Spirent Cuts Deeper, Sticks With OSS

Strategic review identifies further cost cuts but decides against an exit from the service assurance market

November 5, 2007

2 Min Read
Spirent Cuts Deeper, Sticks With OSS

Spirent Communications plc is cutting back its cost base further but has decided not to exit the service assurance space as part of its ongoing transformation under its new management, the test system vendor announced today. (See Spirent Unveils Strategic Review.)

In an investor presentation detailing Spirent's new plans following an extensive strategy review, the company's executive chairman Ed Bramson, who wrested control of the firm last December, today said incremental cost cuts of £7.3 million ($15.2 million) had been identified in addition to the measures announced earlier this year, bringing annual cost reductions to £28.3 million ($58.9 million.) (See Spirent Makes Deeper Cuts .)

That news wasn't enough to please investors though, as following an initial rise the vendor's share price ended the day down nearly 2.5 percent at 69 pence on the London Stock Exchange .

Bramson also said he's still not sure where the company's Service Assurance business unit fits into the company's long-term strategy. (See Spirent Suffers Boardroom Coup .)

He added, though, that as the OSS unit, which has been subjected to heavy cost-cutting in the past two years, is currently generating operating returns of around 11 percent of sales, "it's not hurting us" to keep the division. (See Spirent Cuts More Jobs and Spirent Cuts Back OSS Group.)

"We're taking more time to think about what to do with Service Assurance, and we're analyzing the long-term synergies" with Spirent's Performance Analysis division that sells lab test systems to vendors and carriers, said Bramson.

Performance Analysis is Spirent's main cash generator -- it accounted for more than 70 percent of the company's $237.5 million H1 revenues, compared with Service Assurance's 14 percent -- so it has been the main focus of Bramson's review. (See M&A Disrupts Spirent's Order Book and Spirent Reports H1.)

The chairman said there will be a greater focus on the development of higher margin software-based broadband applications test products that can run on the firm's TestCenter hardware platform, which is generating more and more orders and sales each quarter. The firm also plans to launch a WiMax test product next year.

In addition, Spirent's wireless handset test portfolio will also be extended to include a WCDMA handset emulation product that can replicate 3G services and measure the resulting quality of the service and impact on the device being tested.

Spirent will also add to its triple play service assurance product set by developing software that can be integrated into a home gateway to test services such as IPTV and VOIP.

— Ray Le Maistre, International News Editor, Light Reading

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