Atul Bhatnagar, CEO of Calabasas-based Ixia, has been a busy man lately. Ixia, which manufactures devices that test the performance of wireless and wired networks, has restructured and expanded in the past six months. The company laid off 75-80 employees in June as part of an initiative to save an estimated $6 million annually. And while Ixia has cash and cash equivalents of $129 million and no debt, it has also struggled with decreased revenue and profitability in the past year. But In June, Ixia acquired Catapult Communications Corporation and its suite of platforms for testing wireless edge and core networks. The deal, conducted through a tender offer for all outstanding common shares of Catapult, was for approximately $105 million, or $63 million net of Catapult’s cash and investments. And in early November, the company closed on the acquisition of Agilent Technologies’ N2X Data Networks Product Line in a $44 million cash transaction. Ixia picked-up 200 Agilent employees in India, Australia and Canada as part of the transaction, increasing its total employee count to more than 900 worldwide. Bhatnagar joined Ixia two years ago. This is the high-tech industry veteran’s first job as CEO. Prior to Ixia, he led product development at DiVitas Networks; served as vice president and general manager of the Enterprise Data Networks Division of Nortel; was vice president of Advanced WebSwitching Products at Alteon Web Systems; and worked at Hewlett-Packard for almost 15 years in general management in North America and Asia. Question: Can you describe what Ixia does and the types of clients you serve? Answer: We help networking companies design reliable, secure and bullet proof systems. For example we can simulate one million users in the lab, and give our clients an idea of the real world experience for end users. We do IP protocols, Ethernet protocols and LTE protocols. And we typically work with large companies such as Cysco, Juniper Networks, Alcatel-Lucent, and NTT Communications in Japan. Two of Ixia’s largest customers, Huawei and ZTE, are in China. Q: How has Ixia been able to expand during the recession? A: As the market slowed drastically in the fourth quarter of 2008, we did a business planning exercise. We decided to grow towards the next generation of wireless. As we made that decision, our vision became “testing from the Internet core to the wireless edge.” I believe that slower times are the best times for change. When it comes to acquiring Catapult and Agilent Technologies’ N2X Data Networks Product Line, we did these at a time when the assets were valued better. And when customers come back from the slowdown, we are going to be there with next generation technology. During the recession we have also invested into product development. Q: Can you talk about the company’s current financial status? A: Revenue wise, the year is not over yet, but 2009 revenue is down from 2008 primarily as a result of the recession. Prior to the recession our operating margin was close to 15 percent. In terms of the layoffs, we made sure that we only cut what we had to cut. We have invested in products and innovation rather than cutting back deep. Ixia’s revenues were $175 million in 2008, $174 million in 2007, and $180 million in 2006. Total revenues for the third quarter of 2009 were $46.4 million compared to $47.3 million in the third quarter of 2008. The company recorded a net loss for Q3 2009 of $6.2 million, compared to net income of $483,000 for Q3 2008. The street is estimating revenues of $174.8 million for 2009, said Ixia’s CFO, Tom Miller, and for 2010 the street has Ixia at $231.4 million in revenue. “So after feeling the impact of the recession over the last few quarters, we are seeing some revenue upside and growth in earnings,” said Miller. “In the third quarter of 2008, we hit a non-GAAP operating margin of 15.1 percent. We saw operating margins drop to under five percent for the last few quarters. We have taken some cost cutting measures in Q2 and Q3 of this year, and we hope to see operating margins of 12 to 15 percent next year.” Q: How much revenue are the Catapult and Agilent acquisitions expected to generate? A: The market is expecting $35 million to $45 million in annual revenue from Agilent Technologies’ N2X Data Networks Product Line. Catapult is expected to generate approximately $40 million in annual revenue, said Miller. Q: What is the hardest part of the CEO learning curve? A: The most exciting part is that when you press the gas pedal the car goes. You can make things happen and create a tremendous business. As a general manager at other large companies, I had influence but the car doesn’t go. Also, as CEO, I can make a big difference in helping people develop professionally. Another difference from my past jobs is that, as CEO, you interact with Wall Street more than you do as a general manager. The biggest challenge is that in a large company you have more infrastructure. At a smaller company you have to make do with less. But as a result, the base and efficiency in a smaller company is a lot better, and the overall satisfaction for me is a lot higher. Q: What are some of the challenges specifically related to running a public company? A: When you’re a leader of a public company, retaining integrity right from the start is important. The leader casts a shadow. As a public company, Ixia’s integrity is very high. As CEO, you are more visible and have to be transparent. I learned a lot of those values when I worked with Hewlett-Packard. Q: Ixia is planning on entering the “live network monitoring” market. Please tell me more about this move. A: The reason we are entering the live network monitoring market is that when we finish pre-deployment testing of a network, customers then want to be able to run highly reliable networks. We are essentially leveraging our pre-deployment technology into post deployment uses. And we are developing new products. Q: Can you talk a little about your take on the convergence of wire and wireless? A: The smartphone is the on-ramp to the Internet. And it has to have high quality video and other applications. There’s not as much need to sit at a computer anymore, because there’s a lot more mobile devices. So business is going real-time, and people want high resolution wherever they are. Having rich media and key applications at your disposal allows people to conduct business, with quality, wherever they are. This is driving efficiency to a new level. Work is not where you are; work is wherever you are. That’s the paradigm shift.
Ixia CEO Believes Now is Time For Firm To Prepare for Future
