By Thom Calandra, CBS MarketWatch
Last Update: 12:54 PM ET Apr 22, 1999
StockWatch Chat
LONDON (CBS.MW) -- For years, the lament about Israeli software
companies was: So why should a good Jewish stock trade at a discount?
No more. Israeli technology and telecommunications
stocks, as Goldman Sachs analyst Elan Zivotofsky
puts it, "are maturing." A wave of mergers, stock
swaps and outright cash purchases has lifted the
shares of many Nasdaq-traded Israeli companies.
Israel's crop of three dozen or so Nasdaq-traded
companies has risen about 20 percent as a group so
far this year.
"Generally speaking, Israeli technology names trade
pretty much in line with Nasdaq," said Zivotofsky
from Jerusalem on Thursday. The Nasdaq 100
($NDX: news, msgs) Index of Nasdaq's largest
companies is up 19 percent this year.
Israel, especially the streets in and around Tel Aviv, is
seen by many as a kind of Silicon Valley of
college-educated engineers and software developers.
Since August 1998, no fewer than seven publicly
traded Israeli companies have been bought for cash or
stock. Sungard Data bought Oshap Technologies
(OSHSF: news, msgs) for $210 million. BMC
Software (BMCS: news, msgs) bought New
Dimension Software (DDDDF: news, msgs) for $650 million. Cinar Corp.
bought Edusoft (EDUSF: news, msgs) for $41 million. And so on.
Talk about your Euro-favorites on our StockWatch message board.
Zivotofsky, who takes the 40-minute drive to Tel Aviv each week to size up hot new companies, says the world's large telecom and tech companies are
taking notice of Israeli companies. Even after their share gains, Israeli companies' stocks still trade at price-earnings multiples that are 20 percent to 40 percent lower than their peers, he says.
"Technology has accelerated rapidly, and some of
the larger players, like Cisco (CSCO: news, msgs)
and Lucent (LU: news, msgs) and BMC Software,
have sat up and taken notice and bought Israeli
companies," Zivotofsky says.
Many Israeli technology companies specialize in
so-called niche products, whether they are network
security software programs, electronic commerce
applications or medical technology devices."Yet lots
of these companies lack marketing and distribution
capabilities and need to be parts of larger
organizations."
Quite often, he says, "Israeli companies have a good
technology in a nice market but they are not one-stop shops, and the Lucents and Ciscos want to be the one-stop shops, so it makes sense to expect more acquisitions."
Alas, Zivotofsky said he didn't want to be quoted on specific Israeli targets. In an April 8 report, he identified several companies as "outperformers" or on Goldman's coveted "recommended list." They included security software maker Check Point Software (CHKP: news, msgs), whose shares are languishing after a disastrous quarterly report from competitor Network Associates (NETA: news, msgs). Others seen as "market outperformers" include ECI Telecom (ECILF: news, msgs), a profitable telecom equipment maker, and Gilat Satellite Networks (GILTF: news, msgs), which has a 45 percent market share in the sale of VSAT products and is on Goldman Sachs's recommended list.
One former Wall Street analyst, who asked that his name not be used, said Tecnomatix Technologies (TCNOF: news, msgs), which is partly owned by Oshap, is a potential purchase target. Tecnomatix, whose shares sell for 12 on Nasdaq, has about $7.50 a share of cash.
The former analyst also mentioned Crystal Systems (CRYSF: news, msgs), a software conversion and testing tools developer. The company's shares at 7 on Nasdaq sell near their 52-week low, in part because of slowing sales for Year 2000 software fixes.
For more on European tech stocks, see related article.
I sent the following email to Thom Calandra:
Appreciated you taking the time to bring some attention to these stocks...
Could you at some time take a look, maybe as a follow up to the article today, at TISAF...TOP IMAGE SYSTEMS...
tis.co.il
Israeli software company, very overlooked and making a strong move on the forms processing market. Earnings up 1000% last quarter, may be the software for the German Post Office, and is currently making a move with Blue Cross of Vermont.
in addition I also appreciate you following RADICA Games...
Having been to the stockholders meeting here in Pasadena...it was a real eye opener in terms of what is going on there...IT IS GOOD! the GIRLTECH division is starting to make a great move into the 8-12 year old girl market with great devices and Tiger Woods is helping with the new Tiger Woods GOLF hand held game.
They also have a great investment in a high tech system being developed to be a complete 'GATE' for the home that would allow all isp's, cable companies, web, etc to allow the new bundled providers to reach ALL computers and tv's in the house with ALL the signals..
I thank you
Chris Considine |
