Gilat Satellite's Comeback (GILT)

 |  Includes: GILT, NNDS
by: Shlomo Greenberg

Gilat Satellite Networks (Nasdaq: GILT) began 2006 at $5.65 and ended last week at $8.05, a 42.5% rise, of which 35.7% was recorded from the beginning of April. I attribute part of this rise to the fact that Gilat has become a customer of public and investor relations firm Global Consulting Group, as well as to the restructuring and new-old management headed by company founder Amiram Levinberg.

It’s high time that Israeli companies operating outside of Israel understood two things. Firstly, “when in Rome, do as the Romans,” and second, when you are in Rome, you’ll need someone to take you around and show you how to behave. This is the type of thing that Global does, and as far as I know, it does it properly. Bank Hapoalim is another client of Global, whose parent company Huntsworth Plc has an office in Tel Aviv.

This is a big UK company that defines itself as a communications company built around a PR company. It claims (and, on the basis of experience, rightly) that what it does for clients is PR wrapped in corporate relations. In other words, it knows how to pitch the client’s good sides to the world and the business community. Incidentally, analysts, experts and commentators will find it a great help to turn up at meetings, interviews or company presentations with such a professional in tow.

Personally, I believe that every cent invested in the services of professionals such as these is worth it. The fact is that since they have been handling Gilat’s PR and IR, the stock has risen substantially. You could claim, of course, that this is all nonsense, and that if the market is not doing well, Gilat will fall too, and there can be no disputing that this basic claim has been proven correct on countless occasions. But without such services, any company would spend years proving that it had emerged from a crisis, or that it represented a good investment opportunity.

I have no doubt that Gilat made a smart move when it decided to use these services. Over recent months, I have noticed the changes that have taken place in the company and the developments in the field in general. One thing is clear to me, and that is that Gilat has top flight technology, and if that is the case, then good management is what it needs. Amiram Levinberg, who was actually brought back two years ago after the company was on the verge of collapse, has apparently managed to stabilize the company and lead it forward once again. It seems the best manager was always close to home, while the company searched for managers elsewhere that turned out to be no good.

Gilat’s latest deal with Cisco Corp. (Nasdaq: CSCO), through its subsidiary Spacenet, is an interesting one that will probably add a few dollars to the company’s cash. It is important in that Gilat will be the first company to provide broadband services to Cisco’s infrastructure in the US, for its satellite communications systems. Cisco has only recently entered this field.

Another interesting deal that Gilat recently signed, and which was reported by “Globes” back in April, was the one with China Satcom. The developing world could become fertile ground for Gilat’s activities.

Gilat is yet another example of the incompetence of leading investment houses, who failed to send their analysts to cover this company from Petach Tikva. After all, during all the festivities at the turn of the century, there were plenty of analysts who covered Gilat when it raised $450 million in a convertible bonds issue at conversion prices that don’t bear mentioning, and with great enthusiasm too.

True, the previous management was not as friendly towards analysts, and given the collapse it underwent, this is understandable. But what is stopping analysts today from providing us, the common folk, with some notes and explanations about this company and its place in the field? This really is a shame, because I have the impression that a big story is developing here and that many investors would enter the company if they understood what it was all about.

The gossip that I have been hearing recently from abroad talks of a possible merger or acquisition for Gilat. Today, with the problems of broadband content transmission over satellite solved, Gilat can quite definitely interest big companies such as NDS Group (Nasdaq: NNDS), the global leader in content transmission over satellite networks. Again, this is all gossip, and as I have read about some nonsense about me here and there, I will state here that I don’t have any Gilat shares, but I may well buy some soon, as this is quite definitely an interesting company.

Published by Globes [online], Israel business news - - on June 20, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Reposted on Seeking Alpha with full permission.