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Spirent Sees Steady 2009

Ray Le Maistre
11/24/2008

Amid the telecom sector's welter of warnings and worries, test equipment vendor Spirent Communications plc believes it's on course for an on-target 2008 and a similar level of sales during 2009.

The company recently released an interim trading statement that reported a 9 percent year-on-year increase in third-quarter revenues to £64.8 million (US$97.3 million) and a 31 percent increase in operating profits to £11.7 million ($17.6 million), numbers that are a testament to the company's financial rehabilitation during the past 18 months. (See Spirent Reports Q3 and Spirent on the Mend?)

But the vendor noted that its Performance Analysis division, which generates the majority of the company's revenues and profits by selling lab-based test tools such as its TestCenter to equipment vendors and carriers, had suffered a year-on-year dip in order intake during September, following growth in July and August. (See Spirent Bolsters TestCenter.)

September, of course, kicked off with the collapse of Lehman Brothers , an event that caused widespread financial reviews by companies of all shapes and sizes. (See AT&T Global Sees Virtual Growth.)

September was a temporary blip, though, says the newly appointed Spirent CEO during a recent meeting with Light Reading in London. "We had a good October [for order intake], so we are on course for 2008," says Bill Burns. (See Spirent Promotes Burns.)

In addition, the new CEO says Spirent expects 2009 sales to be "flat in terms of dollars," and with the dollar strengthening against the British pound, "that could mean an increase in revenues in pounds."

But such forecasts can easily change, especially as major customers such as Cisco Systems Inc. (Nasdaq: CSCO), and others, start to feel the pinch. (See Shape of Things to Come?, Cisco Predicts Q2 Plunge, and Cisco in Crisis Mode.)

"The first question everyone asks me is: 'What do you think of Cisco's announcement?' Cisco has good forecasting capabilities, probably the best," so its outlook has to be taken very seriously, says Burns. "We're not naive enough to say the economic downturn is not going to hit us, so we have contingencies in place."

So what's driving Spirent's ongoing business? Burns says equipment firms continue to spend in areas that are core to their strategies: wireless, carrier Ethernet, data center developments, and the automation of lab-based testing processes. "Customers are aiming for better utilization of their resources," says the CEO. (See Spirent Eyes Wireless, New CEO and Spirent Gets PBT Thumbs-Up.)

Burns also believes there are new opportunities emerging in the storage networking space -- "there aren't a lot of testing tools out there today, and those that exist tend to be proprietary" -- while video is still an area of growth for the Performance Analysis and Service Assurance (which sells service monitoring tools to carriers) divisions. Burns says Spirent is working towards the launch of a new product for in-home video service testing, a niche market it has already entered. (See Spirent Tests Home Networks and Spirent Unveils IPTV Testers.)

And what about the impact of "green" strategies among Spirent's customer base? The topic has attracted some debate, and even a product launch and industry-wide initiative from Spirent's key rival, Ixia (Nasdaq: XXIA). (See Ixia, Juniper Start Counting Green.)

Burns isn't diverting too much grey matter to the issue. "It's an issue that people are talking about but not making real decisions about," says the Spirent CEO.

— Ray Le Maistre, International News Editor, Light Reading

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