Spirent says customer delays to hurt fourth-quarter revenue

Oct (KOSDAQ: 039200.KQ - news) 24 (Reuters) - British telecoms testing company Spirent Communications Plc said fourth-quarter revenue would be $12 million lower than it had estimated due to a delay in customers taking delivery of its products.

The company, which tests ethernet networks and 3G and 4G wireless networks and devices, said revenue from the delayed shipments would be recognised in the first half of next year.

Shares in Spirent fell as much as 7 percent in early trade, making it one of the top losers on the FTSE 250 Midcap Index , but recovered some of their losses by midday.

Spirent added that order intake for the fourth quarter was on track and revenue is expected to be in the region of $115 million to $120 million.

Third-quarter revenue fell 3.7 percent to $107.7 million.

Adjusted operating profit dropped more than 40 percent to $16.1 million. Gross margins fell to 70.1 percent from 72.4 percent a year earlier.

Revenue in the Unites States, its largest market, grew 6 percent in the third quarter, while that in Europe dropped 25 percent. Asia Pacific revenue was down 7 percent in the same period.

"Evidence of a slowing order book in 3Q and revenue push-outs on 4Q offer a slower end to the year than we previously anticipated," Jefferies Analyst Lee Simpson said in a note.

"Volatile conditions with handset testing customers appears the main issue."

Spirent has been sailing through rough waters this year with lower orders in the first quarter and a weak performance at its network and applications unit leading to a 72 percent drop in first-half profit.

Simpson said he expects the order book to improve through 2014, with an about 12 percent year-on-year sales growth and gross margin rise of 140 basis points.

He expects earnings before interest and tax of $76 million to $77 million in 2014.

"It is important to note that the downgrades are mostly driven by timing of large firm business in service assurance rather than a marked change in conditions in the wireless business," Numis analyst Nick James said in a note.

James cut his price target on the stock to 145 pence from 160 pence, but said the business was well placed to benefit from a market recovery in 2014.

Anite Plc (LSE: AIE.L - news) warned last week that contract delays in its handset testing business would depress first-half revenue in the unit by 25 percent and hurt full-year results.

Spirent's Chief Executive Eric Hutchinson, who was the company's finance chief, took the helm after former CEO Bill Burns stepped down last month.

The stock was trading down 4.5 percent at 118 pence at 1140 GMT on Thursday on the London Stock Exchange (LSE: LSE.L - news) .