Buried within Viavi Solutions' recent earnings call lies a potential goldmine that seems to have escaped the notice of Wall Street analysts. While everyone is fixated on the anemic spending of telecom service providers, a small but rapidly growing business segment within Viavi's Network Enablement division (NSE) is quietly exceeding expectations: **Positioning, Navigation, and Timing (PNT).** Could this be Viavi's secret weapon for weathering the telecom storm and unlocking future growth?

Let's unpack the situation. Viavi, like many companies in the telecom equipment space, is facing a challenging environment. Service providers are tightening their belts, delaying upgrades, and "sweating assets" – a polite way of saying they're squeezing every last drop of life out of their existing equipment. This has led to a slump in demand for Viavi's core field instrumentation products, dragging down NSE revenue and putting pressure on margins.

However, amidst this gloom, Viavi's PNT business shines. While representing a relatively small portion of NSE's overall revenue, PNT has consistently demonstrated robust growth, driven by increasing demand from the aerospace and defense sector. This is not just any ordinary growth; it's a growth born from necessity.

The world has witnessed a stark rise in GPS signal interference, particularly in regions like Europe and the Middle East. These disruptions, whether intentional or accidental, highlight a critical vulnerability: our reliance on a single, easily-disrupted system for positioning, navigation, and timing.

This vulnerability has sent ripples of concern throughout industries that depend on precise and reliable PNT data. Aircraft manufacturers, defense contractors, and even those involved in critical infrastructure and public safety communications are scrambling for solutions. They need systems that can withstand interference, provide accurate data, and ensure operational continuity, even in the face of GPS disruptions.

Enter Viavi's PNT technology. The company's cutting-edge solutions are designed to address these very concerns. They offer backup and alternative navigation systems, spoofing detection, and robust timing solutions, providing a much-needed layer of resilience against GPS vulnerabilities.

Viavi's strategic acquisition of Jackson Labs, a leader in PNT test and measurement equipment, further bolsters its capabilities. This acquisition, coupled with the company's own innovative product development, has positioned Viavi as a frontrunner in the rapidly evolving PNT market.

While Wall Street may be focused on the short-term headwinds facing the broader telecom sector, Viavi's PNT business is strategically positioned to capitalize on a long-term trend: the growing need for PNT resilience.

Hypothesis: The PNT Impact

**If Viavi can leverage its PNT expertise to capture a significant share of this burgeoning market, the impact on its financial performance could be substantial.**

Consider these factors:

Even if PNT currently represents only a small percentage of NSE revenue (let's say 5%), a doubling or tripling of this business could significantly offset the weakness in other areas.

With its high margins and recurring revenue streams from service and support contracts, PNT could significantly boost NSE profitability and overall EPS.

As a leader in PNT solutions, Viavi could command a price premium for its products, further enhancing profitability.

Revenue Breakdown: OSP vs NSE

The following chart illustrates the revenue breakdown between Viavi's OSP and NSE divisions, based on data from the Q3 2024 earnings call.

Viavi Financial Highlights

It's still early days for the PNT market, but the potential is vast. The demand for resilient PNT solutions is only set to grow as the world grapples with increasing geopolitical tensions, cyber threats, and the need to secure critical infrastructure.

Perhaps Wall Street hasn't yet fully grasped the significance of Viavi's PNT business. But for those who see the bigger picture, it represents a potentially lucrative opportunity, a hidden gem waiting to be unearthed. Could this be the key to not only weathering the current telecom slump but also achieving long-term, sustainable growth? Only time will tell, but the signs are promising.

"**Fun Fact:** Viavi's technology isn't just keeping planes and networks running smoothly, it's also protecting your wallet! The company's OSP segment provides anti-counterfeiting technology for currency, passports, and other valuable documents, helping to thwart criminals and safeguard economies worldwide."