Two investment houses have responded to the acquisition of Jacobs Rimell Ltd. by Amdocs Ltd. (NYSE: DOX) yesterday for $45 million.
Analysts are geneally upbeat on the deal, and point specifically to the opportunities it represents for Amdocs to significantly increase its business with US cable giant Comcast.
RBC Capital Markets analyst Daniel Meron says, "The real cherry is stronger hold of Comcast, which has been one of the major contracts Amdocs has been bidding for." The analyst reiterates his "Outperform" rating on the stock.
Amdocs develops billing and customer service software, and now, Meron explains , "The move helps Amdocs expand its presence in the cable segment and its OSS (operating support systems) operations." He points out that Amdocs actually entered those areas through its DST Innovis and Cramer acquisitions. He continues, "We believe investors will view the move positively as it gets Amdocs one step deeper into Comcast operations. Recall that further expansion of projects with US cable is something investors have been waiting for multiple quarters. We were further encouraged by expression of support for the move by Comcast's CIO."
Oppenheimer analyst Shaul Eyal also gives Amdocs an "Outperform" recommendation, and gives it a target price of $42. He calls the acquisition a "savvy move" and says, "We believe the acquisition further cements the closer relations between Amdocs and Comcast as the latter is also an investor in Jacobs Rimell. We believe Amdocs' chances of winning a major Comcast RFP have materially improved."
Eyal notes, "Not only is Comcast a major customer of Jacobs Rimell, it also carries a vested interest in the company's success being an equity investor. We believe the closer relations between Amdocs and Comcast improve the former's chances of winning a major mega million dollar contract with the latter. We believe the $45 million investment could yield solid returns in the next 3-5 years." He explains that the cable industry is "marching slowly but surely" toward deploying quadruple play - television, internet, telephone, and cellular - solutions.
Amdocs rose 1.8% yesterday on thin trading to $28.50, reflecting a market capitalization of $5.9 billion. The company is set to report its fiscal second quarter results on April 17.
Published by Globes [online], Israel business news - www.globes-online.com - on April 9, 2008
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