Among the first Israeli companies to report earnings this quarter will be Check Point Software Technologies Ltd. (Nasdaq: CHKP), Amdocs Ltd. (NYSE: DOX), Mellanox Technologies Ltd. (Nasdaq:MLNX), and ClickSoftware Technologies Ltd. (Nasdaq: CKSW). The last three are held in my portfolio tracked at "Globes".
From the optimistic pronouncements by Amdocs CEO Dov Baharav, I assume that the company will meet market estimates of $758 million revenue and earnings per share of $0.57 for the company's third fiscal quarter which ended in June.
Although Amdocs is very active in Europe, it seemed from Baharav's words over the course of the quarter that the company was not hurt by the crisis on the continent, or by the euro's weakness. In fact, the company hopes to take advantage of opportunities presented in countries in crisis, for example Spain or Greece, where powerful worker committees at the large telephone companies may agree to improve efficiency after decades. Among other ways, this may include outsourcing billing and other services in which Amdocs specializes.
Because of its strong financial position, and large cash holding of $1.4 billion, Amdocs recently allocated $700 million for share buybacks. It will be interesting to see if and how much of that sum was used during the market falls in the second quarter, which led to an 18% price difference between peak and trough.
The software and services market for the global telecommunications sector is estimated to be about $72 billion per year. While the equipment market for the sector may have fallen over 15% in 2009, the services market only dropped 2%. The relative stability during crises, and the great potential for the years ahead, is based on the fact that telecommunications companies, both landline and cellular, along with cable companies or Internet providers, provide such a wide range of services today, through such an array of plans that are quite confusing to the consumer, that the billing area has become very complicated and critical. Amdocs is considered a clear leader in field.
Mellanox, like Amdocs, is set to meet and even beat market estimates of $39 million revenue and earnings per share of $0.24, which would represent annual growth of 55% and 84% respectively. After Intel (INTC) explained last week that its strong results were based on a strong enterprise market, investors bought Mellanox shares, which rose 8% last week, double Intel's rise.
What Intel said pointed to a strong quarter for Mellanox as well, as Mellanox leads in InfiniBand technologies with OEM sales to large server manufacturers like IBM, HP (HPQ), Oracle (ORCL), Dell (DELL) and others, for computer applications in areas with very high returns, data storage or cloud computing.
Despite Mellanox's rise along the food chain from selling processors to selling switches and other hardware as well, the company has managed to keep its gross profit high at 70-75%.
Clicksoftware merited new and important coverage by RBC analyst Daniel Meron. Meron gives it a "Buy" recommendation, with a target price of 8$, in a review titled "We like the way it clicks". He explains that the company's market of optimization solutions for mobile service people in organizations is expected to grow substantially, from a base of $300-400 million per year today, because organizations are interested in improving service while cutting costs as much as possible.
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.