A recent stock analysis of Indian RA vendors Subex highlights that their net profitability will be enhanced by the restructuring of their debts. However, their results remain vulnerable to the impact of currency fluctuations. See here for the full analysis by the Indian Economic Times.
The analysis is good, identifying the key trends in the company’s performance. However, the reasons given for Subex’s ‘stagnant’ sales are questionable. The article attributes the plateauing of revenue growth to ‘turbulence in the global telecom sector’. A fairer assessment is that Subex’s niche market has shifted rapidly from growth to saturation. Put simply, most telcos have now procured the kind of RA and FMS systems that Subex supplies. In this context, Subex’s increased emphasis on selling managed services is not just a good way of riding out any short-term doldrums in telecoms spending, but is vital to their long-term prosperity.
Meanwhile, Subex has announced another ‘multi-million dollar’ contract to supply its ROC RA and FMS, this time to an unnamed Middle East fixed and mobile telco. You can see the press release here. The description of Subex’s revenues as ‘stagnant’ overlooks recent trends in sales announcements. In short, over the last year, Subex has announced more large deals than all their major rivals put together. 2010 saw a notable reduction in sales announcements compared to the gold rush years of RA roll-out, and this has continued into 2011. It would not surprise me if, in 2011, one of the vendors with weaker financial backing cracks under the strain of diminishing revenues. In contrast, Subex has recovered from their darkest days, and is here to stay.