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Viavi Splashes $455M on Cobham's T&M Unit

Ray Le Maistre
2/6/2018
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In a bid to boost its 5G capabilities, Viavi has agreed to pay US$455 million in cash to acquire the Test and Measurement business of Cobham plc in a deal that is expected to close in the first half of this calendar year. (See Viavi Buys Cobham T&M, Reports Fiscal Q2.)

The test specialist stated late last week that the move will "significantly strengthen" its position in the 5G market, as well as diversify its business into the military, public safety and avionics test markets. It will also make Viavi Solutions Inc. a $1 billion-per-year turnover company.

According to Viavi, the unit it is acquiring, known as Cobham AvComm and Wireless T&M, generated about $200 million in revenues in 2017 and is "the leader in comprehensively testing communication service providers' networks from the radio access network through to the network core." Viavi expects the Cobham business to boost its cash flow and its non-GAAP (before one-time costs) earnings and enable it to better address the "rapidly emerging opportunities in 5G, software-defined and virtualized test."

In the official announcement about the deal, Viavi's CEO Oleg Khaykin noted that the acquisition was aligned with its strategy of "driving operational scale" and that bringing the Cobham business on board will open up opportunities through "channel expansion."

If Viavi can efficiently and successfully manage a post-acquisition integration, the timing of the deal looks good as, with the first 5G standards now approved, the wireless networking industry will be flooded with standards-based products that will need to be tested and verified. Viavi already has some 5G-related products to offer vendors, test labs and operators, but adding Cobham's AvComm and Wireless T&M portfolios, early iterations of which were on show at last year's Mobile World Congress, will greatly enhance its capabilities. (See Cobham to Demo 5G Testing Tools at MWC 2017.)

It will also provide Viavi with more firepower as it battles with other test system specialists, including the likes of Anritsu, Keysight Technologies, Rohde & Schwarz and Spirent, for 5G-related business.

In addition, the diversification of Viavi's business should, in theory, help smooth over any financial bumps in the communications networking test sector -- as long, of course, as Viavi can convince Cobham's customers in the military, public safety and avionics sectors that it is going to continue to invest and innovate in test systems for those markets.

News of the deal came as Viavi announced revenues of $201.8 million, slightly down year-on-year but at the high end of expectations, and a net loss of $4.8 million, compared with a net profit of $49.2 million a year earlier. For the fiscal quarter, Viavi expects revenues in the range $190-210 million.

Investors liked the M&A news and financial update as the company's stock leaped by more than 15% to $10.00 after the news was announced on February 2. It's currently trading at $9.70.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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