Test & Measurement

Ixia's for Sale. Who Might Buy?

Ixia is up for sale. Ixia itself is not commenting, but Reuters said the company has hired an investment banker, competitors acknowledge off the record the company is shopping itself, and Wall Street analysts note the company's stock has been moving more than it should without any other news. The stock hit $17.00 a share Thursday, a new 52-week high, before slipping a bit to close at $16.75.

JPMorgan analyst Rod Hall published a research note this week in which he assumes that Ixia (Nasdaq: XXIA) is for sale, and says he believes Ixia provides more upside potential for Viavi Solutions Inc. than for other candidates. He names EXFO (Nasdaq: EXFO; Toronto: EXF).

Keysite Technologies has also been identified as a possible suitor.

Ixia does not appear to anybody to be in a position where it must sell, so there remains a question if it will sell.

That said, the entire test space is widely considered ripe for consolidation. For starters, there are simply a lot of test companies out there -- hundreds in fact, according to the database listing at Testapedia. (See Test & Measurement – A Niche No More.)

Then there are market considerations. Customers that used to be one thing or another -- fixed telco, wireless telco, cable, satellite -- are merging in genre-bending combinations, making it tougher to cater to just one category or another.

Want to know more about the companies, people and organizations driving developments in the test, monitoring and assurance sector? Check out Testapedia, the most comprehensive online resource covering the telecom test and measurement industry.

Furthermore, it's a well-established trend that several links in the product lifecycle chain -- design, test, monitoring, assurance and network management -- are overlapping each other, leading many to assume they'll all inevitably become part of a continuum.

That phenomenon of previously distinct segments overlapping is one of the main things that impelled NetScout Systems Inc. (Nasdaq: NTCT) to buy most of the test operations of Danaher several years ago. In so doing, Netscout set itself up as a model for this sort of consolidation.

Ixia in and of itself is an example of this. Starting out as a test company, it has branched out into security technology, as the product set in its Testapedia company listing shows .

Any of the named potential suitors would find Ixia's operations mostly complementary to their own (the same would be true for several other potential suitors in the space). One question swirling around the sale of Ixia is who among the interested parties has the wherewithal to duplicate Netscout's approach? Viavi has a market capitalization roughly similar to Ixia's. Ixia's is $1.37 billion. Viavi's is $1.96 billion. Keysight's is $6 billion. Exfo's is about $235 million.

The next question is whether the Ixia sales process kicks off a wave of merger and acquisition activity as there's been in the fevered semiconductor sector, or if the relatively staid T&M companies, many of them privately held, opt to bide their time.

— Brian Santo, Senior Editor, Components, T&M, Light Reading

bosco_pcs 12/16/2016 | 2:19:46 PM
Re: T&M and crystal balls I bought $XXIA when CEO Bethany Mayer took the helm. She was a rising star at HPQ & before that Cisco. So I don't think it is not just the physical asset that should be considered here. She was the NFV star at HP (so I said) and might be instrumental in getting IXIA branching into security, since she also worked at Blue Coat (my guess). So I think it might be a mistake to just consider the company as a T&M shop. Maybe Chairman Ginsberg is ready to move on or maybe Ms Mayer sees limited growth opportunity for the co as a standalone. As the commentators here have pointed out IXIA is in not existential need to sell out, perhaps it is hoping to be an integral part of a bigger shop beyond its T&M root. 

Any thoughts?
brooks7 12/16/2016 | 1:56:25 PM
Re: T&M and crystal balls The t&m business is so stable that it has essentially no growth for having the kind of R&D investments required. I would be hard pressed to pay a premium for that kind of business. I do quarterly reviews of Keysight and they talk about 2% martlet growth for the foreseeable future. Why would you want to invest more in that kind of business? Seven
James_B_Crawshaw 12/16/2016 | 10:24:32 AM
Re: T&M and crystal balls I presume Ixia has received an approach from one of the larger players and so the board has had to hire an investment bank to solicit counter offers while simultaneously trying to evaluate whether they can generate greater value for shareholders by remaining independent. With the size of synergies that analysts are suggesting there could still be a sizeable takeover premium even after the strong run (+40%) the shares have had since early November. 

So assuming Keysight does buy Ixia that might push Viavi to make a move for Ixia's closest peer, Spirent. At $680m it might be manageable for Viavi given its market cap of $1,960m and net cash of around $400m. 
[email protected] 12/16/2016 | 8:25:59 AM
T&M and crystal balls Test and measurement isn't a fad - it's a constant. It might be a tough business but it isn't going away.

And the thing and the sector is that it acts, in a way, like a crystal ball for the market -- today's testing requirements are often tomorrow's deployment requirememnts.

And right now it's even harder than ever to see exactly how things will play out.

An experienced cmopany such as Ixia not only has assets, R&D, customers etc - it has induistry ionsight and experience and that's worth having.

There's little doubt that NetScout, for example, gained an awful lot more than product sets, a pipeline and customers when it took Danaher's assets on board. 
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