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Test & Measurement

Mixed Fortunes for Test Vendors

The test-and-measurement sector continues to be an unpredictable beast in 2007, with vendors experiencing markedly different financial fortunes.

Radcom warns, slumps
Radcom Ltd. is having a bad 2007. Having announced disappointing first-quarter results in April, the company saw its share price crash by $0.52, more than 37 percent, to $0.88 after issuing very poor second-quarter preliminary results. (See Radcom Issues Q2 Prelims and Radcom Reports Q1.)

The Israeli firm, which sells fixed and mobile test tools to carriers and equipment vendors, said its revenues for the three months to the end of June are expected to be just $2.4 million, less than half the $5.7 million it managed in the same period a year earlier. It expects to report a net loss for the period.

The company's valuation has suffered as a result of two consecutive poor quarters and an adjustment to its 2006 numbers. The stock opened 2007 at $2.60 and went as high as $3.10 in late February. Now, at $0.88, the firm has shed 66 percent of its value this year, and has a current market capitalization of $14.3 million. (See Radcom Adjusts 2006.)

Radcom's new CEO, David Ripstein, said the "disappointing period" reflected "both market conditions and the fact that we are still in the process of solving a variety of tactical execution issues." He said the company is "temporarily suspending our annual guidance" while it sorts itself out, adding that "we remain confident in the Company's overall strategy and its long-term potential." (See Radcom CEO to Retire.)

In 2006 the company reported revenues of $25 million, up 12 percent year on year, and net income of $1.8 million. In February this year it issued a 2007 revenue guidance of $28 million to $30 million.

Radcom will report its full results on July 23.

EXFO on a roll
Canadian test vendor EXFO (Nasdaq: EXFO; Toronto: EXF), by contrast, is on something of a roll. Its stock has risen by 27 percent this year, opening 2007 at $5.55 and currently standing at $7.06.

That's because it has been exceeding expectations, having recently reported revenues of $39.2 million and net income of $2.6 million for its third quarter that ended May 31. Those revenues were up sequentially and on a year-on-year basis. The company also reported record bookings during the third quarter of $43.7 million. (See EXFO Reports Q3.)

The company puts its current healthy line of business down to "strong execution across the Americas and EMEA, the diversification of revenue over a wider customer base," and "competitive advantages in next-generation IP testing and optical access test markets."

The vendor has also just been upgraded by BMO Capital Markets analyst Paras Bhargava from Market Perform to Outperform. He has a price target of $8 on EXFO's stock.

Spirent talks Ethernet testing
Spirent Communications plc COO Rob Piconi has been in touch following our news coverage of the test sector at the recent NXTcomm show in Chicago. (See Spirent: We're Not Prepping for Sale.)

Responding to an announcement by rival Ixia (Nasdaq: XXIA) that it can provide vendors and carriers with the necessary tools to test PBT (Provider Backbone Transport) gear, which is shaking up the carrier Ethernet equipment market, Piconi is keen to put forward Spirent's case. (See PBT Parties On and Ixia Tests PBT.)

Despite Ixia's claim to have the first available PBT test capabilities, Piconi says Spirent is "already addressing this with our Spirent TestCenter 2.0 that was announced on May 30." (See Spirent Goes 2.0.)

In an email to Light Reading, Piconi says the new version of TestCenter "has the capability to test PBB [Provider Backbone Bridging] and PBT devices" by allowing test technicians to view backbone MAC (media access control) and customer MAC header fields as part of their Ethernet tests.

PBT is attracting a lot of support among equipment vendors and a fair amount of interest from major carriers, so the market can expect to see all the major test vendors announce capabilities that will help vendors and carriers put PBT-enabled switches and gateways through their paces.

Other test sector news of note includes:

— Ray Le Maistre, International News Editor, Light Reading

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