Spirent's cheering news tempered by analysts' caution

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The Independent Online

Spirent, the telecoms testing firm, cheered investors yesterday by signalling that its business had "seen a period of stability" in second-quarter trading. It also hopes to get its shares listed next month on the New York Stock Exchange.

The company said its troubled telecom test division had seen "a level trend" in order intake in May and June and noted that its network monitoring division continued to perform "well". It called the latter's order book was "robust" and said the outlook for further new business was "positive."

While the announcement lifted the company's shares 14.4p to 202.5p, making the stock the biggest riser in the FTSE 100 index, analysts thought it still too early to say it was out of the woods yet.

Richard Dunn, an analyst at Investec Henderson Crosthwaite, said: "I wouldn't say it's an upturn. People are split into two camps. The positive camp, that I'm cautiously in, thinks there has been no further deterioration in Q2, which means forecasts should hold good, which means the stock is cheap. The negative is that while Q2 is fine, it doesn't mean things can't get worse in Q3, and nobody knows that at the moment."

Shares in Spirent, which hit a high of 688p in October of last year, have plunged dramatically over the last six months, aided by a May profits warning. Spirent said then that the performance of its telecom test equipment division was likely to be "significantly lower" than the year before, hurt by a cutback in its customers' spending. The severity of that alert forced analysts to cut £70m-£80m off their 2001 profit forecasts, to about the £135m level.

Mr Dunn said it was too early to predict whether profit forecasts would have to be cut again. "The order cycles are too short for them to predict that things can't get worse in Q3 and Q4."

"Monitoring is holding up, and that is positive because they are much longer projects. The worry is that if that went soft, it would show up in next year's figures, undermining the recovery story," he said.

Spirent also said it planned to have its shares listed in New York on 10 July. No new shares are being issued. Nicholas Brookes, its chief executive, said: "It will not only increase our visibility but will further reinforce our commitment to our customers, employees and investors in the US."

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