Viavi CEO explains outlook for testing market

Viavi Solutions CEO Oleg Khaykin
Testing solutions company Viavi reported revenue of $224.1 million (+2 percent) and a net loss of $67.5 million in its fourth fiscal quarter.

Net loss was primarily due to a non-cash goodwill impairment charge of $91.4 million related to its Service Enablement segment. Viavi had posted net loss of $32.1 million in fiscal 2015 fourth quarter.

Oleg Khaykin, president and chief executive officer of Viavi, said: “Fiscal year 2016 was a pivotal year in Viavi’s evolution, beginning with the Lumentum spin off, hiring of a new senior management team and the launch of multiple operational transformation initiatives.”

The global Testing solutions company aims to continue to reduce business complexity, improve its operational efficiency and selectively invest in core and growth businesses.

Viavi created 49.1 percent revenue from Americas, 16.6 percent from Asia Pacific and 34.3 percent from EMEA customers in the fourth quarter of fiscal 2016. Viavi said Americas, Asia Pacific and EMEA represented 51.1 percent, 18.3 percent and 30.6 percent, respectively, of total net revenue for the year ended July 2, 2016.

Viavi segments

Viavi has generated $127.5 million from network enablement (NE) business, $33.6 million from service enablement (SE) and $63 million from optical security and performance products (OSP).

NSE revenue at $161.1 million declined 4.8 percent, driven by a 9.4 percent decline in SE segment and 3.6 percent dip in NE. The SE revenue decline impacted both the enterprise and assurance businesses with mature products declining at a steeper pace compared to the growth in new products.

OSP revenue at $63 million grew 24.8 percent, driven by higher demand in the anti-counterfeiting business.

NE revenue declined 3.6 percent. While Viavi continued to see strength in fiber test instruments to support the 100-gig metro deployment and fiber to the home expansion, access and Ethernet copper was weaker. Cable was down slightly the industry prepares to shift to DOCSIS 3.1 later this calendar year.

SE remains challenging as revenue declined 9.4 percent. Service maintenance contracts continued to decline as mature products within SE fell double-digit percentages. The new growth products, which include our data center products, grew low single-digit percentages.

Viavi CEO said the carrier Capex spending during the quarter and the first half of the calendar year remained below the expectations and it is uncertain if the second half of the year will be stronger, which would be necessary in order for carrier Capex projections to stay on plan for the full fiscal year.

The OSP segment delivered its second highest revenue quarter at $63 million on the continued strength in our anti-counterfeiting business.

Viavi CEO has noticed revenue strength in optical coating products for consumer, industrial and government applications.

While the growth drivers for the anti-counterfeiting business are expected to remain intact in the long-term, Viavi CEO expects the demand to pull back in fiscal year 2017 from 2016 levels, as currency reprinting and banknote redesign returns to normal run rate.