Spirent Communications cuts near-term outlook

(Sharecast News) - Spirent Communications cut its near-term outlook on Wednesday as it pointed to an "extremely challenged" telecommunications market and the fact its largest customers are delaying expenditure and technology investments. Spirent said the uptick in demand seen in the second quarter dissipated over the summer months and the expected rebound in September did not materialise.

In contrast, however, there was strong growth from its non-telecommunications end markets such as Positioning.

"As a result, there is not enough near-term strength in the orderbook to support our expectations for the final quarter trading, and accordingly we reduce our outlook for the near term," it said. "The impact of negative operating leverage will very materially affect operating profit in this financial year."

In particular, Spirent noted that demand for high-speed Ethernet was challenged in Q3.

"A strong pick up in orders from China was expected and this did not materialise as the Chinese Government reduced its spending plans and the general economic landscape there deteriorated. The China market represents a large proportion of revenue which we are now not expecting to receive in this financial year," it said.

In the nine months to 30 September, order intake was down 24% on the same period a year earlier, while revenue is expected to be down around 20%, in line with the reduction seen in the first half. This is expected to continue broadly flat at this rate for the full year.

Chief executive Eric Updyke said: "We saw positive trading momentum and pipeline build in the second quarter which gave us confidence for the remainder of the year, however a slow summer and disappointing September meant that we fell materially short of our expectations for the third quarter. In the long run, our drivers remain intact, but the near term orderbook isn't strong enough to support our final quarter expectations, and our outlook for the full year reduces accordingly.

"Given the lack of certainty in the timing on our customers' technology roadmaps, we are taking the necessary cost actions, while being careful to protect those investments that enable us to maximise our long-term structural growth drivers."