LONDON (ShareCast) - Demand for Spirent Communications's products and services in the US and in China "dipped sharply" during the third quarter of the year, prompting shares to slide on Thursday morning.
The decline in demand was due to merger activity by some of their customers and a suspension in capital expenditure, the company said.

Weaker market conditions are expected to continue for the rest of the year.

The group said their networks & applications division was the most affected, with its revenues declining 7% to $54.5m.

Group revenue during the first six months of the year increased from $107.7m to $110.1m, but profit before tax plunged from $13.2m to $2.8m, dragging earnings per share to 0.32c from 1.51c.

Cash and equivalents dropped to $104.9m from $168.4m.

Chief executive Eric Hutchinson said: "Despite the weakened market conditions, the strategic direction for the company is unchanged.

"The technology shift to virtualization in our current served markets will create the need for new test methodologies and advanced test solutions to support the exponential growth in data traffic and the security of the networks."

Numis analysts commented: "While short term visibility of an upturn is limited, we believe it is clear that Spirent should be able to capitalise on its strong market position in comms test to return to historic levels of profitability in due course."

The broker gave an 'add' recommendation, with a target price of 80p.

Shares were down 4.96% to 70p at 11:32 on Thursday.

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