Aaron Katsman
IsraelNewsletter.com

The Israel financial daily Globes is reporting that email animation company Incredimail (MAIL) wants to reprice options for 5 senior managers. The company which works in the space of email animation, clearly has a problem distinguishing between reality and fiction. The stock is down more than 40% YTD, there was a management shakeup, issues with Google (GOOG), and senior management wants to reprice their options? I don’t know, are they planning to sell the company for some kind of premium and attempt to make a boatload of money on the transaction, while all investors will see is a slightly lower tax loss?

According to the article: “The options are held by Incredimail CEO and director Ofer Adler, who is the company’s largest shareholder, president Yaron Adler, the company’s second-largest shareholder, chairwoman Tamar Gottlieb, and directors Yair Zadik and Gittit Guberman.”

I would understand if the company wanted to reprice employee stock options (ESOP) as they would want to retain their employees, but senior management? My hunch is that most investors wouldn’t mind if senior management was let go. Why should these executives profit when investors have seen tremendous losses? Why should 2 directors and the chairwoman get their options repriced? (Continue »)

Share with others:

Aaron Katsman
www.IsraelNewsletter.com

What is going on at Incredimail(MAIL)? the last time we heard from the company was to reassure investors that they had worked out their problems with Google(GOOG), and that they were buying back stock. Well that was 2 weeks ago. In internet time 2 weeks is a lifetime.

Today the company announced a change at CEO. Yaron Adler is stepping down and being replaced by his brother Ofer, co-founder and current Chief Product Officer.

Tami Gottlieb, Chairperson of the Company’s board of directors, commented: “We are grateful to Yaron for his vision, leadership, enthusiasm and determination, bringing together with Ofer the Company so far. We accept Yaron’s wish to allocate more time to other endeavors, resulting in a lesser involvement in the Company’s operations, and are thankful for his continued availability and advice, which we believe will contribute to the Company’s future growth and success.”

The whole thing sounds weird, especially the timing of the recent events. We interviewed Yaron a few months ago, and actually had a conference call with him 2 weeks ago, and he gave no indication whatsoever that he wanted to “allocate more time to other endeavors.”

The fact is that in our conference call, absolutely no new information was shed about the Google issue. The call was just a rehash of the press release. While we had our differences about whether the company should be an acquirer or an acquiree, we really liked Yaron and respected his creative vision, and we wish him well.

Unfortunately for investors the total lack of transparency is shocking. This is a publicly traded company, not some mickey mouse operation. We at Israelnewsletter.com are calling for the company to come clean about the whole Google issue, as well as the sudden change in management.

Disclosure: Author’s has no position in any stock mentioned as of 2/5/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is 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:

NEW! This interview, in its entirety, was published for the subscribers of Israel Opportunity Investor, our new subscription product providing investors with the best ideas in Israeli stocks trading in the U.S. To subscribe, or receive a sample issue and our recently published white paper, go to www.israelnewsletter.com

Tell us about your company.

Yaron Adler, Founder and CEO: Incredimail (Nasdaq: MAIL) is an Israeli company, founded in late 1999. Incredimail is our flagship product for email. The product allows users to customize and personalize traditional email communication, in a way that brings life and excitement to applications they regularly use. We enable you to send emails with 3D effects, funny animations and customized backgrounds. We aren’t re-inventing the wheel. We take existing applications, like email, and make them fun to use.

Giving away free content is not a great business. What’s the business model?

YA: The business model is based on what I like to call “the large numbers game.” We are working hard on two fronts: we are working to bring millions of new users to our products and working on how to best monetize them. We started by using viral marketing to promote our content. Every email sent from Incredimail has a link included on the bottom to bring the recipient of that email to our website. This strategy has worked very well. To date we have 80 million users of which 11 million are active (defined as at least 1 usage event per quarter). Over 300 million emails are sent per month with Incredimail. We get 300,000 new visits to our website daily just from the viral links we include in our emails.

How are your revenues?

YA: For the first nine months of 2007 revenues increased 94% to $13.3 million from $6.9 million for the first nine months of 2006. Net income for the nine-month period was $1.8 million versus $1.6 million for the same period in ’06. Again, we’re focused on two things: accelerating growth to get more users plus trying to better monetize our users. To do this, we need increased R&D to make new products for our users to interact with and we need to improve our revenue sources.

You’ve said search revenues are going to play a bigger role in your revenue model. Can you explain how?

YA: You can grow search revenues in two ways: more searches + more profitable searches. We’re just in the early stages of doing this. We’re directing searches to our search engine (powered by Google) by suggesting to our users to replace their homepage with MyStart page with value added Incredimail content. A soon-to-be-released browser toolbar increases searches away from Incredimail. We can find a way to promote suggested searches and ultimately, as our search traffic increases, negotiate a better deal with Google.

We’ve just started optimizing our search revenues. Our growth continues to accelerate, driven by increased revenues from all streams: products and subscriptions on the one hand, which used to be our big revenue driver, and advertising and search on the other hand, which now accounts for almost 46% of our revenue.

How are your content deals with movie studios coming along?

*****************************************

NEW! To read this interview in its entirety, subscribe to Israel Opportunity Investor. In addition to reading what else Incredimail has in store, you’ll receive monthly stock picks, learn what hedge funds/asset managers are investing into in Israel, read CEO interviews, and hear what leading edge thought-leaders are saying about the next big market opportunities in Israel. To subscribe, go to www.israelnewsletter.com and click on ‘Subscribe’

Share with others:

Aaron Katsman
www.IsraelNewsletter.com

Before we get started, on behalf of the entire Israel Newsletter team, I would like to send out a big Mazel Tov (congratulations) to Zack “Facebook” Miller and his wife Melinda, on the birth of a spankin’ new baby boy born yesterday evening. Both mother and baby are doing well, from what I understand. Just a warning, if Zack gets a little cranky in some of his postings we will just attribute it to his lack of sleep!

Yesterday, Smallcap Investor, had an interesting post on IncrediMail (MAIL) and the big spike up in the stock on Tuesday of 17%. Smallcap Investor spoke with executive vice president Jeff Holzmann and he said that he thinks the stock’s surge can be attributed to the company’s robust earnings reported on August 14. “Because we’re a small company, it takes a while for our stock to get on investors’ radar screens,” said Holzmann. “There’s a bit of a lag effect.”

Huh?

Wouldn’t it be better to say that he knows of no reason for the stock move? From the earnings release through this past Monday the stock actually dropped 20%. Then, the theory goes, a week after earnings, suddenly radar screens started flashing that IncrediMail had good earnings and investors pushed up the price.

Sounds a little far fetched.

I have another possibility. A well-known newsletter (which will remain nameless) blasted an email out over this past weekend titled “The Next Google’s In: Israel” and went on to describe a company that sure sounds like IncrediMail without mentioning it by name.

“Our tiny Tel-Aviv company trades on the Nasdaq at around $7 today, down from $10 after the recent sub-prime panic, but up from $4 about a year ago.

The business model is now advertising-driven as well as subscription-based. Ad revenue is growing 7-fold over last year.

In short, our Israeli company makes your Facebook world more personal, more secure, easier to use and more intuitive.

WILL FACEBOOK BUY OUR TEL-AVIV FLEDGLING?

I’d be surprised if they didn’t, but I’d be just as glad if Facebook’s business drove our $7 stock to $100 and simply gave us that 400% profit we all missed out on in Google.”

Sounds like IncrediMail to me. Even more, it sure sounds like Zack’s post of a few weeks ago vis-a-vis Facebook. In fact Zack’s scoop about potential suitors for IncrediMail was picked up by Reuters, who asked the company and the company actually confirmed that they have been approached by many firms.

Way to go Zack! Congrats on the baby and way to go on the IncrediMail scoop.

Disclosure: Author has no position in MAIL as of 8/23/07.

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: