It’s been a wild and woolly week for stocks in general and even more so for Israeli companies. We’ve seen some disappointing earnings across a broad swath of stocks and even the mighty have felt some pressure.
Let’s start with Alvarion (ALVR). Even after the Cisco purchase of WiMax competitor, Navini, the stock has had a hard go of it and even received a downgrade by Merriman, Curhan, et al. IsraelNewsletter’s Katsman, though, is still very positive on the name. Read his recent post here. Before Cisco (CSCO) officially announced its takeover of Navini, I posited that it would be better served by buying ALVR. Read that article here.
Commtouch (CTCH) out with numbers.
Radvision (RVSN) stinks up the joint. Even my colleague, Aaron “Buy Everything” Katsman has lost faith in the firm. See his recent capitulation here.
Magal (MAGS) Systems gets an order.
RRSat (RRST) reported last week.
Partner (PTNR) sees a lift from rising revenues.
Answers.com (ANSW) reports really strong traffic growth in its new WikiAnswers product.
Laggard BigBand Networks (BBND) terminates its CMTS business. I wrote on BloggingStocks about the future of cable TV and how BBND plays into the thesis.
ClickSoftware (CKSW) traded down big after reporting OK earnings. Read why Katsman smells an opportunity in this name.
Microcap Cimatron (CIMT) out with earnings and some info about its plans for China. Read some excerpts from the conference call.
012 Smile.Communications (SMLC) floated this week. I posted on the offering here.
It’s a holiday-shortened week, so let’s jump right in.
On a macro front, it’s interesting to read that the G-30, an international group established in 1978 and composed of very senior representatives of private, public and academic circles, will be holding their 2008 plenary in Israel. Israel’s own Bank of Israel Governor, Stanley Fischer, will be hosting the group as part of Israel’s 60th anniversary celebrations.
Interesting interview of BigBand Network’s (BBND) CEO, Amir Bassan-Eshkenazi, and how he’s positioning the company to take on Cisco (CSCO). Read last week’s coverage of BigBand and why their positioning in the CMTS market may mean great things as they help determine the future of video delivery.
Google Israel (GOOG) is at it again. Now, they’re expanding into an additional 60m on the 21st floor of the Levinstein Building in Tel Aviv. Read about what IsraelNewsletter thinks is going on at Google Israel here.
Teva (TEVA) gets OK to sell generic version of Protonix. Although the Israeli generic powerhouse won the right to sell a version of Wyeth’s (WYE) Protonix, it may choose to hold off doing so until a full decision comes this Wednesday.
The Butler Group out with a new report saying that many medium- to large-sized ISVs (Independent Software Vendors) would benefit by leveraging Ness Technologies’ (NSTC) Managed Labs Offshore Delivery Model. Working with Ness allows ISVs to continue to beef up and speed up R&D while keeping costs manageable, said Butler. Read the whole report here. Check out IsraelNewsletter’s 4 Reasons to Go Long Ness Technologies as well.
TheStreet.com tries to decipher what’s going on at Medis Technologies (MDTL) through their options action.
Read IsraelNewsletter’s coverage of Blue Square-Israel’s (BSI) new foray into organic and health food.
In spite (because of??) all the M&A hullabaloo regarding ECI’s (ECIL) takeover by the Swarth Group, ECI wins a nice deal with India’s Bharti Airtel. Read what IsraelNewsletter has had to say about the impending ECI deal.
For those of us following BigBand Networks (BBND) undulations, we’re trying to get a handle on what’s going on these days. After IPO-ing in March and seeing a strong run-up in shares, the company has seen a fast erosion of its share price, now down 38% since floating.
Astute news junkies will have seen the LightReading articles over the past couple of weeks with some confusing and seemingly contradictory information on the de facto network architecture provider for digital simulcast.
The first article, published on August 24th and entitled BigBand Reduces CTMS Staff, mentions speculation by a ThinkEquity analyst, Anton Wahlman, that BigBand is reducing staff in their Cable Modem Termination System group or, CMTS, in the Boston area. BigBand’s CMTS business accounts for roughly 10% of their total revenues while their bread and butter business, the Digital Video business, accounts for the rest.
In his note, Wahlman said, “This should not be surprising, but perhaps still noteworthy because it does call into question the viability of the CMTS business.” BBND competes with the Arris Group (ARRS), Cisco (CSCO) and Motorola (MOT) in this business and only has about a 10% market share, which seems to be eroding.
On August 28th, another LightReading article was published, this time entitled “BigBand Not Abandoning CMTS” in which the company itself rebuffed such a suggestion that they were squirming out of the biz.
Rather, to answer the question about whether or not BigBand Networks is abandoning CMTS, the answer is, like many other classical Jewish questions, “yes” and “no.”
It sounds like what the company is saying is that while headcount has been reduced in their CMTS group, those bodies have been “[re]focusing those efforts on Docsis 3.0 and an emerging modular architecture (called, M-CMTS) that allows cable operators to scale upstream and downstream capacity independently.”
In other words, BigBand is sticking with an ailing business but repurposing it by trying to find a market it can compete in and not run head-on into Arris, Cisco and Motorola. BigBand will focus its CMTS efforts on Docsis 3.0 and the M-CMTS, which breaks out functions like downstream and upstream capacity and packet processing, instead of packing these functions together in one chassis.
This structure, in essence, pairs together BBND’s Cuda 12000 CMTS with its edge QAM — with the Cuda chassis taking care of the upstream and the edge QAM handling downstream.
What are investors supposed to make of this?
I think it’s a good sign — BigBand is focusing on developing some really interesting technology. This technology, if assimilated into its roster of clients that include 9 of the top 10 service providers (like Cox and Time Warner Cable).
Imagine a cable architecture that allows a user to receive infinite programming, including web content and H-D, on virtually infinite spectrum. Imagine a cable system with the ability to send individual programs and advertisements to users, giving operators the ability to tailor content and advertising packages for individual subscribers.
In sum, BBND is working on the system to co-opt IPTV, Cable Operators’ worst nightmare and most threatening competitor. The stock is cheap based on 2X 2008 revenues and 21x EPS for 2008.
BigBand is currently going through a technology and marketing maturation process and it may take a couple of quarters to start making a Big Bang again. I’m keeping my eye on it.
Disclosure: Author’s fund does not have a position in any of the stocks mentioned here as of 8/30/07.
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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
