Viavi Solutions Stock

Viavi Solutions Inc. (VIAVI) operates as a global provider of network test, monitoring and assurance solutions for communications service providers (CSPs), hyperscalers, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and avionics. The company helps customers harness the power of instruments, automation, intelligence and virtualization. VIAVI is also a leader in light management technologies for 3D sensing, for the anti-counterfeiting, consumer electronics, industrial, automotive, government and aerospace applications.

Business Segments

The company operates through Network Enablement (NE); Service Enablement (SE); and Optical Security and Performance Products (OSP) business segments.

The company’s NSE and OSP businesses are each organized with their own engineering, manufacturing and dedicated sales and marketing groups focused on each of the markets it serves to better support its customers and respond quickly to market needs. In addition, the company’s segments share common corporate services that provide capital, legal, infrastructure, resources and functional support, allowing them to focus on core technological strengths to compete and innovate in their markets.

Network Enablement

The company’s NE segment provides an integrated portfolio of testing solutions that access the network to perform build-out and maintenance tasks. These solutions include instruments, software and services to design, build, turn-up, certify, troubleshoot, and optimize networks. These solutions also support more profitable, higher-performing networks and help speed time-to-revenue.

The company’s solutions address lab and production environments, field deployment and service assurance for wireless and wireline networks, including computing and storage networks. The company’s test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major network equipment manufacturers (NEMs), operators and service providers worldwide.

Within the NE product portfolio, the company’s wireless products consist of flexible application software and multi-function hardware that its customers can easily use as standalone test and measurement solutions or combine with industry-standard computers, networks and third-party devices to create measurement, automation and embedded systems. The company’s Radio Access Network (RAN) to Core test and validation product addresses the various communications infrastructure market segments.

The company’s AvComm products are a global leader in test and measurement (T&M) instrumentation for communication and safety in the government, aerospace and military markets. AvComm solutions encompass a full spectrum of instrumentation, which include turnkey systems, stand-alone instruments and modular components that provide customers with highly reliable, customized, innovative and cost-effective testing tools and resilient Positioning, Navigation and Timing (PNT) solutions for critical infrastructure serving military and civilian applications.

Markets

The company’s NE segment provides solutions for CSPs, as well as NEMs and data center providers that deliver and/or operate broadband/IP networks (fixed and mobile) supporting voice, video and data services, as well as a wide range of applications. These solutions support the development and production of network equipment, the deployment of next generation network technologies and services, and ensure a higher-quality customer experience. AvComm products are positioned in all of the customers’ product life cycle phases from research & development (R&D), manufacturing, installation, deployment and field, to depot repair and maintenance of devices.

Customers

NE customers include CSPs, NEMs, government organizations and large corporate customers, such as major telecom, mobility and cable operators, chip and infrastructure vendors, storage-device manufacturers, storage-network and switch vendors, radio and avionics commercial companies, original equipment manufacturers (OEMs), state and federal agencies, utilities, law enforcement, military contractors and the armed forces and deployed private enterprise customers. The company’s customers include America Móvil, AT&T Inc., Lumen Technologies, Inc., Cisco Systems, Inc., Nokia Corporation, British Telecom Openreach, Deutsche Telekom AG, and Verizon Communications Inc.

Competition

NE competitors include Anritsu Corporation, EXFO Inc., Keysight Technologies Inc., Rohde & Schwarz, VeEX Inc. and Spirent Communications plc.

Offerings

The company’s NE solutions include instruments and software that support the development and production of network systems in the lab. These solutions activate, certify, troubleshoot and optimize networks that are differentiated through superior efficiency, reliable performance and greater customer satisfaction. Designed to be mobile, these products include instruments and software that access the network to perform installation and maintenance tasks. They help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network. These instruments are highly intelligent and have user interfaces that are designed to simplify operations and minimize the training required to operate them. The company’s NE solutions are also used by NEMs in the design and production of next-generation network equipment. Thorough testing by NEMs plays a critical role in producing the components and equipment that are the building blocks of network infrastructure. The company leverages its installed base and knowledge of network management methods and procedures to develop these advanced customer experience solutions.

The company also offers a range of product support and professional services designed to comprehensively address its customers’ requirements. These services include repair, calibration, software support and technical assistance for the company’s products. The company offers product and technology training, as well as consulting services. The company’s professional services, provided in conjunction with system integration projects, include project management, installation and implementation.

The company’s NE products and associated services are, as follows:

Field Instruments: Primarily consisting of access and cable products; avionics products; fiber instrument products; metro products; RF test products; and radio test products.

Lab Instruments: Primarily consisting of fiber optic production lab tests; optical transport products; computing and storage network test products; and wireless products.

Service Enablement

SE provides embedded systems and enterprise performance management solutions that give global CSPs, enterprises and cloud operators visibility into network, service and application data.

The company’s assurance solutions let carriers remotely monitor the performance and quality of network, service and applications performance throughout the entire network. This provides the company’s customers with enhanced network management, control, and optimization that allow network operators to initiate service to new customers faster, decrease the need for technicians to make on-site service calls, help to make necessary repairs faster and, as a result, lower costs while providing higher quality and more reliable services. Remote monitoring decreases operating expenses, while early detection helps increase uptime, preserve revenue, and helps operators better monetize their networks.

The company’s network performance management products help enterprise IT and security teams monitor and optimize connectivity for their employees across on-premise and cloud domains and conduct preventative and forensic analysis to address rising security challenges. This functionality has become more critical as organizations continue to operate under remote working procedures, increasing network challenges and security risks.

Markets

The company’s SE segment provides solutions and services primarily for CSPs and enterprises that deliver and/or operate broadband/IP networks (fixed and mobile) supporting voice, video and data services, as well as a wide range of applications. These solutions provide network and application visibility to enable more ways to provide a higher-quality customer experience.

Customers

SE customers include similar CSPs, NEMs, government organizations, large corporate customers and storage-segment customers that are served by the company’s NE segment.

Competition

SE segment competitors include NetScout Systems, Inc., Riverbed Technology, Inc., and Spirent Communications plc.

Offerings

The company’s SE solutions are embedded network systems, including instruments, microprobes and software that collect and analyze network data to reveal the actual customer experience and identify opportunities for new revenue streams and network optimization. These solutions provide the company’s customers enhanced network management, control, optimization and differentiation and a complete service assurance platform for mobile communications, providing operators with network performance, inventory, configuration and fault management solutions through artificial intelligence driven key performance indicator analysis. The company’s customers are able to access and analyze the growing amount of network data from a single console, simplifying the process of deploying, provisioning and managing network equipment and services.

The company’s SE products and associated services are, as follows:

Data Center: Primarily consisting of the company’s network performance monitoring and diagnostic tools (Apex, GigaStor, Observer).

Assurance: Primarily consisting of the company’s growth products (location intelligence and NITRO mobile products) and mature products.

Optical Security and Performance Products

The company’s OSP segment leverages its core optical coating technologies and volume manufacturing capability to design, manufacture, and sell technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.

The company’s technologies targeting anti-counterfeiting applications include Optical Variable Pigment (OVP) and Optical Variable Magnetic Pigment (OVMP). OVP enables color-shifting effects, and OVMP enables depth and motion effects in addition to color-shifting effects. Both OVP and OVMP are formulated into inks used by banknote issuers and security printers worldwide for anti-counterfeiting applications on banknotes and other high-value documents. The company’s technologies are deployed on the banknotes of more than 100 countries.

Other OSP product lines include custom color solutions and spectral sensing. Custom color solutions include innovative special effects pigments for the automotive market. Spectral sensing solutions include handheld and process miniature near infrared spectrometers for pharmaceutical, agriculture, food, feed, and industrial applications.

Markets

The company’s OSP segment delivers overt and covert technologies to protect banknotes and documents of value against counterfeiting, with a primary focus on the currency market. OSP also produces precise, high-performance, optical thin-film coatings and light shaping optics capabilities for a variety of applications, including for example, optical filters and Engineered Diffusers, marketed under the trademark Engineered Diffusers, for 3D sensing applications.

Customers

OSP customers include SICPA Holding SA Company (SICPA), STMicroelectronics Holding N.V., Lockheed Martin Corporation and Seiko Epson Corporation.

The company has a strategic alliance with SICPA to market and sell its OVP and OVMP product lines for banknote anti-counterfeiting applications worldwide.

Competition

OSP competitors include providers of anti-counterfeiting technologies, such as Giesecke & Devrient, De La Rue plc; special-effect pigments, such as Merck KGA; coating companies, such as Nidek, Toppan and Toray; optics companies, such as Materion; and manufacturers of passive and other optical components, such as II-VI Inc. and AMS.

Offerings

The company’s OSP business provides innovative light management technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.

Anti-Counterfeiting: The company’s OVP and OVMP technologies are incorporated into inks used by many government and state-owned security printers worldwide for banknote protection. These technologies deliver a range of intuitive overt effects that enable the rapid verification of banknotes without requiring a specialized device or reader.

Consumer Electronics and Industrial: The company’s OSP business manufactures and sells optical filters for 3D sensing products that separate ambient light from incoming data to allow devices to be controlled by a person’s movements or gestures. The company’s Engineered Diffusers shape light emitted for 3D sensing applications and also enhance eye safety. The company provides multicavity and linear variable optical filters on a variety of substrates for applications, including thermal imaging, spectroscopy and pollution monitoring. The company also develops and manufactures miniature handheld and process near infrared spectrometers that leverage its linear variable optical filters for use in applications for agriculture, pharmaceutical and other markets.

Government: The company’s products are used in a variety of government and aerospace applications, including optics for inter-satellite laser communications, guidance systems, laser eye protection and night vision systems. These products, including coatings and optical filters, are optimized for each specific application.

Automotive: For product differentiation and brand enhancement, the company provides custom color solutions for a variety of applications using its ChromaFlair and SpectraFlair pigments to create color effects that emphasize body contours, create dynamic environments, or enhance products in motion. These pigments are added to paints, plastics or textiles for automotive, sports apparel, and other applications. Additionally, the company’s optical filters and Engineered Diffusers enable automotive sensing applications, including LiDAR and in-cabin monitoring.

Strategy

The company’s near-term strategy, and next transformation phase, will be more focused on growth, both organic and inorganic. Although the company is working to successfully implement its strategy, internal and/or external factors could impact its ability to meet any, or all, of its objectives.

Sales and Marketing

CSPs make up the majority of the company’s NSE revenues. The company also markets and sells products to NEMs, OEMs, enterprises, governmental organizations, distributors and strategic partners worldwide. The company has a dedicated sales force organized around each of the markets that it serves that works directly with customers’ executive, technical, manufacturing and purchasing personnel to determine design, performance and cost requirements. The company is also supported by a worldwide channel community, including its Velocity Solution Partners, who support its NSE segment.

OSP sales and marketing efforts are targeted primarily toward customers in the consumer electronics, government, automotive and industrial markets. The company has a dedicated direct global sales force focused on understanding customers’ requirements and building market awareness and acceptance of its products. The company’s direct sales force is complemented by a highly trained team of field applications engineers who assist customers in designing, testing and qualifying its products. The company markets its products and capabilities through attendance at trade shows, the production of promotional webinars, the development of samples and product demonstrations, participation in technical forums, select advertising and by developing customer partnerships.

A high level of support is a critical part of the company’s strategy to develop and maintain long-term collaborative relationships with its customers. The company develops innovative products by engaging its customers at the initial design phase and continue to build that relationship as its customers’ needs change and develop. Service and support are provided through the company’s offices and those of its partners worldwide.

Patents and Proprietary Rights

As of July 1, 2023, the company owned 956 U.S. patents and 1,892 foreign patents and had 1,155 patent applications pending throughout the world. The average age of the patents the company holds is 8.9 years, which is younger than the midpoint of the average 20-year life of a patent.

Seasonality

The company’s business is seasonal, as is typical for its competitors and many large companies. For NSE, revenue is typically higher in the second and fourth fiscal quarter, all else being equal. There is typically a modest end of calendar year customer spending budget that benefits the company’s second fiscal quarter. Telecom and cable spending budgets are typically set at the start of a new calendar year, thus with all else being equal, the company’s third fiscal quarter is NSE’s weakest revenue quarter with spending release benefiting its fourth fiscal quarter.

For its OSP business, given the company’s exposure to the consumer market, namely its 3D sensing products into the smartphone market, OSP revenue is expected to be seasonally higher in the first and second fiscal quarter followed by seasonal demand declines in the third and fourth fiscal quarters (year ended July 1, 2023).

History

The company was founded in 1923. It was incorporated in California in 1979 and reincorporated in Delaware in 1993. The company was formerly known as JDS Uniphase Corporation and changed its name to Viavi Solutions Inc. in 2015.