Atul Bhatnagar, chief executive of Ixia, at the network test maker's Calabasas headquarters.

Atul Bhatnagar, chief executive of Ixia, at the network test maker's Calabasas headquarters. Photo by Ringo Chiu.

Ixia, a manufacturer of network testing devices, is all about stress tests. Its products are used by some of the leading communications companies, such as AT&T Inc. and Cisco Systems Inc., to find out how much pressure their wireless systems and landlines can bear.

But the Calabasas-based company itself underwent a stress test of another kind during the downturn. The company’s core business lagged during the recession as customers shied away from investing in new networks and cut back on testing. Ixia also laid off about 10 percent of its work force – roughly 75 to 80 people. The company posted a net loss of about $16 million in 2008 and $44 million last year.

But as the economy picks back up and the next generation of networks comes online, Ixia is looking for an upswing. Last year, Ixia spent an estimated $149 million to acquire two of its competitors. The deals helped Ixia surpass its main rival, Spirent Communications Plc, to become the largest network testing company in the world.

Analysts predict that network testing will become increasingly important as more people rely on computers and cell phones. Traffic on so-called smartphones – including iPhones and BlackBerries – was up 200 percent in February from the same time last year, according to the latest report from San Mateo mobile advertising network AdMob. Increased use means cell phone carriers and network companies will need ways to stress test their systems – and Ixia is one of the few companies in the world to provide them with the equipment to do so. Turnaround time appears at hand.

“Ixia should be delivering sales and earnings growth significantly higher than its peers and the broader technology sector,” said Ajit Pai, an analyst with Thomas Weisel Partners in New York who rates the company’s stock as “overweight.” “They have built good momentum for the next two or three years.”

Ixia’s stock was trading last week above $9 a share, up from recent lows of about $5.

Ixia’s products are boxes covered with switches and buttons. Clients use the devices to test their networks in simulations of how they would react if thousands or millions of people suddenly started using their computers or mobile devices for e-mailing, video streaming or downloading movies – from lighter data loads to heavier ones.

Cycle trouble

Until now, Ixia’s fortunes have risen and fallen along with technology upgrade cycles. When a big customer such as Cisco prepared to roll out its next-generation network, orders for Ixia’s products would surge as the customer ramped up testing ahead of launch. But when no one was introducing new technology, business at Ixia would fall into a lull.

Prev

For reprint and licensing requests for this article, CLICK HERE.