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Spirent Cuts Back OSS Group

Light Reading
News Analysis
Light Reading
6/29/2005

Spirent plc (NYSE: SPM; London: SPT) cut another 180 jobs at its struggling Service Assurance division today as part of the continuing restructuring of its OSS business unit (see Spirent Restructures Division).

In April, Spirent cut 90 jobs following the division's disastrous first-quarter financials, when its revenues were £9 million (US$16.3 million), a drop of more than 50 percent compared with a year earlier (see OSS Decline Hurts Spirent). The company admitted it had been caught out by carriers' faster than expected deployment of IP networks and services and that it had work to do in developing products to match operators' strategies.

Those cuts took the division's staffing levels down to about 510. Now a further third of the unit's jobs are being sacrificed as Spirent attempts to improve its performance and shift the division's focus away from its traditional DSL and leased-line service assurance products. The company says it will instead "deliver service assurance solutions for IP business services and residential triple play offerings, including voice, video and data, as well as DSL and field test solutions."

Those staff reductions are expected to result in annual savings of £8 million ($14.5 million), and cut costs in the second half of this year by £3 million ($5.4 million). The vendor will take a one-off charge of about £2 million ($3.6 million) in the first half of this year to cover the costs of the redundancies, in addition to the £3 million ($5.4 million) charges announced in April.

The company also anticipates an additional one-time charge of £3 million in the second half of the year following the restructuring of its supply chain.

Investors liked the news, as Spirent's share price leapt by 2.75 pence, nearly 6 percent, to 48.75 pence in early morning trading on the London Stock Exchange.

The Service Assurance division is, as previously stated, expected to record an operating loss of £10 million ($18 million) in the first half of this year. In April, Spirent said it didn't expect revenues from IP service monitoring products to ramp up until 2006. However, a backlog of orders and the impact of cost reductions means Spirent expects the Service Assurance business to record only a small loss in the second half of 2005.

Fortunately for the vendor, it hasn't experienced such troubles in its Performance Analysis division, which saw its first-quarter revenues rise by 6 percent to £40.2 million ($72.9 million), though that was slightly below the company's expectations. That division has built a strong position in the VOIP equipment testing market (see Spirent Touts VOIP Tester, Customer and Spirent Slims IP Telephony Test).

— Ray Le Maistre, International News Editor, Light Reading

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