An acquisition that Ixia made over the summer appears to be paying off.
The Calabasas distributor of network testing devices announced this month that it expects fourth quarter revenue to be higher than it originally predicted. Driving the sales boost is the Wi-Fi testing division that Ixia acquired with its purchase of VeriWave last year.
“Demand for that product is growing,” said Tom Miller, Ixia’s chief financial officer. “Revenue is coming in higher than we thought.”
The company raised its guidance Jan. 10, estimating that fourth quarter revenue would be $83 million to $84 million, compared with an original estimate of $79 million to $82 million. Quarterly results will be announced in February.
Ixia’s high-speed Ethernet products also contributed to the adjustment, Miller said. The company’s network provider customers, such as Verizon, are ordering more of Ixia’s products as the demand for faster Internet increases.
“Network traffic is increasing, driven by social networks, video streaming and things of that nature,” he said. “That’s really driving the demand to upgrade the networks.”
Investors responded to the renewed guidance by driving up the company’s stock. Shares closed Jan. 18 at $12.03, up $1.03 for the week. Ixia was one of the week’s top gainers on the LABJ Stock Index (see page 36).
The company experienced a sales slump last summer as economic uncertainty caused several of its customers to reduce or delay orders. Revenue for the second quarter dropped below Wall Street expectations to $69 million.
Many customers that purchase Ixia’s core network testing services, including Sunnyvale manufacturer Juniper Networks Inc., have continued to pull back on spending. But analysts said Ixia’s acquisition of VeriWave, a Beaverton, Ore., wireless testing company, has added customers that have helped boost revenue.
“Wi-Fi is a different customer set of corporations and medium-sized businesses,” said Jonathan Kees, a senior telecom equipment analyst with Capstone Investment in New York. “They’re getting a lot of synergy from that acquisition.”
Also driving Ixia’s growth is Chinese business. The company has offices in Shanghai and Beijing, and is considering growing its presence by adding to its sales force and support team, Miller said. Ixia is also considering building a research and development facility there.
China is an important market for the company because the region is adding to its networking infrastructure, said Kees. That means there’s a big market for Ixia’s testing services.
“You have a lot of growth and a lot of new technology being deployed there,” he said. “So you want to go and participate in the market that’s growing rapidly.”