Ixia reaches yearly high point with acquisition of software. (Investments & Finance).

SHARES of Ixia Inc., a maker of testing systems for computer networks, rallied in the past week as investors cheered its acquisition of a software license that is expected to broaden its customer base.

Ixia's stock reached a 52-week high of $8.30 July 9 and closed at $8.20, up 18.5 percent for the week.

The company last week announced it had purchased a software system for testing computer networks for $17.5 million in cash from NetIQ Corp.

The deal gives Ixia the exclusive rights to distribute the software in North America, and more importantly, it allows the company to reprogram the software and sell it as its own product. The company also has the option to buy other NetIQ software after 18 months for $2.5 million.

The NetIQ software will be sold together with Ixia's main revenue generator, components that measure performance of computer networking hardware.

"Ixia lowered their risk in the enterprise sector by maldng the NetIQ technology proprietary," said Paul Knight, senior analyst at Thomas Weisel Partners, a San Francisco-based brokerage.

Knight upgraded the company's stock to outperform from "peer perform" after the deal was announced last week, seeing the deal as a sign the company is ready to wean itself from its largest customer, networking leader Cisco Systems Inc.

Ixia's customers--network equipment makers, telecommunications carriers and suppliers of network equipment microchips--use the company's testing system in developing new products.

The bursting of the Internet bubble in 2000 caused sales to network carriers to suffer, but Ixia remained profitable by increasing its investment in office network markets.

"We maintained revenue by diversifying our product line. Large companies are almost like carriers now in the complexity of their networks," said Errol Ginsberg, chief executive at Ixia.

Ginsberg said Ixia derives roughly 10 percent of its business from Cisco, the largest maker of network routers.

Corporate networks have been called upon to carry more complex software applications in recent years and testing tools have become a standard part of installing such equipment.

Recently, Ixia has attempted to make its testing hardware more competitive by adding software testing components. Prior to the NetIQ deal, Ixia began distributing software from Radview Software Ltd. that tests the ability of Web sites to handle difficult network conditions.

"Ixia has strengthened its product line with more advanced products and with the ability to test more complex network scenarios," said Timon Sloane, senior director of product management at Extreme Networks, a Santa Clam- based provider of network infrastructure equipment.

Extreme Networks, like Cisco, uses Ixia to test its new products before selling them to business and government customers.

That market is one Ixia is looking to move beyond.

Ford Motor Corp. and the Chicago Board of Trade both completed $100,000 deals this year with Ixia that called for a mix of hardware and software testing. Ford is using the Radview software to make sure its new Web servers can withstand massive traffic and sophisticated hacking.

The Chicago Board of Trade uses the NetIQ software to test the transmission of various financial transactions.

Ixia hopes to find more customers in the financial industry, and has opened sales offices in New York, Boston and Chicago.

Ixia was bankrolled by a $1.6 million investment from Jean-Claude Asscher, the chairman of Calabasas-based Tekelec, a maker of telecom network equipment. Asscher is also Ixia's chairman.

Ginsberg, Ixia's founder and its largest individual shareholder with a 12.3 percent stake, is a former engineering executive at Tekelec.

Ginsberg founded Ixia in 1997 after Ethernet hardware began to replace an older network technology known as SONET.

"As this became dominated by Cisco in the mid-1990s, I anticipated more sophisticated tools would be needed to measure network data," Ginsberg said.

Ethernet hardware sales have grown from generating roughly half of Ixia's revenues in 2000 to more than two-thirds last year.

[GRAPH OMITTED]

Stock Prices

July 9, 2002  $5.39
July 9, 2003  $8.20

Note: Table made from line graph

YEAR (Dec. 31)                  2002   2001

Revenue (millions)             $67.6  $77.2
Operating Expenses (millions)   51.7   47.6
Operating Income (millions)      2.6   12.9
Net Income (millions)            3.4    9.7
Earnings Per Share             $0.06  $0.16

RELATED ARTICLE: SUMMARY

Business: Network performance systems

Headquarters: Calabasas

CEO: Errol Ginsberg

Market Cap: $474.4 million

Dividend Yield: N/A*

Total Liabilities: $11.8 million

P/E Ratio: 135

Long-Term Debt: $0

* Company does not pay dividends.