Ixia’s acquisition of a small Wi-Fi performance testing company last week may not have looked like a big deal for the leading manufacturer of network testing devices. But analysts say the sale was a significant move for the Calabasas company because it opens a market and adds a customer base.
Ixia announced June 27 its plans to pick up VeriWave, a Beaverton, Ore., company that specializes in testing the quality and speed of wireless networks and Wi-Fi-enabled devices for big-time telecom companies and large businesses. Terms of the deal, which are to be finalized July 18, were not disclosed.
“It’s a small acquisition but strategic,” said Ryan Hutchinson, a director and senior analyst at Lazard Capital Markets in San Francisco. “It’s key for the company’s overall growth profile over the next few years.”
Ixia makes devices that measure the performance of land line and wireless networks before they go live. VeriWave tests networks and Wi-Fi devices that are already operational.
The two companies already share some customers, such as service provider AT&T, but the acquisition will allow Ixia to expand the types of testing services it provides and add VeriWave’s customers to its list, said Jonathan Kees, senior telecom equipment analyst for Capstone Investments in New York.
“They’re venturing out of their normal area,” said Kees, who recently rated the company a “buy.” “It broadens their technology portfolio.”
It’s good timing for Ixia. As more people purchase smart phones, cell phone service providers are leaning on Wi-Fi to help offload the stress that those devices have placed on their phone networks. Moreover, the popularity of tablet devices has created additional strain on both wireless and Wi-Fi providers.
Ixia saw Wi-Fi as an important market to enter into, said Joe Zeto, senior manager of market development at the company.
“Wi-Fi is going to be even more important going forward,” he said. “It was a well-established mandate for us that we were looking to expand there.”
Just three years ago, Ixia was fixated more on survival than expansion. The company, hit hard by the recession, posted a net loss of $44 million in 2009 and laid off 10 percent of its work force.
It’s made a turnaround by acquiring two of its main competitors, making it the world’s largest network testing company. The expansion has brought results: In the first quarter this year, the company had $78.5 million in revenue, up 26 percent from the same period last year. Net income was $7.1 million for the first quarter, compared with $900,000 last year.
Capstone’s Kees said Ixia transitioned smoothly as it brought its former competitors into the fold. It currently has 1,100 employees.
“Management did a good job integrating them and providing a more robust portfolio,” he said.
VeriWave has 50 employees. The research and development team will remain in Oregon for now. Some sales and marketing workers are already in a Calabasas office and those departments will be integrated.
Hutchinson at Lazard said the merger makes sense.
“Their move into new markets, including the recent acquisition of VeriWave, will enable them to grow at least 20 percent in 2011 and beyond,” he said.
