IOI’s Zack Miller and Aaron Katsman were interviewed by CNBC’s Squawk Box. CNBC is here in Israel celebrating Israel’s 60th Birthday. See the video here.
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Aaron Katsman
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News that Time Warner Cable (TWC) and Comcast (CMCSA) are discussing a plan to provide funding for a national wireless network using WiMax technology, has sent shares of the IsraeliCeragon (CRNT) surging higher. According to the report, “Sprint (S) and Clearwire (CLWR) have been working for months to cooperate on a WiMax rollout and are now trying to raise at least $3 billion for a joint venture, the report said. Under the plan the parties are reviewing, Comcast would put as much as $1 billion into the venture, with No. 2 operator Time Warner Cable adding $500 million.
Why is this such good news for Ceragon? Because Ceragon, the leading provider of wireless backhaul solutions for IP-centric networks, has been rumoured to be a big winner if Sprint were to go ahead and build out the WiMax network. Ceragon stock has gotten crushed over the last few months, as Sprint bailed on their deal with Clearwire. The fact that we are again talking about a nationwide U.S. WiMax network, is great news for Ceragon.
For investors, if we hear some more good news from the company coming on the heels of this report, it could potentially send Ceragon stock back to the highs made last year. It’s important to note that this is not a stock for the weak of heart, but for volatility lovers, this may be a company to take a look at.
Disclosure: Author’s fund holds a position in CRNT. He holds no position in any other stock mentioned as of 3/26/08.
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.
On the back of the wireless spectrum auction results, I just wanted to share some ideas I had penned, oh about 2 months ago about how to make sense of the rapid changes going on in the wireless industry. More specifically, what I believe is happening is the evolution from Internet and wireless as 2 separate entities to a more unified, Wireless Internet. We’re still just in the putting-the-infrastructure-pieces-together stage.
I think it’s best to describe the trends briefly and then see who stands to benefits from such trends:
The opening of networks
As wireless networks begin to open up (this will take time before it really happens), the carriers should stand to benefit from the ability to monetize their networks via new revenues from non-subscribers. Much like the interconnect fees, the consumer will end up paying more in the short-run and all the open networks will win in 2 ways: you’ll have to open up to compete , monetizing cross network traffic
Apple (Nasdaq:AAPL) right now has made a commitment to only one network in the US. The device is so compelling that it may not matter but if the device ever loses some of its luster, Apple may need to think about making its device work on other networks.
Qualcom (Nasdaq: QCOM) loses. As networks open up, it will be hard for Qualcom to continue to collect its royalties on its closed-technology. Competitive pressures at both the device level and the network level will push Qualcom to find other revenue streams.
Google (Nasdaq: GOOG) wins. I never believed Google was bidding to win wireless spectrum. Instead of owning spectrum, Google has already won by pushing/lobbying the opening of competitive networks. Android and the Open Handset Alliance will allow Google to run the advertising OS of the mobile industry, just like it has become the Web’s Advertising OS.
Sprint seeking a strategy and what’s really happening in WiMAX
I see Sprint’s reworking of its WiMAX strategy as less a call on WiMAX and more specific to the Sprint situation. Sprint has internal issues it needs to shore up before it can think about any new audacious network rollouts. The fact that Ceragon (Nasdaq: CRNT) and Alvarion (Nasdaq: ALVR) are just continuing to knock the ball out of the park in terms of new WiMAX deals won (Alvarion has over 220 plus 40 in mobile WiMAX) shows that the for the rest of the world, WiMAX isn’t going to happen, it’s already started to happen. When WiMAX reaches critical mass, companies like Alvarion are in on the ground floor.
Retail sales move away from Big Box retailers as products unbundled
If the hardware ever is truly unbundled from network service contracts, then I think everything points to retail sales immediately taking to the Internet. Contracts and bundles are so complicated that you need local stores and the Big-Box operators to man sales forces to sell these. Once you can purchase a phone and a network contract separately, look to Amazon to become a major force in wireless sales.
I don’t think Retail sales go away entirely, but you’ll see a chink in the armor once direct sales become more feasible. Ebay and comparison shopping sites should begin to take over this field as they have in other fields where the products are more straight-forward and more commoditized.
Personalization
We’ve seen just the early innings of the personalization movement on the mobile device. Ringtones have become a $6 billion/yr business. The next stage here is video usage (less than 20% of US mobile subs use video on their handset). Private companies like Vringo and public companies like EA, which bought Jamdat (one of the early casual gaming firms focused on the mobile) should benefit. As more value-added services roll-out, companies like Comverse Technologies (OTC: CMVT.PK) (estimated to have almost 50% of world market share in voice mail services) and Amdocs (NYSE: DOX) will play a big role at the carrier level for running the content/technology/billing environments. If services don’t go the carrier route and instead work at the handset level, we’ll see tons of startups in this area.
I think iTunes will play a big role in delivering music to the phone and other products will follow suit, though not nearly as successfully.
Music firms, like Universal, who get it (albeit just a little) will begin to see opportunities for distribution online beyond just selling buckets of ringtones. Companies like Jupitermedia (Nasdaq: JUPM) are assembling large royalty-free libraries of music and this may begin to get interesting.
Hardware
I’m not that knowledgable on the equipment side but I do think Synaptics (Nasdaq: SYNA) will continue to see design wins as the device takes more center stage in the future as we get closer and closer to a true computing+mobile device. Input devices, as clearly demonstrated in the iPhone UI, are getting more creative and more useful.
Disclosure: Author’s fund has positions in ALVR, DOX, and CMVT as of 3/24/08.
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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
www.IsraelNewsletter.com
With the NCAA tournament’s selection Sunday fast approaching, I need to speak about a different type of March Madness. WiMax leader Alvarion (ALVR) has gotten absolutely crushed, and that’s is pure and utter madness. Alvarion is trading at $5.65 a share and the stock has shed 25% since the beginning of the month. Why? What has so dramatically changed in 13 days? The stock is almost 40% down YTD. Yikes.
Colleague Zack Miller had a great post about Alvarion last month, and today he screamed, in a voice heard throuout IOI corporate headquarters, ” They just did a deal in Kenya, what’s going on?”
While I don’t think it’s accountable for all the recent losses in the stock, the impact that the Israel shekel has on Alvarion shouldn’t be dismissed. The greenback getting slammed this week against the shekel coincided with Alvarion stock falling sharply as well. In fact we highlighted that in our last issue of the newsletter. The company admitted that it is hurt by the weak U.S. dollar compared with the Israeli shekel in a recent earnings call.
Whether WiMax takes hold in the U.S. or not is not so relevant if you ask me. Alvarion is executing their business model quite well in developing nations and this is a nice little growth business, which I think the market has completely forgotten about.
If you are long-term investor, it may pay to have a look at Alvarion at these levels.
Disclosure: Author’s fund holds a position in ALVR. He has no position in any other stock mentioned as of 3/13/08.
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.