The share, which was at $5.40 at the beginning of May, fell below $4 in the middle of July, and since then has recovered by some 18% to around $4.70. Eisenstein writes that Ceragon has developed into what he terms "a potential acquisition target." He reaches this conclusion because his study has made it clear that the company's field of operations is attracting more and more attention from the large suppliers and distributors in the communications field, who are looking for ways to add "meat" to their broadband products. Motorola (NYSE: MOT) is, in his opinion, the leading contender, since this year it has already bought two companies in the field. Eisenstein talks about processes in the wireless broadband sector, which lead him to conclude that Ceragon does indeed interest leading companies like Motorola.
By the way, Motorola is building a product line for the famous WiMAX, and, in the analyst's opinion, needs bolstering at the top end of its business. Ceragon is gaining momentum as an OEM supplier for companies such as Nokia (NYSE: NOK) and Nortel (NYSE:NT).
I can only agree with Eisenstein that the potential is very high, not necessarily because of the potential for an acquisition, on which he is making a gamble, but rather because of the low value at which the share is being traded. Still, the question is why did the share go up and down like it did in the past three months. Why it went down we can only guess. In my opinion, the reason is that the whole wireless chip and telecommunications industry started to slide from the first week of May until the middle of July, and we can assume that if the semiconductors index, for example, which includes the best of the wireless companies, dropped by 27 % from 530 at the beginning of May to 385 in the middle of July, and Motorola dropped in the same period by 19% from $23 to $18.60, then the fall in the Ceragon share price can be explained by the general decline.
Why has Ceragon risen since the middle of July? Because confidence in wireless communications, broadband, chips, etc. has been restored. And why is that? It's all because of the sudden revival of WiMAX. Eisenstein mentions this revival as a factor in his analysis, especially the Sprint-Nextel (NYSE:S) deal, Intel (Nasdaq:INTC) etc. The WiMAX revival has also boosted companies like Alvarion (Nasdaq: ALVR) and Harmonic Inc. (Nasdaq:HLIT), which have risen by 40% and 30% respectively since the middle of July. Alvarion and Harmonic also fell precipitously between the beginning of May and the middle of July. These two, and especially Alvarion, are more familiar to US investors in connection with WiMAX. Incidentally, the WiMAX revival has also woken up the US Federal Communications Commission, which is suddenly showing huge interest in the purchase of wireless rights in the US. The commission says that it will receive $5.67 billion net. I really hope that the result of the competition for rights will provide a livelihood for all three of the companies mentioned above, and for a few more Israeli companies besides.
CRNT 1-yr Chart
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.