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Why Spirent Communications Plc Shares Tumbled

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares in Spirent Communications (LSE: SPT) plummeted by more than 11% in early trade this morning, following an adjustment to its strategic priorities.

So what: Q4 brought in revenue of around $115m, which was at the lower end of previous guidance (between $115m-$120m), while full-year revenue dropped to $413m from $472.4m in 2012.

Along with the board, new CEO Eric Hutchinson has assessed the company’s opportunities and believes that “the conditions within Spirent’s markets continue to be, and will likely remain, volatile in the medium term”. As a result, a number of senior management and structural changes have been made in order to create “a more agile and responsive organisation”.

Now what: These changes have been made to capitalise on a number of key areas, including: the acceleration of the development of virtual test systems; software defined networking solutions; expansion of its Enterprise sales channel; enhancements to Spirent’s Cyber Security test offering; as well as advancements in Automotive software and related connectivity testing. 

Shareholders will have to revisit their original thesis on why they bought shares in the company, though under the refreshed vision, the future of the business will focus on consolidating its position as leading experts in test and measurement for information technology communications worldwide.

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> Sam owns shares in Spirent. The Motley Fool has recommended shares in Spirent.