The billion dollar question

Shlomi Cohen

A billion dollars is still a great deal of money, but besides Radware there are other Israeli companies in hot niches that could be worth it to the giants.

"A billion dollars isn't what it used to be" brothers Bunker and Herbert Hunt replied to journalists when asked how it felt to lose $2 billion.

It happened in the 1980s, outside a courthouse in Texas, when the brothers were charged with an illegal attempt to corner the market in silver together with Saudi sheiks, an attempt that failed and made them bankrupt.

I was reminded of the Hunts' remark on Tuesday evening, when "Globes" broke the exciting news that Radware Ltd. (Nasdaq: RDWR) would probably be sold for $1 billion cash.

Even after 30 years, and despite the belittling by the Hunts, a billion dollars is still a great deal of money, and one asks oneself why anyone would pay $1 billion for a company that may be excellent, and has $150 million cash, but that will have sales next year of $160-200 million at best.

Well, if Dell, HP, IBM, Cisco, Juniper, or any other company enters the race and wants Radware, it will have to pay $1 billion, and that will still be cheap compared with the sales multiples the market currently gives competitors to Radware like F5 and Citrix, or a company in a tangential field such as Riverbed.

As we wait tensely for the result of the negotiations for the sale of Radware, we can place bets on which other Israeli companies in hot fields could be acquisition targets for the technology giants.

One company that springs to mind is Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX). This is because of its size (annual sales comparable to those of Radware), because of its large reserves of cash (more than $230 million), but mainly because it is in the hot niches of data storage centers and cloud computing, with unique solutions for high-speed connectivity and low delay.

On the other hand, I see only slim chances that Mellanox co-founder and CEO Eyal Waldman will sell the company. Anyone who has heard him over the past year has heard about a company that in the long term - by itself and through acquisitions - will reach annual sales of over $1 billion.

Roy Zisapel probably thought like Waldman a decade ago, and perhaps the miserable time Radware had on the capital market in the crisis years have now made him hit the ejector button, while he's at the top.

Published by Globes [online], Israel business news - - on September 16, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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