By Zack Miller

www.IsraelNewsletter.com 

CIBC launched coverage of CEVA Inc. (CEVA), a leading DSP-core licensor and innovator. While many investors abroad may not know what DSP is, Israel has a long tradition in furthering DSP technology.

For Luddites like us, CIBC has included a DSP Industry primer. Outtakes are below:

The DSP Industry

What are DSPs?

Digital Signal Processors, DSPs, are specialized processors designed for standalone use, most often used for real-time processing of digital signals in a range of devices. DSPs are at the core of next generation personal communications, audio and video devices. They are fast, easy to program, extensively libraried and inexpensive.

What is driving their growth?

These devices will continue to drive high performance applications such as mobile handsets, digital cameras, IP set-top boxes, wireless communication devices, wired communication devices, digital portable audio and video players, and smart handheld devices.

In-house or Outsource?

With more complex designs and shorter design cycles it is no longer cost efficient, and becoming progressively more difficult, for most semiconductor companies and designers to develop the technology in-house. Therefore, companies increasingly rely on licensing other intellectual property, such as DSP cores, from third parties such as CEVA.

DSP Industry Revenue Growth

Driven by handset unit growth (as mobile technology moves to 3G and beyond)
and by increased usage in consumer electronics and automotive applications, revenues from DSP sales are expected to grow at a 14% CAGR through 2010, rising from $7.6 billion in 2005 to $14.8 billion in 2010.

DSP Market Share

The DSP market is highly concentrated, with five players controlling over 90% of the market in 2005.

1. TI held the No. 1 position in 2005 with 58% market share, with its leadership position in GSM, GPRS, and UMTS baseband chips and its strong ties to handset leader Nokia.
2. Freescale was No. 2 with 14% share in 2005, much of it derived from its relationship with its former parent company, Motorola.
3. Agere fell one spot to No. 3 as NEC discontinued Agere-based 3G platforms in 2004.
4. Rounding out the top five were Analog Devices
5. NXP/Philips, both with 6% share.

Other vendors include Toshiba, NEC, Cirrus Logic, Sunplus, and Fujitsu.

DSP Segmentation by Application

By end market, 75% of all DSP revenue is derived from the wireless market,
both from handsets and base-stations. Six percent is derived from the consumer
market, primarily for portables such as digital cameras, camcorders, and MP3
players as well as high-end consumer devices such as DVD recorders; 5% sell
into wireline, mostly broadband modems; 4% into computing applications; and
3% is derived from the automotive market.

Disclosure: The author’s fund currently holds no position in any of the companies mentioned here. That may change at any time. 

Please see our Disclaimer HERE.

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Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC. and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email zack@profile-financial.com

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Well, I guess the cat is now out of the proverbial bag with the Reuters story that the positive action we’ve seen in Ormat (ORA) over the past couple of days was businessman, Chaim Katzman’s (no relation to IsraelNewsletter.com’s Aaron Katsman) Gazit Inc. acquiring a 12% stake in Ormat worth about $168MM. See our previous coverage on what we assumed was going on at Ormat.

Interesting interview on Globes with Homi Shamir, Given Imaging’s (GIVN) recently appointed CEO. In the interview, he claims that GIVN is not being set up to be taken out by a larger entity. He also commits to 25-30% year-over-year revenue growth. Interesting read.

CIBC initiates on CEVA (CEVA), an interesting company with a market cap under $200MM. We’ll talk about this company in a later post.

TheMarker has launched the Gaydamak Index.  For those who don’t know, Arcadi Gaydamak is a Russian-Israeli billionaire (estimated to be worth about 4 Billion Pounds) who has stormed onto the Israeli political scene recently with some highly-publicized events (see his Wikipedia entry here).   He recently purchased 4 publicly traded Israeli firms as part of a foray into the capital markets here in Israel.  So far, the index is down 8%…

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By Aaron Katsman
www.IsraelNewsletter.com

Rumors are swirling that a foreign institution is eyeing Ormat (ORA) as a potential takeover target, or at least as a possible recipient of a large investment. Ormat shares surged over 11% in Tel Aviv trading earlier today on volume that was 9 times average. In US trading the stock is currently up about 6% on much heavier than average volume.

Colleague Zack Miller had a great post recently about Ormat’s dual personality. On the one hand the company is experiencing compressing margins and on the other, with the global warming craze, Ormat’s geothermal energy provides a way to increase renewable energy production. Zack also mentions that he foresees consolidation in the geothermal industry, and with Ormat continuing to add geothermal assets to its portfolio, this may make for an interesting target.

I think that Zack is right, and we will see consolidation in the industry. As long as global warming remains a fashionable cause, the investor demand for alternative forms of energy will remain strong. Tom Konrad has an informative post on SeekingAlpha, on investing in renewable energy. While I am no big believer in the global warming hysteria, as long as the fad remains in its infancy, money can be made. If correct, Ormat investors may see large gains ahead.

Disclosure: Author’s fund is long ORA as of 6/13/07. He does not hold positions in the other companies listed.

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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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By Zack Miller

www.IsraelNewsletter.com 

Read yesterday’s research update on Teva’s (TEVA) win versus on a preliminary injunction filed by Novartis (NVS). This is good news for Teva and warranted a write-up on the events leading up to yesterday’s news.

5/18/07: Teva received final approval and launched its generic version of Lotrel caps, beginning the ticking clock for Teva’s 180-day exclusivity.

5/19: Judge Cavanaugh of the U.S. District Court, District of New Jersey granted Novartis’s motion for an emergency temporary restraining order (TRO) and recall order.

5/21: Judge Cavanaugh vacated his TRO and recall order; instead, Judge Cavanaugh ordered both Teva and Novartis not to further sell or offer generic product beyond what has already been commercialized, at least until the status call held 5/29/07.
In typical Israeli fashion, Teva continues to manufacture and import product to America.

5/29: Judge Ackerman extended the 5/21 restraining order until further notice. In
addition, the judge stated that “the parties may confidently expect an opinion from this court one week from today.” Also on the 5/29 status call, the judge stated that he would decide the preliinary injunction motion based on the papers and briefs filed (no oral arguments), and therefore canceled the previously scheduled PI hearing on 7/11/07.

Lehman Brothers’ Analyst Richard Silver is excited about TEVA’s win. He believes, “generic Lotrel has the potential to remain a very attractive earnings contributor well beyond Teva’s 180-day exclusivity owing to the regulatory and legal status of potential future generic competitors, which may not arrive until mid-2008, or later…”

Please see our Disclaimer HERE.

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Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC. and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email zack@profile-financial.com

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