Good News from Japan for Alvarion, Orckit

by: Shlomi Cohen

Intel (NASDAQ:INTC) announced a further investment of $43 million through Intel Capital, in the mobile WiMAX venture in Japan, UQ, that it is promoting jointly with telephony company KDDI (OTC:KDDIF), which is supplying the network infrastructure, and another four Japanese companies. After a five-month trial period, the service will have its commercial launch on July 1, and by 2012 it will reach coverage of 90% of Japan. With the launch of the service, several companies will introduce new notebook computers on the Japanese market, equipped with embedded WiMAX-enabled chipsets.

In the Israeli context, and despite the fact that it has no share in the project, this is very good news for Alvarion (Nasdaq: ALVR). Without Intel's backing, the WiMAX vision would long ago have been buried, and LTE, a technology that is gathering momentum from day to day, would be unchallenged. A first LTE-based project is due to be launched in the US next year by Verizon (NYSE:VZ). For Orckit Communications (Nasdaq: ORCT) too, the Japanese venture is very good news, in an even more concrete way, for KDDI's entire network is based on its technology, and any expansion for the purposes of providing WiMAX services means larger procurement from Orckit. I believe that this will happen very soon, because, apart from the new service, KDDI's network is coming to the end of five years with the same equipment, and in telecommunications it is normal to renew equipment at the end of five years or even less.

It is also time to refresh the portfolio. Today, I am parting from its Chinese component,Qiao Xing Universal Telephone (XING), after a heavy loss of 75%, which has taught me that with the Chinese you know what you are getting into but you sometimes don’t know what you will get out with. Although the company is traded on Nasdaq, transparency to investors remains foreign to it, and like other Chinese companies, it took a long time to come into line with US reporting requirements. Until recently, XING was mainly a local mobile telephone manufacturer, and it always claimed to have about a 2% share of the Chinese market.

From its telephone business, which prospered before the recession, XING managed to accumulate a cash pile amounting to hundreds of millions of dollars, but at the same time its market cap steadily shrank to its current level of less than $100 million. I didn't manage to fathom the reason for that, until the cat was recently let out of the bag. XING announced that with most of its accumulated cash, it was buying molybdenum mines throughout China. Molybdenum is a transition metal used in making alloys for the aerospace industry. Since my original idea was to be in the telephones market, but along the way I received a metals company, I have decided to end my Chinese romance today. It looks like it may be my first and last.

With the money left from XING, plus cash from realizing half my investment in Elbit Systems (Nasdaq: ESLT), which has yielded me a 200% return, I am reinvesting in a problematic company, but at least its Israeli, which gives me some ability to understand what's going on in it. I refer to Verint Systems (Nasdaq: VRNT), a competitor of NICE Systems (Nasdaq: NICE). I will have an opportunity of elaborating on this company later. For the time being, I will mention that I believe that Verint's business is in good shape these days, even though it has not been publishing financial statements because of affairs involving its fugitive former chairman Kobi Alexander.

What's more, I believe that it will release all the statements for the past few years at the beginning of 2010, and will then be offered for sale by parent company Comverse Technology (Nasdaq: CMVT). According to research by Oppenheimer analyst Shaul Eyal published last week, it will be worthwhile for NICE to buy Verint at a price of up to $20 per share. The current share price is below $9.

Published originally by Globes [online], Israel business news -

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