Assuming that the problem of the US fiscal cliff is being dealt with, that Europe's problems are no longer terrifying Wall Street, and that our region will stay relatively quiet - including from the Iranian threat - there is a reasonable chance for an end-of-year rally on the basis of expectations of much better results than the spluttering of the third quarter.
The technology rally will be led by Apple Inc. (Nasdaq: AAPL), which reached the start of the holiday shopping season on Black Friday without any special delivery problems of the kinds it had at the start of the quarter. Those problems sent its share price to a low point of almost $500, compared with its peak of over $700 this year.
In the full trading week ahead, the fourth quarter investor conferences season will resume. Tomorrow, new Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) CFO Jacob Shulman will attend the Credit Suisse conference in Arizona and the JPMorgan conference in New York on Wednesday. The tone of his remarks will resemble the tone of last week's report by Barclays Capital analyst Joseph Wolf, who said that Mellanox's share price could quickly rise back to triple digits.
Wolf reiterated his "Buy" recommendation and high target price of $140 for Mellanox. He believes that the company has great potential, and that it is only at the start of strong sales growth, which will bring it to an annual turnover of $1 billion within 18-24 months.
Mellanox's growth will come from two core markets. The first is high-performance computing (HPC), where the company's Infiband technology got its start and won a great success. The second is the huge market for large data storage centers, where we recently realized that there are no rivals to the company's solutions, in terms of cost/performance ratios.
SanDisk Corporation (Nasdaq:SNDK) CFO Judy Bruner will also present at tomorrow's Credit Suisse conference. I assume that she will dispel the market's fears about a "flash prices cliff" in early 2013, something that happens almost every year following the Christmas shopping season. These fears have already sent SanDisk's share price back toward $30.
Most analysts believe that there will be no severe prices cliff in 2013, because investment in flash lines was minimal, despite the huge consumption of flash processors by the world's top two manufacturers of smartphones and tablets, Apple and Samsung Electronics Co. Ltd. (KSX: 5930; LSE: SMSN; SMSD). In addition, Toshiba Corporation (TSE: 6502; LSE: TOS) today published its financials, in which it said that in the event of a sharp drop in prices, it will reduce production, as it did during the summer, which sent prices back up.
In general, SanDisk's situation at the end of the year is very different from what it was in previous years, because Apple became its biggest customer early in the third quarter. In its expanded quarterly financial report, SanDisk said that one customer accounted for 16% of sales, and there is no doubt that the reference is to Apple. This will more or less presumably be the percentage of sales in the fourth quarter, but the significance in dollars is much greater. For example, SanDisk's solution is embedded in the iPhone 5 32-gigabyte smartphone, which is the preferred product of most customers, according to Black Friday summaries.
Something has happened in Israel
The two co-founders of an Israeli high-tech company, who led the board of directors by the nose in the ten years since its IPO, will, at the end of December, find themselves facing a board of mostly American directors, who, not to put too fine a point on it, do not exactly like the co-founders, because of the company's past performance. We are talking about the takeover by investor Jerry Ivy of the board of OTI - On Track Innovations Ltd. (Nasdaq: OTIV; DAX: OT5), founded by chairman and CEO Oded Bashan and VP projects Ronnie Gilboa, which happened faster than I expected.
After OTI's general shareholders meeting rejected Bashan's three Israeli nominees to the board earlier this month, the two American directors whom he had previously appointed also resigned last week. Under pressure from Ivy, who owns 10% of the company, and who has the support of shareholders with large stakes in it, Bashan was compelled to summon a special general meeting for December 30.
The summons states that the meeting's agenda includes cancelling the appointment of Israeli director Eli Akavia, and the appointment of at least six Americans from Ivy's list of nominees. If passed, the result will be a new OTI board of directors comprising three Israelis, including Bashan and Gilboa, who face six Americans, who will quickly navigate the company toward fulfilling its potential - which it has.
By the way, I added OTI to the portfolio because of the potential of its scores of patents, some of which are in the hot field of electronic wallets in smartphones, and specifically because of the company's patent infringement litigation filed against US carrier giant T-Mobile Inc. OTI's new, mostly American, board of directors, will probably be better able to leverage this lawsuit better from the US than from Rosh Pina.
Published by Globes [online], Israel business news - www.globes-online.com - on November 26, 2012
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