Amid class action lawsuit threats, a delayed SEC filing, and an embarrassing CEO departure, at least one financial analyst is finding something to like about the future of test and measurement firm Ixia.
James Kisner, vice president of communications infrastructure equity research at Jefferies, reiterated his Buy rating on Ixia's stock. Kisner also says in a research note to investors that Ixia stands to benefit from increasing activity in the 40G/10G Layer 2-3 datacenter market, as well as LTE expansion projects, VoLTE launches, and small cell developments (See Ixia Monitors 100G, Ixia Validates LTE Core, and Ixia Tests Small Cells.)
Though Kisner made a downward adjustment to his fiscal year 2014 earnings per share estimate for Ixia from $1.05 to $1, he cites Ixia's stable relationship with customer AT&T Inc. and Ixia's cost-cutting efforts, such as office closures in Australia and India, as positives. He also says that doom-and-gloom forecasts surrounding major Ixia customer Cisco Systems Inc. "may be overdone," and that Cisco's Imsieme datacenter switch unit likely will continue to need Ixia's test capabilities, as will other vendors in the Layer 2-3 segment. (See Cisco Set for Sales Slump and AT&T Expects Leg-Up in 100G Deployment.)
Still, another dark cloud around Ixia has to do with the departure of former CEO Victor Alston after it was discovered he lied about his academic achievements. The scandal was a tough blow for a company already struggling financially, and it caused Ixia to delay its third-quarter 10Q filing with the SEC while the company investigated further. The issue also has inspired several class action lawsuit sharks to circle Ixia during the past two weeks, a period during which it also received a de-listing notice from Nasdaq. (See Ixia Chief Fails Veracity Test , Ixia's CEO Quits, and Ixia Issues Q2 Sales Warning.)
Yet, Kisner downplays the panic. He writes that "the company's auditors had to ensure that Alston's fraudulent behavior didn't extend into his business activity. Based on our conversations with the company, we'd be surprised if we didn't see the 10-Q filed in the next few weeks."
Ixia CFO Tom Miller has not currently replied to a request for comment.
— Dan O'Shea, Managing Editor, Light Reading