Viavi, spurned again, sees no end to telecom's winter

"Money talks and bullshit walks," Viavi CEO Oleg Khaykin said this week during his company's quarterly conference call, according to Seeking Alpha.

Khaykin was responding to a question on whether telecom network operators would start spending again in 2025. Khaykin explained that operators continue to suggest they'll soon begin buying new network equipment – but that they continue to defer actual spending. As a result, vendors like Viavi have been left waiting for demand to pick back up.

Earlier this year, Viavi officials had suggested that spending might pick up in the second half of this year. They don't feel that way anymore.

"We expect the conservative spend environment to persist for the remainder of calendar '24," Khaykin said this week.

Viavi isn't alone. For example, Cisco said earlier this year that it doesn't expect network operators to resume spending until next year, rather than later this year as it previously anticipated.

Broadly, a global slowdown in spending in the telecom industry – stretching from 5G to fiber to cable – started last year and today shows few signs of relenting.

For its part, Viavi reported quarterly net revenue of $246 million, below most analysts' expectations of $249 million.

Viavi officials blamed the situation on the ongoing slowdown in operators' spending, likely due to high interest rates. Viavi sells network testing and measurement gear, and is therefore often seen as a bellwether for overall demand for telecom equipment.

Left at the altar

For its part, Viavi has been working for years to expand through acquisitions. But it has not found any willing takers.

In 2021, US-based Viavi pursued a hostile takeover bid for rival network testing equipment supplier EXFO. After several different bids, Canada-based EXFO managed to successfully fight off Viavi's overtures and, in the fall of 2021, EXFO became a private company.

A similar situation is playing out this year. In March, Viavi made a $1.3 billion takeover bid for UK-based Spirent Communications, another testing and measurement company. At the time, Omdia's James Crawshaw said the deal was more complementary for Viavi than its previous bid for EXFO.

But weeks later, Spirent received a better, $1.5 billion offer from another US-based network testing company, Keysight Technologies.

This week, Spirent said it would cancel its review of Viavi's offer and will officially consider Keysight's offer on May 22.

Spirent also issued its own financial warning: "Market conditions remain challenging," the company wrote. "First quarter revenue is in line with the management plan, though modestly behind the same comparator period for last year. Previously taken cost saving actions have continued to favourably impact our performance."