For many years, the poster child for Israeli ingenuity was clearly Given Imaging (GIVN). The company which produces a disposable, miniature video camera contained in a capsule, which is used for gastrointestinal diagnosis, is well-known for this ground-breaking technology, but has disappointed investors with trouble growing sales aggressively. The hype of the technology has been way ahead of the company’s actual execution of their business model. After their earnings report, that may have changed.

The company reported Q2 revenue off $33.1 million, an increase of 19% of last years Q2 and a 22% increase over Q1 ‘08. Gross margins remained strong coming in at 75.5%, and net profit came in at $0.09 a share, and the company raised guidance for the rest of ‘08.

Commenting in the press release, CEO Homi Shamir said, “We are very pleased with our robust second quarter financial results. “Expanding market penetration and stronger global demand for PillCam SB in our three operating regions helped increase sales by 19%. We are especially pleased to be back on track with revenue growth in the Americas region which increased 25% on a sequential basis while PillCam reorders increased 28% sequentially in the region. In the first six months of 2008 total revenues grew 18.3% over the same period last year, which positions us to meet our 2008 revenue guidance. Looking ahead, we are confident in our ability to expand the global market for PillCam SB, as well as to develop the market for our other next generation PillCam products.”

Maybe just maybe the company has turned the corner.

Disclosure: Author’s fund has a position in GIVN. He has no position in any other stock mentioned as of 8/07/08.

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.

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The entire interview with Cliff Goldstein of AMIDEX is part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the product and the opportunities we cover at www.israelnewsletter.com.

Can you tell us how AMIDEX got started?
Cliff Goldstein: I’m a lawyer by trade. In 1998 I saw some really compelling advances being made by Israeli technology companies. I decided to go to brokerage firms to see if I could find a way to invest in this ingenuity. I was specifically looking for a mutual fund that invested in Israeli companies. There wasn’t anything out there. After speaking directly to brokers, it was also clear to me that brokers themselves weren’t really knowledgeable about what was occurring on the ground in Israel. I then went to Israeli Economic Mission to the U.S. to complain about the lack of retail investment opportunities.

Why aren’t there Israeli investment products in the U.S.?
CG: I think part of the problem was that there was no benchmark for those Israeli companies trading in the U.S. There is really no comprehensive index because a significant portion of Israeli marketcap trades in the U.S. and in Tel Aviv. There were indices for the Tel Aviv Stock Exchange (TASE) but not one that included New York as well.We decided in 1999 that we could address this barrier and create our own index that included both U.S. and Tel Aviv listed Israeli companies. As this was a time before Exchange Traded Funds (ETFs) had really developed, we borrowed from the protocols developed by the WEB products. We created an index that included 60% of total Israeli marketcap. To get here, we needed 35 companies to get 60% of the total universe. Most of the companies in the initial index were Israeli companies that traded in the U.S. Given what’s transpired over the past couple of years in the U.S. and the growth of Israeli  businesses, we now see the inverse: about 60% of our firms trade in Tel Aviv and the minority in the U.S. It was these 35 companies that comprised the original AMIDEX35. We could then back test historically and when speaking to investors, this really looked good from a performance point of view. When we launched the actual fund in June of 1999, 68% of the companies traded in the U.S. and the remainder in Israel. We thought that the volatility and risk of political disruption would be highest in Israel so we were comfortable with this mix. It’s interesting to think that soon after we had the meltdown of the dot com boom. (Continue »)

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Aaron Katsman
www.IsraelNewsletter.com

Yesterday’s news that the Israeli ‘pill in a camera’ company Given Imaging (GIVN) has settled patent litigation with Olympus (OCPNY.pk), with the Japanese company having to pay Given $2.3 million.

According to the Marketwatch report: “Under the terms, Olympus will pay Given $2.3 million. The companies will cross-license existing patents to each other without royalty payments and agreed to work out royalty payments for future patents. And they’ll cooperate in efforts to develop the market for products.”

I think it’s interesting to note that part of the settlement calls for ‘cooperation’ in developing markets for the products. It’s not often that you see competitors agree in a settlement to work together for a common goal.

The glaring question must be whether we are about to see Given Imaging acquired by Olympus? Only time will tell, but it would make an interesting match. As someone who dabbles in matchmaking in his spare time, I can tell you that both companies posses complementary qualities that would greatly help the other party. Given posses the technological know-how and Olympus has the distribution and marketing network. This sure sounds like a match made in heaven.

For disappointed Given Imaging investors who have continued losing money on their investment, Olympus may just be the white knight that saves the day.

Disclosure: Author’s fund has a position in GIVN, fund has no position in any other stock mentioned as of 4/23/08.

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.

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