Keysight Dominates Communications Testing With a Broad and Comprehensive Portfolio of Solutions

Business Strategy & Outlook

The Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G market. The Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. A comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers. The Keysight can reduce time to market for customers more than competitors as a result of its end-to-end portfolio of premium offerings. The Keysight’s leadership stems from its large investment in R&D–annually doubling that of the nearest competitor–that it focuses on the communications market. The hefty organic and inorganic investment has led to Keysight leading the market pivot toward software and credit its unmatched portfolio breadth for its top market share. A broad portfolio that layers software and services on top of hardware embeds Keysight into customer workflows and entrenches customers in its ecosystem. A broad, sticky portfolio underpins the wide economic moat rating for the firm. Keysight should continue to dominate the communications market, especially as it pivots toward more complex 5G testing in which it is already demonstrating proficiency. The market share gains for Keysight and think greater complexity in 5G networks will expand its wallet share at customers–both of which would result in continued outperformance of the underlying testing market. The firm to continue shifting customers to subscription billing for its software and services and think it will complement continued organic investment with strategic M&A to further build out its software portfolio. The growing mix of software and services to expand margins. Finally, the Keysight to continue generating impressive cash flow and to send a large proportion of it back to shareholders.

Financial Strengths

The Keysight Technologies to continue generating impressive cash flow, which will fund organic and inorganic investment as well as returns to shareholders. As of Oct. 31, 2021, the firm held a net cash position, with $2.1 billion in cash on hand and $1.8 billion in gross debt. The firm will stay leveraged–especially with its current long-term maturities–but pay off its debt as it comes due. The firm also has an untapped $450 million revolver that expires in February 2022.The Keysight to continue its record of strong cash generation. The firm has converted well over 100% of its net income into free cash flow since 2017, and this pattern to carry forward through the forecast. As per forecast over 100% free cash flow conversion through 2026 and anticipate more than $1 billion in free cash flow annually during this period.

Bulls Say

The Keysight’s large research and development budget has created a competitively advantaged portfolio for communications testing that one doesn’t expect other firms would be able to easily replicate.
Keysight holds a majority share of the 5G testing market, which will elicit strong top-line growth and expand profitability over the next five years.
The Keysight to continue converting over 100% of net income into free cash flow, and predict it to generate over $1 billion in free cash flow annually over the forecast.

Company Description

Keysight Technologies is a leader in the field of testing and measurement, helping electronics OEMs and suppliers alike bring products to market to fit industry standards and specifications. Keysight specializes in the communications market, but also supplies into the government, automotive, industrial, and semiconductor manufacturing markets. Keysight’s solutions include testing tools, analytical software, and services. The firm’s stated objective is to reduce time to market and improve efficiency at its more than 30,000 customers.

(Source: Morningstar)

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