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Springtime often brings with it many investor conferences, such as the JP Morgan Global Technology, Media and Telecom Conference, a major conference taking place in Boston.

Here, in Tel Aviv, investment house Oppenheimer held its annual Israeli conference earlier this week, and Oppenheimer managing director and chief investment strategist Brian G. Belski, who until recently held similar posts at Merrill Lynch, said he saw a bullish but volatile market ahead over the next 18 months. Belski recommended shares of large technology companies, along with healthcare and communications services.

Sometimes you don't have to go to New York or Boston in order to get good advice, and it seems to me that it pays to listen to Belski. At last year's Oppenheimer conference, Oppenheimer managing director and senior oil and gas sector analyst Fadel Gheit warned of three-figure oil prices, claiming it could be a bubble that would burst in people's faces. Also, Oppenheimer banking analyst Meredith Whitney, who was then not yet so well known (today she is a global star with her own firm), warned about bank shares, specifically Citi (NYSE: C), despite the fact that many bank shares had already fallen tens of percentage points. No one dreamed then that Citi would fall within ten months to a low of around $0.97.

Among company executives that presented at this year's Oppenheimer conference, Mellanox Technologies Ltd. (Nasdaq:MLNX) founder and CEO Eyal Waldman displayed a lot of optimism, despite the fact that the crisis is far from over. He reminded participants that he has never issued a profit warning for a quarter, and when someone says that in the middle of the second quarter, which according to his guidance will be better than the first quarter, it can be assumed that there won't be a profit warning for the current quarter.

Furthermore, Waldman implied that visibility had improved to such an extent that he could say that each remaining quarter of the year will be better than its predecessor.

There are two major developments in Mellanox's data storage sector, which is an $85 billion market if you consider hardware and software solutions. Mellanox's specific niche is around $2 billion.

The first item is Cisco's (NASDAQ:CSCO) entry, next month already, into the sector with new servers and its own communications solutions. The second item is Oracle's (Nasdaq: ORCL) takeover of Sun Microsystems (Nasdaq: JAVA).

Waldman expects that those two changes will be good for Mellanox, because in the battle which has already begun between IBM and HP (NYSE: HPQ) on one side, and Cisco on the other, IBM and HP are cutting the ties which they had until recently with Cisco as a supplier of communications solutions, as Cisco is now a competitor. Now both IBM and HP find alternative solutions from Mellanox, which Waldman claims are better than Cisco's offerings in the server market.

The second change is also good for Mellanox, because it already collaborates with Oracle and Sun individually, and the merger will only strengthen the ties.

In contrast to Mellanox's good visibility, wireless equipment developer Ceragon Networks Ltd. (Nasdaq: CRNT) CFO Naftali Idan claimed limited visibility. Ceragon has already warned on profits twice in the current crisis.

Projects are not being canceled, but the sales process is being lengthened, and when asked how much worse it could be, he answered that a catastrophe was not expected. He is sure that India, with monthly growth of 14 million new subscribers, will soon return to stronger infrastructure investments, from which Ceragon will also benefit.

Indian company Bharat Sanchar Nigam Ltd. [BSNL] is expected to announce shortly who will be its suppliers for a $6 billion infrastructure project for 93 million subscribers. According to unofficial sources in India, Nokia-Siemens Networks, a major OEM customer of Ceragon, did not win. When asked about the project, Idan said that he was not sure those sources are reliable. He pointed out that in the U.S. market there is somewhat of an awakening, so Ceragon expects higher sales growth there compared to the rest of the world.

The telecommunications infrastructure in the U.S. is old, as it is based on low quality copper wires buried in the ground, with very little wireless communications. At the same time, the networks are overflowing with data traffic, primarily video, which has risen drastically. When a consumer skips a purchase of one item of clothing during a recession, he won't buy two when the recession is over, so for retail chains that sale is lost. However, when a telecommunications company skips infrastructure investments during a recession, it doesn't really save, and it will have to go back and make up that investment at some point, so for equipment suppliers the sale is just postponed, and will return sometime.

Disclosure: Author holds a position in MLNX in his portfolio tracked by "Globes".

Published originally by Globes [online], Israel business news - www.globes.co.il

© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

Source: What Mellanox Can See That Ceragon Cannot