Test & Measurement

Spirent Stabilizes

The ongoing restructuring process at Spirent Communications plc appears to be paying off as the company announced Thursday it is on track for a better 2006, with plans to return £50 million ($93.8 million) cash to its shareholders and to delist from the New York Stock Exchange to save money. (See Spirent Provides Update.)

The news sent Spirent's stock up more than 11 percent from 52 pence to 58 pence Thursday. Following a trading update in June, Spirent's share price had dipped to just 36 pence. (See Spirent Slumps on Update.)

The main message is that, barring a disastrous fourth quarter, revenues are on course to be slightly better than last year's £259.3 million ($486.5 million), and that, as a result of cost-cutting this year, is an "improved performance" in terms of operating profit, which came in at £11.5 million in 2005.

Analysts, on average, expect Spirent's 2006 revenues to hit £279 million ($522 million).

Last year's results were badly affected by a slump in fortunes for the vendor's service assurance division. (See OSS Lapse Hits Spirent.)

That division has borne the brunt of this year's restructuring, with the latest job cuts announced in June this year. (See Spirent Cuts More Jobs.)

Now the company has announced "further restructuring plans across its Communications businesses to help achieve its divisional margin targets; these are in addition to the restructuring actions announced in June 2006."

About 100 jobs will be cut across Europe and the U.S., with the headcount reduction set to result in a one-off charge of £1 million ($1.9 million) this year, and result in annual savings of £6 million ($11.3 million).

The vendor is also on course to close its Belfast and Glasgow offices, a move that will cost £1.5 million ($2.85 million) and save £1 million a year.

Analysts liked the news. Citigroup analysts believe the cash return plan is a sign of greater internal confidence and an indication that there are no more acquisitions on the horizon.

Spirent has made four specialist acquisitions this year, boosting its VOIP, wireless, and security capabilities. (See Spirent Gets Imperfect, Spirent Buys Test Partner, Spirent Buys VOIP Test Firm, and Spirent Buys Wireless Test Firm.)

The acquisition of wireless performance management firm SwissQual has just helped Spirent land a deal with Telefónica O2 Germany GmbH & Co. OHG , which will use the vendor's Diversity platform to benchmark the performance of its 3G network against its competitors. (See O2 Tests With Spirent.)

The company is also working hard to build a position in the 10-Gbit/s Ethernet switch test sector, and in August added 10-Gbit/s Ethernet test interfaces to its TestCenter product, and claimed its product was "approximately 50 percent more affordable than the nearest competitor," and "10 times more precise than its nearest competitor for latency testing." (See Spirent Tests 10GigE.)

That pitch was an indirect attack on 10-Gbit/s Ethernet specialist Ixia (Nasdaq: XXIA). Its director of product management, Bruce Miller, said the affordability claim was not valid as the two vendors' products are not directly comparable, with Ixia's platform performing higher density testing. He also said that Ixia couldn't understand how Spirent could make the latency precision claim.

— Ray Le Maistre, International News Editor, Light Reading

Be the first to post a comment regarding this story.
Sign In