Spirent Spikes CEO
Bramson bulldozed his way onto the board in a pre-Christmas coup, and the removal of Gustafsson means he has firm control of the company as he tries to mold Spirent into a consistently profitable concern. (See Spirent Suffers Boardroom Coup .)
The chairman is currently undertaking a companywide review in an effort to find ways to cut costs and increase profitability, and is due to publish the results of that review before the firm's annual meeting on May 9. (See Spirent Faces Further Upheaval .)
Gustafsson, who left the company with immediate effect, joined as CEO in July 2004 and his since revamped the company, cutting back its Service Assurance (network probes) division and engaging in a series of M&A deals that focused the company on the telecom test-and-measurement sector. (See Spirent Stabilizes, Spirent Buys Test Partner, Spirent Cuts More Jobs, Spirent Buys Wireless Test Firm, Testing's Tasty Tidbits, and Tellabs Exec Quits to Head Spirent.)
With the repositioning of the company and signs of a recovery in its fortunes, news of Gustafsson's departure sent Spirent's share price up more than 3 percent to 61.25 pence on the London Stock Exchange , giving it a market capitalization of nearly £530 million (US$1 billion).
Why? It appears that investors believe Bramson will be ruthless in maximizing shareholder returns, as he has been at previous companies. And that ruthlessness could even mean the sale of Spirent's test business, according to one financial analyst.
Bramson "doesn't spare the knife," says Evolution Securities Ltd. analyst Lee Simpson. "I'm not surprised. Anders did a great job, but it looks like it's going to be someone else bearing the fruit of this transition."
Simpson says the chairman's track record speaks for itself, noting that, although Bramson doesn't have experience in the telecom test market and might have profited from the experience of the prior CEO, a clash of ideas and personalities was likely in the offing.
The track record that Spirent investors will have noted is Bramson's turnaround job at Elementis PLC, a London-listed chemicals company that Bramson took on as chairman in June 2005. Simpson notes that, at Elementis, he also instigated a company review, highlighted some areas of weak profitability, and made cuts, after which the company has grown in profitability and valuation.
"A lot of the same could be done at Spirent, but Anders has already done a lot of restructuring. There's maybe more to be done with non-core parts of the business, and maybe some more site rationalization, in the way that some locations have already been closed in Glasgow and Belfast," says the analyst.
But "a fresh pair of eyes is not without merit," and many things could come out of the review, says Simpson.
One clear possibility is that the telecom test division could be sold. Simpson says a combination with Agilent Technologies Inc. (NYSE: A), JDSU (Nasdaq: JDSU; Toronto: JDU), or Anritsu Corp. , although unlikely in the near term, can’t be ruled out.
The test business accounts for nearly all of Spirent's business -- revenues of £235.8 million ($456 million) and an operating profit of £9.4 million ($18.1 million) in 2006. Any such disposal would leave the company with its Systems division, which makes control systems for electrically powered medical and industrial vehicles, such as wheelchairs. That business generated operating profits of £4.7 million ($9 million) from revenues of £35.8 million ($69 million) in 2006. (See Spirent Reports 2006.)
Should Spirent hang on to the test business, Simpson believes profitable growth in the Performance Analysis (lab test equipment) part of Spirent's Communications Group is "assured." And while there are already slow signs of recovery in Service Assurance, he doesn't believe there will be any meaningful pickup in business until at least 2008, when the effect of major carrier consolidation will have waned and the operators will start to "focus on how they are going to manage their services... There's a lot of potential opportunity in the U.S., but not until next year."
— Ray Le Maistre, International News Editor, Light Reading