The invisible hand of the market dealt a very conspicuous blow to telecoms and IT testing specialist Anite (AIE) after it spooked the market with its third quarter update. Reading between the lines, investors seem to be fearing that the testing kit good times are over, spiking the shares with a 14% sell-off to 133p, swiping £65 million from its market value.


Yet what is most surprising in this reaction is that the market seems to feel it has been caught on the hop at all. That Anite order flow has been a little sluggish should not be a shock, this is pretty typical of a leaden-footedness at this time of year. Bumper business this time last year was a one-off thanks to the start of significant telecoms infrastructure spending on long-term evolution (LTE), or 4G. That travel is off-pace – a typically lumpy contract business, or that its network testing side remains sluggish should not come as a huge surprise. Spirent (SPT) has been saying much the same about its performance analysis unit lately because of squeezed telco investment in many areas.


Anite's business at its core suffers from low visibility, it's tough to gauge from where and when orders might flow through. Chief executive Christopher Humphrey has never made any bones about it. Yet revenue and profits remain ahead of the equivalent figures this time last year, showing that Anite is still putting up growth. There is also little change to the fundamental and structural growth drivers of the future. LTE isn't going away and there's tons of work still to do, both on the infrastructure side and in handsets, particularly as competition in the latter market heats up thanks to a resurgence at HTC (2498:TW), ongoing strength in iPhone and Galaxy handsets, plus rescue attempts going on at both Blackberry (BB:TO) and Nokia (NOK1V:HE).


Last summer @SharesMag reported (16 August, page 7) Anite admitting to completing barely 15% of the 4G testing hardware it anticipates selling to existing customers to meet LTE demands, and even less of the accompanying software. Nine months on and that opportunity remains huge, and might even be bigger. The underlying message that I read is that the pipeline is in place to hit forecast pre-tax profits of £32.7 million, but the risk remains in execution. But that's pretty typical in most businesses, and many would love to be as well placed within their market as Anite is in its. This is not a company with a reputation for counting unhatched chickens, nor does management play the share price ramping game, and rightly so. But it seems that the market just isn't in the mood to give credit where it's due.

Issue Date: 11 Mar 2013