Aaron Katsman
www.IsraelNewsletter.com

Labor day weekend signals both the end of summer and back to school. In fact my oldest daughter started first grade today, and if any of you care, she had a great day. But for most of you, in a few days you will be sending your children off to school, and will start having meetings with teachers and hear how much potential your child has.  With the recent passing of former NBA coach Butch Van Breda Koff, I am reminded of one of the most classic quotes regarding “potential” that I ever came across. (I am pretty sure he said this; keep in mind, though, it was twenty-eight years ago. If it was someone else, then my apologies.) When a reporter asked him about the potential of a young player who spent most of his time on the bench, Van Breda Koff answered, “potential is a french word meaning that you aren’t worth a damn yet.” I consider myself an expert of sorts on this topic, because all my parents ever heard from my teachers, was that if I would just study and apply myself, I would do great in school. That strategy never worked well for me. Case in point, the night before my class spelling bee in 4th grade. My mother, of blessed memory, and my siblings all were trying to get me to practice spelling, but Monday Night Football was on. To make a long story short, I won the contest without studying. Well, as a tribute to the former coach, and with schools about to re-open, IsraelNewsletter would like to present two stocks that so far have disappointed investors, but are full of potential.

Radvision (RVSN), which specializes in video conferencing over IP and 3G networks, has enjoyed a very cozy relationship with Cisco (CSCO) over the years, and as a result, they produced some nice growth. Unfortunately, while last quarter’s numbers were as expected, Radvision forecast third-quarter per-share earnings of 16 cents, or 23 cents excluding items, on revenue of $25 million. Analysts were looking for a per-share profit of 26 cents on revenue of $26.6 million, so the stock has gotten pummled. Once again we have a company with cutting edge technology that can’t seem to produce consistent numbers. At current levels, the stock looks attractive and, as always, the potential of Cisco buying them out is very real. Keep in mind that Cisco CEO John Chambers recalled that he closed the WebEX acquisition,  for $2.9 billion, through a ten day marathon of meetings, which he conducted by conference call using Radvision technology, without leaving his office. Chambers went on to say that he is spared the need to travel so much because of this technology. John, do us a favor and buy them already!

Next comes Metalink (MTLK), who makes WiFi chips for the wireless, digital home. About a month and a half ago they announced that their chipset had received WiFi certified 802.11n draft 2.0 Certification. Since I took physics for poets in university I can’t exectly explain what this means, but I can tell you that this is a very important milestone for the company. It means that they have become the industry standard. Metalink’s Chairman and CEO, Tzvika Shukhman, said, “Over the past two years, we have succeeded in positioning our WLANPlus as the wireless home networking industry’s best-of-breed chipset. The recent certification process started by the Wi-Fi Alliance, followed rapidly by the certification of our WLANPlus chipsets, is a major milestone for the industry and for Metalink. The transition of the market to the 802.11n standard represents a major disruption in the Wi-Fi chipset market. By leveraging on the proven superiority of our technology, the strong partnerships we have established with industry leaders, and the design-in momentum we have established, we expect to become a significant player in this huge market.”

It seems that they should start signing major deals by the end of the 3rd or early 4th quarter, and I would expect the stock, which is 30% off its’ 52 week high to make a strong move to the upside.

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Disclosure: Author has a position in RVSN of 8/31/07. Author has no holdings in any other stock mentioned.

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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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