Needham & Company Remains Sidelined on Viavi (VIAV) Following Following 4Q Report
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Needham & Company maintained a Hold rating on Viavi Solutions (NASDAQ: VIAV) following the company's 4Q earnings report. The company's OSP unit is expected to decline year-over-year by ~$25-30MM in revenues. Needham also estimate the profits from the Legacy SE businesses will decline by roughly $7MM. Cost cuts are likely to help reduce expenses by $10MM year-over-year in FY17 and a similar amount in FY18.
Analyst Alex Henderson commented, "Viavi reported a solid quarter and offered an in-line guide for the September FY1Q17 quarter. Viavi is planning an analyst day in midSeptember. We expect the relatively new management team to lay out its plans for the troubled Service Enablement unit. We think remediating the steep losses in the SE Growth units is a big opportunity. The question is whether management will make the hard decisions and aggressively prune these businesses back. We estimate they are losing a significant $0.30+ per share. We think they will likely gradually address this issue in FY17 and FY18. As the high-margin OSP business eases back from a spike in FY16 and the SE high-margin legacy continues to decline at a 30% pace, the June FY17 fiscal year looks like a transition year. We remain on the sidelines."
Shares of Viavi Solutions closed at $7.30 yesterday.
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