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Ixia Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

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Ixia (XXIA) filed Quarterly Report for the period ended 2010-06-30.

Ixia has a market cap of $701.2 million; its shares were traded at around $10.92 with a P/E ratio of 84 and P/S ratio of 4. XXIA is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Sales to our largest customer accounted for approximately $9.4 million, or 14.3%, and $21.5 million, or 16.7%, of our total revenues for the three and six months ended June 30, 2010, respectively, and $7.1 million, or 18.6%, and $14.0 million, or 18.5%, of our total revenues for the three and six months ended June 30, 2009, respectively. To date, we have sold the majority of our products to network equipment manufacturers, and in the second quarter of 2010, sales to network equipment manufacturers represented nearly two-thirds of our total sales. While we expect that we will continue to have some customer concentration for the foreseeable future, we continue to sell our products to a wider variety and increasing number of customers. To the extent that we continue to develop a broader and more diverse customer base, our reliance on any one customer or customer type should decline. From a geographic perspective, we have historically generated the majority of our revenues from product shipments to customer locations within the United States. For the three and six months ended June 30, 2010, we generated revenues from product shipments to international locations of $26.4 million, or 39.9%, and $59.8 million, or 46.7%, of our total revenues for the three and six months ended June 30, 2010, respectively, compared to $13.5 million, or 35.1%, and $30.2 million, or 40.0%, of our total revenues for the three and six months ended June 30, 2009, respectively. During the three and six months ended June 30, 2010, our revenues generated from international locations increased both in dollars and as a percentage of revenues when compared to the same period in 2009 primarily due to additional sales arising from our acquisitions of Catapult in June 2009 and N2X in October 2009. We also intend to continue increasing our sales efforts internationally with a targeted focus in the Europe and Asia Pacific regions. Looking forward, and given our 2009 acquisitions of Catapult and N2X, we expect our international revenues to continue to grow on an annualized basis as a percentage of our total revenues.

In the first six months of 2010, total revenues increased 69.7% to $128.1 million from $75.5 million recorded in the same period of 2009. As a result of our 2009 Acquisitions, revenues for the first six months of 2010 included approximately $34.4 million related to the 2009 Acquisitions. The second quarter of 2009 included approximately $2.8 million in revenue related to Catapult from the acquisition date through June 30, 2009. Excluding the revenues from our 2009 Acquisitions, revenues increased to $93.7 million in the first six months of 2010 from $72.7 million in the first six months of 2009 principally due to a $16.6 million increase in shipments of our hardware and software products (primarily our 10 Gigabit and 1 Gigabit Ethernet interface cards and our IxLoad and IxNetwork software products) in the first six months of 2010 over the same period in 2009.

Research and Development Expenses. In the second quarter of 2010, research and development expenses increased 56.3% to $17.9 million from $11.4 million in the second quarter of 2009. As a result of our 2009 Acquisitions, our research and development expenditures in the second quarter of 2010 and 2009 included approximately $5.0 million and $220,000, respectively, related to the research and development activities of the acquired operations. Excluding the incremental research and development costs related to the 2009 Acquisitions, research and development expenses in the second quarter of 2010 were $12.9 million compared to $11.2 million in the second quarter of 2009. This increase was primarily due to an increase in compensation and related employee costs, including travel, of $1.2 million and an increase in stock-based compensation expense of $314,000, partially offset by a reduction in consulting costs of $275,000. The increase in compensation and related employee costs was primarily due to the reinstatement of our global bonus plan in 2010.

Research and development expenses for the first six months of 2010 and 2009 increased 56.7% to $36.5 million from $23.3 million in the same period of 2009. As a result of our 2009 Acquisitions, our research and development expenditures in the first six months of 2010 and 2009 included approximately $11.3 million and $220,000, respectively, related to the research and development activities of the acquired operations. Excluding the incremental research and development costs related to the 2009 Acquisitions, research and development expense in the first six months of 2010 were $25.2 million compared to $23.1 million in the first six months of 2009. This increase was primarily due to an increase in compensation and related employee costs, including travel, of $2.4

Sales and Marketing Expenses. In the second quarter of 2010, sales and marketing expenses increased 43.4% to $19.2 million from $13.4 million in the second quarter of 2009. As a result of our 2009 Acquisitions, our sales and marketing costs in the second quarter of 2010 and 2009 included approximately $6.4 million and $365,000, respectively, related to these acquisitions. Excluding the incremental sales and marketing costs related to the 2009 Acquisitions, second quarter 2010 sales and marketing expenses of $12.8 million were relatively flat compared to $13.0 million in the second quarter of 2009.

For the first six months of 2010, general and administrative expenses increased 35.2% to $17.2 million from $12.7 million in the same period of 2009. As a result of our 2009 Acquisitions, the first six months of 2010 and 2009 included approximately $918,000 and $149,000, respectively, of general and administrative costs of the acquired operations. Excluding the incremental general and administrative costs related to the 2009 Acquisitions, general and administrative expenses in the first six months of 2010 were $16.3 million compared to $12.6 million in the first six month

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