IDC, the leading research and forecasting group, describes the WAN Optimization Market as hardware and software products that compress information streams, regulate information traffic flow, prioritize movement by importance of queries and answers, and manage various applications from the protocol aspect. These tools analyze information flow from the router through the network to the end customer. Put perhaps more simply, when talking about the network optimization market, the reference is to information flow streamlining.
This is, without doubt, an important process but IDC thinks it is expanding rapidly. The current leader in this field is a small company from Cupertino in California by the name of Packeteer Inc. (Nasdaq: PKTR). Founded in 1996, Packeteer has annual sales of $136 million and profit of $13 million. It currently controls 36% of the global market, with Cisco Systems Inc. (Nasdaq: CSCO) far behind in second place with 6% and Nortel Networks (NYSE; TSX: NT) in third place with less than 5%.
Another player now trying to get a foothold in this arena is Kfar Saba-based Silicom Ltd. (Nasdaq:SILC; TASE:SILC), which I have followed since time immemorial and, which emerged from the darkness, thanks to the phenomenal talent of its semi-new management team. The company announced on Monday that it won two new design wins for the bypasses it produces. Bypasses, literally, create bypasses to help information circumvent any blockage on networks that may be preventing normal transmission.
Silicom manufactures high-power adaptors and these are its claim to fame. It claims that it has been selected as the preferred manufacturer in this growing bypass market. All that remains for me is to wish this excellent team the very best of luck because they deserve it. Who knows? The stock might even make it back to the March 2000 high of $23. And why not? At least they have a good product this time round whereas back then they hardly had anything.
I see that G. Willi-Food International Ltd. (Nasdaq:WILC), has acquired the assets of a leading US distributor of kosher food. The company said in its announcement on Monday that it signed a binding agreement with the distributor but past experience has taught the market to view such announcements with caution. I have no doubt that if Willi-Food does indeed finally manage to get a foothold in the US kosher food marketing network, the stock will duly make its way north. The questions ‘if’ and ‘how’ are as pertinent as they were before. Buying the assets of a local distributor will give the company the requisite tool, but knowing how to use that tool is an entirely different matter. I was unable to ascertain from the announcement what exactly it is that the company is buying. But here too, I will be keeping my fingers crossed for the Williger brothers and hope that their train does leave the station and knows which direction to head in.
Ness Technologies (Nasdaq: NSTC), is one company that certainly does know which direction it is headed in, both on Main Street, where it is expanding its global reach, and on Wall Street, where its stock had been making good progress until yesterday’s abrupt hiccup. The stock fell, apparently in response to the company’s announcement on Monday that it acquired Selesta Espana S.A.U., a privately held IT software distribution and systems integration company based in Spain. I noticed later on that investment bank Susquehanna Financial Group downgraded its rating for Ness in view of its strong climb up to Monday. My feeling is that downgrading the rating of a company just as it is in the middle of a business momentum amounts to idiocy, but that’s what happened and Wall Street and its analysts have their own rules.
The deal itself looks excellent. While I don’t have any figures for Selesta Espana, the price that Ness will pay for it, €10 million in all, certainly shouldn’t be a strain on the Israeli company. Of this sum, Ness will pay €6.25 million in cash with a further €3.75 million to be paid over the next two years based on the achievement of certain performance goals. Ness has almost $50 million in cash so why all the panic? The Spanish company, which has a reputable customer base, both public and private, in Spain and Portugal, will open up doors for Ness in Spanish speaking countries, and this amounts to considerable potential. I am due to meet with Ness’s CEO soon so perhaps he will be able to throw some light on all this.
Several months back I wrote about the extremely positive vibes that I have been getting about Blue Phoenix Solutions Ltd. (Nasdaq: BPHX; TASE: BPHX), and these are still coming in. On Monday, investment house Roth Capital Partners, which has been covering small Israeli companies for some time, rated the company “Buy.” In their review, analysts Nathan Schneiderman and Nick Pajwani based their rating on Blue Phoenix’s recent successful acquisition of UK company Code Stream. They claim that this acquisition is highly suited to Blue Phoenix’s activity and it will enable it to continue the momentum it recently began. Schneiderman and Pajwani raised their target price for the company to $7.50 from $7.
Blue Phoenix has gained 57% since the beginning of the year, and has soared 12% so far this week, apparently in response to Roth Capital’s latest review. In a nutshell, the company develops solutions that enable companies to automate the process of modernizing and upgrading their existing mainframe and distributed IT infrastructure. Blue Phoenix is headed by Arik Kilman who was appointed in 2001 when the company was founded and remained CEO following the merger with Crystal in 2003. All the signs are that he is the one behind Blue Phoenix’s successful development.
To be honest, there are a lot of Israeli software upgrade and harmonization companies about, and this is one area in which I must profess my ignorance. But associates in the US have advised me to take a look at this company, so I am very happy to do just that. Blue Phoenix does indeed look like it’s going places, but please exercise caution.
Published by Globes [online], Israel business news - www.globes.co.il - on December 20, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006