Test market rejigs to regain revenue

Network operators can expect test-equipment makers to reposition formerly “nice-to-have” products as “must-haves,” in their attempt to regain revenues after the economic slowdown, according to one industry research firm.

The likes of Acterna LLC, Fluke Networks and Spirent Communications Inc. are changing the way they sell LAN/WAN test-equipment to recover from the nasty market they faced between 2001 and mid-2003, said Jessy Cavazos, a San Antonio, Tex.-based industry analyst in Frost & Sullivan’s communication test group.

The test-equipment market “was pretty much hammered” for two years, Cavazos said, pointing out that a number of factors led to this sorry state of affairs for gear makers.

“We have a large market for second-hand test equipment that affects the revenue from new instrument sales. That’s one of the factors that have been restraining the market. And there has been a reduction in test-equipment spending. That, of course, impacted the market as well.

“Because of the economic conditions, end-users are deferring the purchase of test equipment, pushing back the purchase decision,” Cavazos continued. “That hurt the market. Also, there’s a slowdown in [network] infrastructure deployment….Many of the large carriers and service providers have cut back their expansion plans.”

All of the above spelled trouble for test-equipment manufacturers. Witness the problems that Acterna faced. The Germantown, Md.-based company filed for bankruptcy protection in a New York court last May, in an effort to reduce its financial debt load.

“Between 2001 and mid-2003, the industry as a whole lost momentum,” said Bruce Hembree, Atlanta, Ga.-based head of Acterna’s WorkFlow Solutions division. “The test-and-measurement, network-management piece of that declined as well.”

But Acterna and its kind are not sitting still, waiting for the next wave of bad market news to hit them. According to Cavazos, test-equipment makers are changing their ways to regain some of the revenues they lost during the downturn. Frost & Sullivan explains this shift in its report, World LAN/WAN Test Equipment Markets, published earlier this year.

Specifically, Cavazos said some test-gear manufacturers are selling their wares as more than mere packet sniffers, opting to provide something of a network management solution to enterprises, carriers and gear makers. She said Spirent and Network Associates Inc. are among the companies trying this approach.

Meanwhile, Fluke Networks has leveraged its partnerships with network infrastructure firms like Extreme Networks Inc. and Cisco Systems Inc. to some success.

“Fluke has actually gained market share in the LAN/WAN test-equipment market,” Cavazos said, adding that other test-gear companies are trying to follow in that firm’s footsteps and forge equally strong relationships with network gear makers. “This is one of the factors that has impacted their performance.”

Cavazos also said we should expect to see test-equipment firms getting more involved in trade associations and standards-making bodies, in an attempt to get closer to the technologies they work with and the customers they seek.

Hembree said Acterna takes part in the Alliance for Telecommunications Industry Solutions (ATIS) forum, which develops communication standards. The firm has also been trying to get the message across to customers that its wares are not just protocol analyzers.

“We linked together the instrumentation we have and the test expertise, as well as the OSS carrier-class software,” Hembree said. “We’re much more than just a test instrumentation company.”

Acterna’s efforts have paid off. Hembree said the firm emerged from bankruptcy protection in October. “We did increase our cash flow and our ability to handle the debt that we had. More recently, in Q4, we returned to profitability.”

“I have to attribute a piece of it to the overall industry and the economy, the same thing that everybody’s experiencing a little bit,” Hembree explained. “But more so, our piece of the comeback is attributed to the way we positioned our products over the past year or year and a half.”

Dan Wright, Fluke Networks’ spokesperson, said that although his firm keeps close ties with network gear makers and participates in trade associations, it has not changed the way it presents products to customers.

Rather, this company sticks to its status quo: “We’re really trying to tailor the right product for the right customer,” Wright said, referencing the OptiView network analysis platform. “We have 16 different hardware options on that, and 30 accessories, trying to match the product to the right mainframe, the right software, the right accessories for what the customer is trying to do.”

Wright said the second half of 2003 was kind to Fluke Networks. “We have definitely been more encouraged by what we’ve seen over the past six months.”

For more information about Frost & Sullivan’s World LAN/WAN Test Equipment Markets report, visit www.frost.com.

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