As the US economy continues its recovery trend, the outlook for the global economy remains uncertain with UK’s withdrawal from the EU, decelerating economic growth in China, accompanied by delay in introducing 3CA (3-Band Carrier Aggregation) and the increasingly tense situations in East Asia. Consequently, investments planned by telcos have been altered, and the ownership of smartphones has also reached a saturated level. The test and measurement instruments (T&M) industry was relatively slow last year too.
Mergers and acquisitions is the name of the game. Consolidation continues to shape the industry. The T&M companies are constantly on the look out to acquire, sell, spin off, or otherwise fundamentally change their business operations. Keysight Technologies purchased Anite; JDSU split into two companies; and Anritsu acquired Azimuth Systems. Elektrobit split into two companies and sold off its automotive business and brand name, so its test unit now operates as a much smaller company named Bittium. Ascom recently divested its network testing operations to InfoVista. Danaher completed its separation of T&M segment from Fortive Corporation, strategically strengthening its position as a multi-industry science and technology company.
We bring to you the performance of the large, global T&M companies. A few caveats on this list: it includes only publicly traded companies for which revenue information is available. Revenue figures are based on the most recent full-year results that are available, which at this point in the year means that some figures are from 2015.
Leading T&M Instrument Player
Fortive Corporation is a diversified industrial growth company comprised of Professional Instrumentation and Industrial Technologies businesses that are recognized leaders in attractive markets. Fortive Corporation is a Delaware Corporation and was incorporated in 2015 in connection with the separation of Fortive from Danaher Corporation on July 2, 2016 as an independent, publicly-traded company. At the time of the separation, Fortive Corporation consisted of Danaher’s former Test and Measurement segment, Industrial Technologies segment (excluding the product identification business), and retail/commercial petroleum business.
The professional instrumentation businesses specialize in advanced measurement and monitoring to keep critical infrastructure up and running, turn innovative concepts into finished products and deliver valuable business intelligence. They are sub-divided as field solutions, product realization, and sensing technologies.
Its Advanced Instrumentation & Solutions business was primarily established through the acquisitions of Qualitrol in the 1980s, Fluke Corporation in 1998, Tektronix in 2007, Keithley Instruments in 2010, eMaint in 2016 and numerous bolt-on acquisitions. And the Sensing Technologies business was primarily established through the acquisition of Chicago Pneumatic in the 1980s and Gems Sensors in 1997.
2016 compared to 2015. Year-over-year price increases in the segment contributed 0.5% to sales growth during 2016 as compared to 2015 and are reflected as a component of the change in sales from existing businesses.
Sales from existing businesses in the segment’s Advanced Instrumentation & Solutions businesses declined at a low-single digit rate during 2016 as compared to 2015. The business continued to experience stabilization in demand during the second half of 2016 as compared to the first half 2016. Geographically, sales from existing businesses declined in the United States and Latin America, partly offset by increases in China and Western Europe. Demand for field solutions products and services declined at a low-single digit rate during 2016 as compared to 2015. During 2016, year-over-year demand increased for online condition-based monitoring equipment and network tools as well as for thermography equipment in China, while demand decreased for calibration and biomedical equipment. On a year-over-year basis, industrial product sales for field solutions products and services declined during 2016 but grew during the second half of 2016 compared to the comparable period in 2015, reflecting a stabilization in end customer demand. Year-over-year sales of product realization services and products declined at a mid-single digit rate during 2016 as compared to 2015. Declines in some major product realization product lines were partly offset by growth in education and defense-related end markets and semiconductor and communications end markets in China as well as increased demand for precision electrical measurement products and video network monitoring products. Demand for design, engineering and manufacturing services increased on a year-over-year basis but slowed during the second half of 2016.
Sales from existing businesses in the segment’s Sensing Technologies businesses declined at a low-single-digit rate during 2016 as compared to 2015. Demand in these businesses continued to stabilize throughout the year and delivered high-single-digit growth on a year-over-year basis during the fourth quarter of 2016. Sales declines during 2016 for control products were partially offset by increased sales of sensing products primarily in the food and beverage, medical equipment and heating and air conditioning end-markets. Geographically, sales from existing businesses decreased on a year-over-year basis in North America, partly offset by improved demand in Asia.
Keysight Technologies helps customers bring breakthrough electronic products and systems to market faster and at a lower cost. Keysight’s solutions go where the electronic signal goes, from design simulation, to prototype validation, to manufacturing test, to optimization in the network. Customers span the worldwide communications ecosystem, Internet infrastructure, aerospace and defense, automotive, semiconductor, and general electronics end markets. Keysight generated revenues of USD 2.9 billion in fiscal year 2016.
Fiscal Year 2016 Financials
Revenue grew 2 percent over last year and totaled USD 2.9 billion.
- GAAP operating margin was 14 percent, compared with 15 percent in fiscal 2015. Non-GAAP operating margin was 19 percent, compared with 20 percent in fiscal 2015.
- GAAP net income was USD 335 million, or USD 1.95 per share, compared with USD 513 million, or USD 3.00 per share in fiscal 2015, which included the recognition of a USD 213 million tax benefit. Non-GAAP net income was USD 419 million, or USD 2.43 per share, compared with USD 432 million, or USD 2.52 per share in fiscal 2015.
- Communications Solutions Group (CSG). For fiscal 2016, CSG generated USD 1.8 billion in revenue, compared with revenue of USD 1.7 billion in fiscal 2015.
- Electronic Industrial Solutions Group (EISG). For fiscal 2016, EISG generated USD 776 million in revenue, compared with revenue of USD 758 million in fiscal 2015.
- Services Solutions Group (SSG). For fiscal 2016, SSG generated USD 402 million in revenue, compared with revenue of USD 401 million in fiscal 2015.
Yokogawa Electric Corporation has been involved in the testing field since its founding and has contributed to numerous industries through its supply of T&M equipment. The company meets customer needs with a wide-ranging product lineup and an extensive range of calibration and other services.
Yokogawa has developed testers that can handle high-speed, high-performance semiconductors and always offers the latest testing solutions. Yokogawa is also engaged in businesses involving products such as confocal scanners for the real-time observation of life processes at the molecular level and drug discovery support systems for the automatic testing of candidate compounds, and the company anticipates that these businesses will drive the development of new markets.
In the T&M segment, net sales in 2015-16 declined due mainly to the impact of the strong yen. The company forecasts that orders received are expected to remain nearly unchanged year on year, while operating income is forecast to increase due to an increase in sales, among other factors. Orders received are expected to decrease by 0.7 percent from ¥ 22.153 billion in 2016-17 to ¥ 22 billion in 2017-18. Net sales are expected to increase by 5.7 percent from ¥ 22.242 billion in 2016-17 to ¥ 23.5 billion in 2017-18.
The T&M business offers waveform measuring instruments; optical communications measuring instruments; signal generators; electric power, temperature, and pressure measuring instruments; and confocal scanners for observation of live cells.
Rohde & Schwarz is active in five business fields: test and measurement; broadcast and media; cybersecurity; secure communications and monitoring. T&M instruments includes T&M instruments and systems for wireless communications, aerospace and defense, automotive, research, and industrial electronics.
The company faced mixed conditions in the markets it addresses.
Despite the still subdued mobile communications market, the T&M business grew overall, in part due to a significant increase in demand from the automotive market.
Rohde & Schwarz has helped write an unparalleled success story of the digital wireless communications industry from the very beginning. In the early 1990s, the GSM system simulator established the technological basis for testing user equipment, paving the way for mass production. Since then, the company, as a strategic partner of the mobile communications industry, has supported the rollout of new standards with a comprehensive portfolio of T&M instruments and systems for every stage of the value chain.
Customers include chipset manufacturers, infrastructure providers, consumer electronics manufacturers, and network operators. For network operators, Rohde & Schwarz is the only single-source provider of T&M equipment for the entire network lifecycle. Device manufacturers find all the T&M equipment they need, including RF measuring regulators, instruments for fundamental research, complex network simulators for standard-compliant QM acceptance tests, and T&M instruments for mass production. Government regulators use their radio monitoring and direction-finding systems to ensure normal, interference-free communications.
In the fiscal year 2015-16 (July to June), Rohde & Schwarz generated revenue of around € 1.92 billion.
In the past fiscal year, Rohde & Schwarz focused even more on the diverse requirements of its customers. One key market that the group is addressing with its T&M equipment is the wireless market. The largest contributor to the group’s positive results was again mobile communications T&M, despite a market environment that remained subdued. Fifth-generation mobile communications (5G) and the Internet of Things (IoT) provided new impetus, and Rohde & Schwarz is playing an active role in the development of these two future technologies.
All in all, T&M grew slightly compared with the previous year, in part bolstered by further expansion of the company’s wide-base market activities and an even broader oscilloscope portfolio.
Rohde & Schwarz is well positioned for the future with its broad product range and its even stronger focus on customer needs. The group has created the necessary internal structures and laid the foundation for continued profitable growth. In fiscal year 2016-17, Rohde & Schwarz expects to be able to defend its strong position in its traditional markets. Based on its initial success, the group is also confident that it will be able to further expand its new business fields.
Viavi Solutions' net revenue for fiscal 2016 was USD 906.3 million, with net loss of USD 50.4 million. Its net revenue for fiscal 2015 was USD 873.9 million, with net income of USD 44.0 million. Americas, Asia-Pacific, and EMEA customers represented 49.1 percent,16.6 percent and 34.3 percent, respectively, of total net revenue for the quarter. Americas, Asia-Pacific and EMEA customers represented 51.1 percent, 18.3 percent and 30.6 percent, respectively, of total net revenue for the year ended July 2, 2016.
Teradyne Inc. designs, develops, manufactures, and sells automatic test systems used to test semiconductors, wireless products, and data storage and complex electronics systems in the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries.
The decrease in System Test revenues of USD 21.8 million, or 10 percent, from 2015 to 2016 was primarily due to lower sales in Storage Test of 3.5” hard disk drive testers used for testing drives for cloud storage applications.
The increase in System Test revenues of USD 49.1 million, or 30 percent from 2014 to 2015 was primarily due to higher sales in Storage Test of 3.5” hard disk drive testers used for testing drives for cloud storage applications.
The decrease in Wireless Test revenues of USD 88.4 million, or 48 percent from 2015 to 2016 was driven by lower demand for connectivity and cellular test systems primarily from the company’s largest Wireless Test segment customer. As a result of significant customer concentration in the company’s Wireless Test segment, revenues in that segment are subject to significant fluctuations based on the segment’s largest customer’s order levels. Wireless Test revenues were approximately flat from 2014 to 2015, as an increase in cellular product volume was offset by lower connectivity product volume.
Teledyne Technologies Inc. provides enabling technologies for industrial growth markets. It has evolved from a company that was primarily focused on aerospace and defense to one that serves multiple markets that require advanced technology and high reliability. Products include monitoring and control instrumentation for marine and environmental applications, harsh environment interconnects, electronic test and measurement equipment, digital imaging sensors and cameras, aircraft information management systems, and defense electronics and satellite communication subsystems. The company also supplies engineered systems for defense, space, environmental, and energy applications.
The Instrumentation Division includes test and measurement instruments, monitoring and control instrumentation, and power and communications connectivity devices for marine, environmental, electronics, and other applications. In 2016, the entire division had sales of USD 876.9, while T&M contributed USD 187.9 million to sales. The corresponding figures were USD 1051.1 million in 2015, when T&M sales were USD 168.4 million Since August 2012, with the acquisition of LeCroy Corporation, the vendor develops, manufactures, sells, and licenses high-performance oscilloscopes and high-speed protocol analyzers for various computer communication links. It also provides related test and measurement equipment, probes, accessories, and application solutions. To a lesser extent, it provides extended warranty contracts, maintenance contracts, and repairs and calibrations on their instruments after their warranties expire.
In 2014, the vendor released the world’s first 100GHz real-time scope, aimed at applications such as high-speed optical communications, and extended their line of 12-bit oscilloscopes to include an eight channel product with specialized capabilities for analyzing power and efficiency of motors and the associated drive circuitry. In 2015, the company introduced the IQS series of Coherent Optical Receivers. In April 2016, it acquired Frontline, which allowed to expand their protocol test portfolio into important wireless technologies like Bluetooth and 802.11 (Wi-Fi); and assets of Quantum Data, which broadened the protocol product.
National Instruments manufactures, and sells tools to engineers and scientists that accelerate productivity, innovation, and discovery. Its platform-based approach to engineering provides an integrated software and hardware platform that speeds the development of systems needing measurement and control. The company has been profitable in every year since 1990. No single customer has accounted for more than 3 percent, 3 percent, or 5 percent of our sales in 2016, 2015, and 2014, respectively.
Current business outlook. We (Quoting from Annual Report ) are encouraged by improving trends in the industrial economy in early 2017 as well as continuing success in the market for semiconductor test systems. However, the ongoing uncertainty created by volatile currency markets and continued weakness in the PC and energy sectors remain concerning as we look ahead to 2017. During 2016, we saw a sharp and broad appreciation of the US dollar against many of the currencies in which we do business with the US dollar index trading at or near a 14-year high. The strength of the US dollar is expected to continue to have a negative impact on the US dollar equivalent of our foreign currency-denominated sales. For the first quarter of 2017, we expect the strong US dollar will reduce the US dollar equivalent of our foreign currency-denominated sales by as much as 1 percent. The ongoing uncertainty created by volatile currency markets, a prolonged period of low oil prices, the new US presidential administration, and continued weakness in the PC industry, alone or in combination, may continue to have a material adverse effect on our revenues and the financial results of our operations. In addition, we remain concerned about the geopolitical and fiscal instability in the Middle East and some emerging markets where we do business. These factors as well as some others that we may not contemplate could have a material adverse effect on the spending patterns of businesses including our current and potential customers, which could have a material adverse effect on our revenues and on results of our operations. Other factors that could adversely influence demand for our products include unemployment, labor and healthcare costs, access to credit, consumer and business confidence, and other macroeconomic factors that could have a negative impact on capital investment and spending behavior.
Acquisitions. On October 23, 2015, the company completed the acquisition of M2, a privately held French holding company and its wholly owned subsidiary, Micropross, a supplier of software-based test systems for near field communications (NFC), smart cards, and wireless charging test systems.
During the 12-month period ending December 31, 2015, four additional businesses were acquired. These included a leading designer, manufacturer, and provider of data acquisition solutions for the test and measurement marketplace, a technology innovator and leading supplier of high-performance FPGA prototyping and deployment products for advanced wireless research, wireless infrastructure, and military/defense applications and a PXI modular instruments hardware are product line.
Advantest Corporation semiconductor test systems, known as Automatic Test Equipment (ATE), are essential to quality assurance. Advantest is a pioneer in this field and a world leader in test technology. Its diverse, high-productivity solutions provide unmatched support for suppliers of various devices, ranging from logic ICs to the memory chips used in computers, servers, game consoles, smartphones and vehicles.
Anritsu Corporation. During the fiscal year ended March 31, 2017, while demand for measuring instruments for optical/digital devices was strong, in the mobile market, restrained investment by customers continued, thereby revenue in the T&M business decreased compared with the previous fiscal year. Consequently, segment revenue decreased 12.4 percent compared with the previous fiscal year to ¥ 59,333 million, operating profit decreased 54.7 percent to ¥ 2130 million and adjusted operating profit decreased 53.6 percent to ¥ 2504 million.
In the Products Quality Assurance business, revenue and profit increased compared with the previous fiscal year mainly due to growth in sales in Japan and overseas market. Foreign exchange losses (including fair value of foreign exchange contracts) of ¥ 529 million for trade receivables in foreign currency were recorded in finance income and expenses.
As a result, overall orders decreased 6.0 percent compared with the previous fiscal year to ¥ 88,934 million, and revenue decreased 8.3 percent to ¥ 87,638 million. Operating profit decreased 28.2 percent compared with the previous fiscal year to ¥ 4234 million, profit before tax decreased 33.2 percent compared with the previous fiscal year to ¥ 3628 million. Profit decreased 27.4 percent compared with the previous fiscal year to ¥ 2734 million, profit attributable to owners of parent decreased 28.3 percent compared with the previous fiscal year to ¥ 2698 million.
Amid such business environment, the Anritsu Group has acquired Azimuth Systems, Inc. in the US in September 2016, and has worked to build up a platform for business expansion by carrying out strategic investments mainly in the areas of growing market and enhancing competitiveness in the offering of solutions. In addition, company-wide efforts are being made to streamline the organization and reduce costs to further improve the profit structure.
EXFO Inc. As the telecom industry continued gradually moving toward an increasingly NFV and SDN-centric network architecture and despite currency headwinds, EXFO generated revenue and booking growth of 4.7 percent and 7.7 percent, respectively, (+6 percent and +9 percent on a constant currency basis) while strengthening its order book (book-to-bill ratio of 1.03).
Raising profitability is management’s central focus and the vendor made significant strides toward this objective in 2016.
In 2017, EXFO remains fully committed to driving adjusted EBITDA faster than revenue until it gets closer to its medium-term target of 15 percent adjusted EBITDA margin. In 2016, the company exceeded its adjusted EBITDA target of USD 20 million to achieve USD 22.0 million, or 9.5 percent of revenue. For 2017, it plans to expand adjusted EBITDA to reach at least USD 26 million (+18 percent year-over-year), while remaining steadfastly focused on its medium-term target.
Spirent Communications PLC
- Strong growth in largest business, Networks & Applications, revenue increased 6 percent driven by strong demand for high-speed Ethernet and test automation, operating profit before exceptional items up 33 percent.
- Positioning delivered strong growth, although revenue in Wireless & Positioning reduced 14 percent due to the contraction in the device test market. Operating profit before exceptional items increased 15 percent and operating margin before exceptional items rose to 14.4 percent due to strong performance in Positioning and operating expense management.
- Service Assurance revenue decreased by 17 percent as expected, reflecting part of the non-repeating contract for hand-held test tools delivered in 2015, while maintaining operating margin before exceptional items at 14.6 percent.
- 18 new products were launched including the industry’s first Quint-speed high-speed Ethernet product covering 100G, 50G, 40G, 25G and 10G, the industry’s first 2.5G and 5G BASE-T Ethernet test solution, software-as-a-service solution for network and cloud testing, next-generation channel emulator, an innovative security test product and a mid-range global navigation satellite system simulator.
- Major contract won with Tier-1 service provider for active testing in the network.
- Completed security test product (CyberFlood) and launched our security consulting practice (SecurityLabs). Closed deals with a large global telecoms company, a leading security products vendor and a global financial institution.
- The Networks & Applications develops performance and security test systems for next-generation networks and applications, simulating real-world, high-capacity conditions in the lab and on the network. It provides test automation, orchestration and management systems. The portfolio covers high-speed Ethernet/internet protocol (IP) for data centers and networks, cloud, virtualisation, applications, security, and mobile networks.
- Revenue up 6 percent to USD 259.4 million with improved operating margin.
- Strong demand for high-speed Ethernet test solutions from switch and router to firewall testing.
- Carriers adapting virtual test solutions globally in network functions virtualisation (NFV) trials.
- First deployment of a 400G Ethernet test solution with major network equipment manufacturer.
- Completed our security test product (CyberFlood) and launched our security consulting practice (SecurityLabs).
Networks & Applications revenue grew by 6 per cent to USD 259.4 million in 2016 (2015 USD 244.0 million), driven by strong demand for high-speed Ethernet and test automation.
Moving forward, standardization has been moved ahead of expectations with respect to the 5G mobile system, the next-generation communications system which is expected to provide the infrastructure to a wide range of mobile broadband services, and accordingly, the commercialization of 5G is beginning to materialize, as operators are announcing plans for verification tests of 5G. These moves actualize new business opportunities such as demand for development of new wireless communications technology which are needed in most-advanced markets.
Smiths Interconnect comprises three technology-focused businesses:
Connectors provides application-specific, high-reliability electrical interconnect solutions.
Microwave provides components, sub-assemblies, and systems for defense, aerospace, and wireless telecommunications.
Power provides distribution, conditioning, and monitoring solutions for data centers.
Smiths Connectors meets the requirement of T&M applications by an optimum cost/performance ratio. It has three applications: automotive testing, electronics testing, and avionics and railway testing. Smiths Interconnect is part of Smiths Group, a global leader in applying advanced technologies for markets in threat and contraband detection, energy, medical devices, communications, and engineered components.