Cisco Sales Fuel Ixia's Growth

The big cheeses at Ixia (Nasdaq: XXIA) likely share a higher opinion of Cisco Systems Inc. (Nasdaq: CSCO) following the test solution firm's first-quarter performance (see Ixia Reports Q1 Growth).

Cisco contributed more than a third of Ixia's revenues for the quarter -- $8.8 million, or 35.2 percent, of a total $24.9 million. That contribution is a massive increase from $5.7 million in the previous quarter, and $6.1 million in the first quarter of 2003.

CEO Errol Ginsberg says revenues from Cisco have picked up across the board, with contact and visibility "further up the food chain with higher-level managers." For the first time, Ixia has sold kit to the vendor's development and marketing labs.

Those sales helped Ixia to its 24th consecutive quarter of profits, with net income reaching $3 million. The $24.9 million in revenues was up 8 per cent from the previous quarter, and a whopping 32 per cent higher than the same quarter a year earlier.

Cisco wasn't the only significant bright spot, as Japan figured prominently, too. Sales to national operator NTT Group (NYSE: NTT) topped $2 million, while fellow carrier KDDI Corp., and vendors Fujitsu Ltd. (OTC: FJTSY; Tokyo: 6702) and Hitachi Ltd. (NYSE: HIT; Paris: PHA) also contributed smaller, but significant, revenues.

In total, equipment companies accounted for more than 70 percent of Ixia's revenues, with Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Allied Telesyn Inc., and Motorola Inc. (NYSE: MOT) joining Cisco and NTT as Top 5 customers.

Ixia still relies on its Ethernet interface cards for the majority (61.5 percent) of its revenues, with revenues from 10-Gigabit products growing quickly. Carriers needing more bandwidth are rolling out 10-Gigabit Ethernet switches at an increasing pace, and that's driving sales for associated test products, says Ginsberg.

But Ixia has been slow off the mark in another growth market, VOIP test solutions, where the likes of Acterna Corp., Empirix Inc., Navtel Communications Inc., and Spirent plc (NYSE: SPM; London: SPT) have been making headway (see VOIP Boost Spurs T&M).

Ixia filled that particular hole in its product set in February with an acquisition and the simultaneous launch of its VOIP test solution IxVoice (see Ixia Acquires G3 Nova for VOIP).

"There's a lot of upside in the VOIP test market," says Ginsberg, and Ixia has already sold IxVoice to Cisco, NTT, Level 3 Communications Inc. (Nasdaq: LVLT), and Texas Instruments Inc. (NYSE: TXN), though revenues are small. The company hopes to ramp up those revenues in the second half of the year and top $1 million per quarter before the year's end.

Ginsberg says more acquisitions are planned, with a focus on the wireless and security sectors. Ixia has the funds to do that, as it had $122.4 million in cash and cash equivalents at the end of the first quarter, and has no debt.

The results weren't enough to sustain the stock's late rally yesterday, when it ramped up and closed at $11. Today it's down 55 cents, or 5 per cent, at $10.45, which values Ixia at $625 million.

— Ray Le Maistre, International Editor, Boardwatch

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