Thursday, 2 July 2009

Anite betting on 4G

(By Philip Carnelley, Thursday July 2 2007 9.05) New Anite CEO (former CFO) Christopher Humphrey focused on the potential opportunity from “4G” wireless technology in the results briefing following yesterday’s results announcement. He called it “central” to the company’s future and its stated aspiration to become a “global leader” in wireless testing. However Humphrey admitted that the payback is likely to be more than a year out, somewhat damping expectations from 6 months ago (see Anite boosts profitability but loses CEO). Profits are likely to dip next year as development runs ahead of orders. In Anite’s favour, it appears that there is converging agreement on 4G technology (aka LTE) and strong drivers for its adoption due to rapidly growing use of mobile data services and smartphones. But success here is uncertain. Humphrey said that the company had signed seven “important” early adopters of its prototype technology, which will develop into the finished article over the coming months.

We hope his optimism is justified. Looking at the results (see Anite battening down the hatches), there wasn’t a great deal to cheer about other than the successful disposal of Anite Public Sector, which cleared the company’s debts and given it £27m in the bank, allowing it to fund its strategy as well as pay increased dividends. But revenue fell 10% at constant currency, and margin improvements were mainly due to a one-off payment and currency effects. Internationalism (95% of wireless and 30% of travel is international) has brought resilience as well as the currency bonus – for example China was cited as a buoyant market in 3G testing, and Germany is the best growth area for travel.

Anite is operating in two extremely different markets – travel and wireless equipment testing – but both are proving tough, for different reasons. In Wireless there is ‘saturation’ in 3G handset testing, inhibiting revenue growth (and hence the focus on 4G). Revenues fell 2% (to £59m) and the order book is down 12% y o y to £54m. Travel is simply a depressed market, so the company did well to maintain revenues, flat at £31m, but orders are down 41%, to £24m. Whether Anite should continue operating as two such diverse businesses is questionable. Humphrey stated that Anite’s focus for the travel business was ‘long-term value,’ through consolidation and enhancement. Migrating customers to Anite’s latest platform and to a hosted services delivery model should increase margins and stickiness. But when asked if that meant things would continue as they were for “quite some time” his answer was that he wouldn’t say that. In the current climate, sensible offers for the travel business seem unlikely but would probably be welcomed.

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