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Spirent Cuts More Jobs

Ray Le Maistre
6/29/2006

Test and measurement firm Spirent Communications plc is again cutting staff at its OSS business in an effort to stem losses and lay the ground for a profitable 2007. (See Spirent Restructures.)

The company this morning announced new "restructuring actions" that will help cut annual costs by £9 million (US$16.3 million) and result in a one-time charge of £5 million ($9 million) that will be reported in the interim results being announced on August 10.

The move follows a disappointing trading update issued earlier this month that saw the share price dip by 17 percent to 36 pence. (See Spirent Slumps on Update.)

This morning's news edged the stock up slightly, by 0.75 pence, about 2 percent, to 38 pence, giving the company a market capitalization of £362 million ($657 million).

Spirent's CFO Eric Hutchinson says the latest restructuring actions mostly involve staff cuts, and that the majority will affect the Service Assurance division that provides OSS products to carriers, though some jobs will also be lost in the Performance Analysis division that supplies test tools to equipment firms and test labs.

"We need to rightsize the business so we can use the revenue stream to fund our triple-play product developments," Hutchinson tells Light Reading. However, the CFO says the company is not saying how many employees are affected by the new cuts, though some details might be made public on August 10.

Spirent's Service Assurance business has had a rough time in the past 18 months as the shift by carriers to IP networks and services caught the company off guard. In 2004 the division reported revenues of £74.7 million ($135.6 million), but that dropped by 43 percent to £42.8 million ($77.7 million) in 2005, sending the division into the red, as demand for legacy monitoring products dwindled. (See OSS Lapse Hits Spirent.)

Spirent reacted by cutting about 260 jobs in the OSS unit, a reduction of about 40 percent that left Service Assurance with about 390 staff at the end of 2005. (See Spirent Cuts Back OSS Group.)

The company says the latest measures will enable the Service Assurance division to achieve "near breakeven" for the second half of the year and, on an annual basis, position it to break even from sales of £36 million ($65 million).

Analysts see 2006 as a transition year for Spirent as the company shifts from its legacy product set to new products that tackle emerging carrier technologies such as Ethernet and WiMax, new services such as VOIP and IPTV, and the introduction of new network architectures based on IP Multimedia Subsystem (IMS). (See Spirent Checks IMS, Spirent Tests IPTV, Spirent Unveils Tester, and Spirent Intros New Tools.)

To achieve that transition, the company has been doing more than just cut back staff. In the past seven months it has sold its main non-telecom business and acquired two specialist test firms. (See Testing's Tasty Tidbits, Spirent Buys Wireless Test Firm, and Spirent Buys VOIP Test Firm.)

— Ray Le Maistre, International News Editor, Light Reading

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