What’s the matter with Mind?
Shlomo Greenberg
Today, I want to talk about Mind CTI Ltd. (Nasdaq: MNDO; TASE: MNDO) ,which recently published good results for both the fourth quarter of 2005 and for the year as a whole, indicating improvement. Like many other technology companies, Mind CTI began a handsome climb between the slump of October 2002, and the peak at the beginning of 2004. Its share price rose from a low of $0.8 to a record $6.5. It made its ascent in good company:, Silicom Ltd. (Nasdaq:SILC; TASE:SILC), Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT) M-Systems Flash Disk Pioneers Ltd. (Nasdaq: FLSH), Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR) and others. But from the beginning of 2004 onwards it started to tumble, once again in good company. The question that must be asked is why Mind CTI has been on a downward slide since 2004, while its business operations only continue to grow stronger.
Mind CTI suffers from three problems, none of which are real, certainly not on Main Street. But on Wall Street, the feeling is that these three problems are making life tough for the company. The first of these problems is Amdocs Ltd. (NYSE: DOX) and we’ll explain why presently. The second is the company’s lack of presence in the US - a problem which was solved last summer when Mind CTI bought Sentori for $5.1 million, an acquisition whose positive effect could already be seen in the company’s financial statements for the final quarter of 2005.
The third problem is the $40 million that the company earmarked for the unsuccessful structured deposit (for which a solution will certainly be found, with the help of some creative people). The damage caused by this failed device drained the financial profits that were so crucial to a company such as Mind CTI. So while it would be correct to say that someone got it wrong and the company subsequently had less profit than it could have made, this is no reason not to invest in the company’s stock. On the contrary, once this issue is sorted out, it will add to the bottom line. The company should not be judged by this, but rather by the continuing growth on Main Street, and if the latest reports are anything to judge by, it is indeed making good progress.
The biggest mistake that people are making is to make comparisons with Amdocs, with statements such as, “what do I need Mind CTI for, if I already have Amdocs?” Why do people make this comparison to begin with? Because in the past, long before investors understood the mechanisms involved in defining companies by their fields of activity, when people mentioned billing they referred to Amdocs and Mind CTI, as these companies were the ones that made their livelihood from this growing sector. This is the only similarity between the companies, and even this is incorrect. Mind CTI does not compete with Amdocs; if anyone is competing with Amdocs, it’s Comverse Technology Inc. (Nasdaq: CMVT).
Mind CTI operates in an area in which Amdocs is inactive and has no interest - customer relations and billing by small businesses with some specialization in billing for VoIP companies. Mind CTI’s latest contract, with Croatian company Iskon Internet, is a classic of the niche in which this company from Yokne’am operates. Mind CTI offers small and medium-sized companies a triple-play platform, i.e. the ability to provide customer relations management (CRM) and billing for wireless IT, cable and television operators. For Iskon, a small company, and for similar companies, Mind CTI has the solution, and there are thousands of companies like Iskan in the world.
CRM and billing services for small companies is a fairly new sector, and is huge niche for a company like Mind CTI. If, in two or three years, Amdocs or Comverse decide that it’s worthwhile entering the small business sector, then acquiring Mind CTI or Mer Telemanagement Solutions Ltd. (Nasdaq: MTSL), another company that entered the small business sector by acquiring a small company, is the solution.
For me, the math is simple. A valuation of $68 million for Mind CTI, its current market cap, means that its entire business is valued at less than $28 million. That’s serious?
Published by Globes [online], Israel business news - www.globes.co.il - on February 28, 2006
The above recommendations were made by a person/s working in the investment industry who may hold positions in securities mentioned in the column. This column should not be taken as advice to buy, sell or continue to hold any securities, and anyone acting on the advice of this column does so at his or her own risk.
globes.co.il
Dubi |
