Aaron Katsman
www.IsraelNewsletter.com

Zoran (ZRAN), a developer and marketer of integrated circuit cores (ICs) and embedded software for DVDs, digital cameras, and set-top boxes, is getting nailed today on the back of an analyst downgrade. A Deutsche Bank analyst cut his price target for the company down to $20. In lowering his rating on the chip industry analyst Arnab Chanda said, “While the stocks have declined dramatically in the fourth quarter and year to date, we do believe that for the vast majority of companies, the next six months is not likely to yield positive returns.”

Well, I disagree. The stock has gotten hit. Since the end of October the shares are down 38%. Now he decides to downgrade the stock? Thanks for playing.

In one of the best named posts we have had here at IOI my colleague Zack “Let’s get Jiggy” Miller has a great analysis of all that’s right with Zoran. One potential catalyst is that in February 2009, the US will turn off analog TV broadcasts, forcing the conversion to digital TV. In order to receive the new signals, the installed base of analog TVs will need to connect to an ATSC converter box. Congress has approved a coupon program such that each qualifying household will receive two $40 coupons to defray the cost of buying a converter box. Management estimates that the number of converter boxes sold ahead of the turnoff could reach 20-25 million units. Zoran typically sees a high-single digit dollar content off of these units.

At under $15 a share this looks like an interesting long-term play.

Disclosure: Author’s fund has no position in any stock mentioned as of 1/15/08.

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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.

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