companies listed in the article. That said, RADCOM is public, trades under ticker symbol RDCM on the NASDAQ exchange. It's a ~$200m market cap today, $18(ish) stock and call it 12 million shares out.
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
1/8/2017 | 4:46:49 PM
Re: Still no coverage of RADCOM?
Good article. Hard to get insight into M&A prospects of private companies unless there is a leak of some sort. However, all signs indicate here a consolidation of some sort for sure. 
microcaptechinvestor
50%
50%
microcaptechinvestor,
User Rank: Lightning
1/6/2017 | 1:07:57 AM
Still no coverage of RADCOM?
I have to repost, yet again, RADCOM landed the first NFV service assurance transformation deal w/ AT&T who endorsed RADCOM's MaveriQ solution back in August. MaveriQ scored 100/100 in AT&T lab trials, nearest competitor was 70/100 in the bake-off. Now, RADCOM disclosed on its last earnings call that it is now in 9 Tier-1 CSP trials, four of which accelerated after the AT&T endorsement, and there is ZERO competition.

 

Seems like a MUST OWN asset for many legacy players who appear to be losing out on the NFV race.
More Blogs from Brianiac
The next G.fast plugfest will lead into the certification process for commercial products, which some service providers will start deploying shortly thereafter -- in just a few months' time.
Should we be worried about artificial intelligence? Maybe. But it sure makes for good reading, viewing and game playing.
You might think Amazon's Unlimited is just another me-too streaming music service. You'd be wrong. If successful, it will be a critical tool to help slice off a fat, juicy chunk of Google's $75 billion ad business.
Light Reading is proud to bring you our latest community site, Testapedia, the go-to hub for test and measurement (T&M) professionals and their customers.
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
Heavy Reading: The Web-Scale View

1|18|17   |     |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Heavy Reading's former chief analyst Patrick Donegan shared insight from the recent web-scale operators report, which featured research on how web-scale operators view the market, the best web-scale companies to ...
LRTV Custom TV
Cisco's Cloud Scale Networking: Automation, Virtualization & Simplification

1|18|17   |     |   (1) comment


Cisco's Sanjeev Mervana outlines the latest innovations in networking technology at CES 2017 in Las Vegas.
LRTV Custom TV
ADVA Talks Innovation & the Future of Networking

1|17|17   |     |   (0) comments


Ray Le Maistre and Christoph Glingener, CTO of ADVA Optical Networking, discuss the current state of the industry, cooperation and collaboration, open innovation and the future of networking.
LRTV Custom TV
Cisco's Infinite Video Platform

1|17|17   |     |   (0) comments


Cisco's Infinite Video Platform allows service providers to deliver broadcast-quality video over IP networks. Infinite video supports many devices, from 4K TVs to tablets to game consoles. Join Cisco's Rajeev Raman for a brief tour and live demo.
LRTV Interviews
Masergy: Ability to Adapt Key for NFV

1|16|17   |   6:40   |   (0) comments


Speaking at Light Reading's 2020 Vision in Rome, Masergy's VP, Global Technology, Ray Watson, said agility is key to providing the mix and match NFV-based services that are driving business for the managed service provider today.
LRTV Interviews
Equinix: The Data Explosion

1|13|17   |   4:16   |   (0) comments


At Light Reading's 2020 Vision in Rome, Eric Schwartz, president of EMEA, Equinix, talked about how Equinix is helping its customers manage the influx of data today, and how it's preparing for a future filled with millions of connected IoT devices.
LRTV Interviews
Heavy Reading: The Changing Data Center Landscape

1|12|17   |   6:05   |   (1) comment


At Light Reading's 2020 Vision event in Rome, Heavy Reading's Senior Analyst Roz Roseboro talks about how virtualization is impacting data center evolution and how that evolution is affecting the relationship between service providers, data center operators and public cloud providers.
LRTV Interviews
Boingo: Prepping for Millions of Devices

1|12|17   |   5:07   |   (1) comment


At Light Reading's 2020 Vision in Rome, Boingo's CTO Derek Peterson discusses how wireless operators will address the needs of low-bandwidth and high-bandwidth apps at the same time, the need for more MHz, the impact of IoT and more.
LRTV Interviews
Comcast Shows Off Gig Gateway at CES

1|11|17   |     |   (1) comment


With its largest presence at CES in years, Comcast took the wraps off its long-awaited gigabit gateway and a new platform for managing the home WiFi network. Light Reading Senior Editor Mari Silbey sat down with EVP Chris Satchell to discuss the latest Comcast advance, and met with VP of Product Strategy and Development Andrea Peiro to walk through a demo of the ...
LRTV Interviews
Colt: End-to-End Key for 2017

1|10|17   |   6:21   |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Nico Fischbach of Colt said having a multi-carrier, end-to-end service proposition is going to be key for 2017 -- and SD-WAN is instrumental in making it happen.
From the Founder
Cisco's Clemson on Mobile Cloud Video

1|9|17   |     |   (1) comment


Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators. "If you think about where we're going… whether it's a mobile application, or a video ...
LRTV Custom TV
VMware Telco NFV Solutions – Preparing for 5G & IOT

1|9|17   |     |   (0) comments


Shekar Ayyar, EVP & Corporate Strategy/General Manager of Telco for VMware, discusses VMware's Telco NFV solutions role and foundation for the Imminent Arrival of 5G & IOT.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
A Women in Comms Glossary
Sarah Thomas, Director, Women in Comms, 1/18/2017
Is Cable One Beefing Up for Slaughter?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 1/20/2017
Google Security Lessons for IT
Curtis Franklin, Security Editor, 1/18/2017
TV's Paradox: No HDR Without 4K
Mari Silbey, Senior Editor, Cable/Video, 1/17/2017
Nokia CTO: 2017 Is the Year 5G Gets in the Field
Dan Jones, Mobile Editor, 1/19/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading founder and CEO Steve Saunders chats with Sportlogiq CEO Craig Buntin about sports data analysis.
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.