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.
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