Radvision: Another Quarter, Another Warning
Written by: Aaron Katsman | October 2, 2007
By Aaron Katsman
IsraelNewsletter.com
Radvision(RVSN), an innovator in the video-conferencing over IP, wireless and desktop markets, yesterday lowered their revenue forecast for the 3rd quarter. The stock, in turn, got squashed. In late July the company had forecasted revenues of $25 million( this was the first lowering of estimates as analysts had expected almost $27 million in revenue) and yesterday lowered expectations to $20.5 million. In Q3 ‘06 Radvision produced $23.6 million in revenues. Great! so we have have a company that keeps saying that they are in such a hot, video-conferencing, space, and they have shrinking revenues.
In a slightly bizarre comment, Boaz Raviv, Chief Executive Officer, commented: “We are disappointed by this setback in the third quarter but remain fully confident in our strategy and market position and in the growth prospects of videoconferencing in the enterprise and service provider markets.” The company added that, ” its revised third quarter outlook reflects a reduced revenue forecast for its Networking Business Unit (NBU) due to lower than expected sales both to the federal market and through its channels.”
Could it be that the company has neglected growing the business by getting new customers, and been relying too much on their relationship with Cisco(CSCO)?
About 3 weeks ago the stock was upgraded by analysts. Ouch! Since the upgrade the stock has gotten crushed, but I believe the argument that they made still holds water. The upgrade came on the heels of Tandberg ASA, a Radvision competitor, announcing that it would acquire a third video conferencing company, U.K.-based Codian Ltd., for $270 million, beating others to the punch. It was thought that Cisco was interested as well. Analysts viewed this deal as a win for Radvision as it soldifies their Cisco relationship. It’s great that the Cisco relationship is stronger than ever, but I go back to what I mentioned before. Don’t they need to try and grow business outside of Cisco? We all know the danger of having just one big customer. At $14.50 the stock looks interesting. Okay, so I said the same thing at $20, but now it’s even 25% cheaper. “Instant Rebate” Katsman can smell a good deal.
I will say that if we don’t start seeing some real growth, regardless of the Cisco relationship, I would be a seller, but let’s give it a bit more time.
Please see our Disclaimer HERE.
Disclosure: Author’s fund is long RVSN as of 10/2/07. Author has no positions in any other companies mentioned.
Like what you see? Sign up to receive daily updates from IsraelNewsletter here
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.
Share with others:
