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Yesterday marked the opening of SEMICON West in San Francisco, which calls itself the flagship annual event for the global microelectronics industry - from electronic design automation to processing and manufacturing. Analysts at investment bank Needham & Company recommend semiconductor equipment stocks, and they think that an optimistic conference this week will launch a wave of investor demand for the shares.

Among Needham's recommended stocks is Israeli firm Nova Measuring Instruments Ltd. (Nasdaq:NVMI), which on Thursday announced several installations with a total of seven new customers by the end of the third quarter. The announcement, and announcements of other new orders in the second quarter, is likely to lead Nova management to raise guidance for its annual results for the second time this year. With the release of first quarter results in May, the company raised annual revenue guidance to up to $66 million, compared with guidance for $63 million issued in February.

Needham also recommends a small US company that I hold in my portfolio tracked by "Globes", Ultra Clean Holdings (NASDAQ:UCTT), which will be at the conference this week. Ultra Clean enjoys strong growth, due among other reasons to two significant customers not in the chip sector - Orbotech Ltd. (Nasdaq: ORBK) and Intuitive Surgical (NASDAQ:ISRG).

Nova trades (as of 7/13/10) at a very low P/E ratio of 8, and Ultra Clean at a P/E of 7, based on Needham's estimates of the firms' 2011 profit.

Mobile Internet on the move in India

The mobile Internet, or surfing via mobile phones, iPADs, or laptops in any location, is a huge market that will also generate billions of dollars each year in communications infrastructures around the world. The World Cup which ended earlier this week will be the final trigger for investments by carriers who hesitated until today. One of the largest and least penetrated markets in the world for mobile broadband is India, which has 650 million cellular subscribers, a penetration rate of 55% who are waiting for 3G or 4G, and only 10 million have broadband, most of it over wires, using DSL.

As the Chinese market, which is bigger than India's, is "captive" to Chinese communications equipment suppliers, the giant Indian market is the greatest hope for all Israeli equipment suppliers, because India treats Israeli firms with respect and Chinese suppliers with suspicion. Israeli executives joined those from international giants in attending a conference last week called the "Mobile Broadband Summit 2010" in New Delhi and Mumbai.

Alvarion Ltd. (Nasdaq: ALVR) was there, waiting for huge orders from telecommunications provider BSNL, whose manager confirmed at the conference that the government of India set a goal for operators of 100 million Internet subscribers by 2014, a tenfold increase. Since this is basically mobile Internet, they are technologically set with WiMAX as the most available and quickest solution to reach this goal.

There were also ECI Telecom Ltd. executives there, as ECI's giant win with BT in the UK will help them greatly in marketing in India, which has a British orientation in many areas. A significant portion of the new subscribers will connect through fiber optic to the home [FTTH], and ECI has a lot to offer in this niche, as its big win with BT proved.

The BSNL executive at the conference confirmed that they plan to wire 100 Indian cities with fiber optics to the home, primarily to business customers and heavy users. You don't need to explain how large a city in India is, when the city adds 10-15 million new cellular subscribers each month.

One of the winners of the first section of this new network, Orckit Communications Ltd. (Nasdaq: ORCT), was there. Orckit has already supplied systems worth about $4 million, and is waiting for authorization from BSNL in order to recognize the revenue and to receive follow-on orders.

Disclosure: Author holds shares as part of his portfolio tracked by "Globes".

Published by Globes [online], Israel business news - - on November 17, 2009; Reprinted on Seeking Alpha with permission
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009