Video/web conferencing and telecommuting are two of the biggest growth trends in American business right now. International companies are increasingly realizing the benefits of conducting meetings and trainings virtually, rather than deal with the cost, complexity, and lost time of travel.
Radvision’s financials demonstrate the enormous growth of this market. Revenues have doubled since 2003, from $51M to an estimated $105M this year. Earnings have grown even faster, more than quintupling over the same period. The company has a strong balance sheet, with a market cap of $450M and over $130M in cash. Considering its growth, the Radvision has a reasonable PE of 29 - lower than 42 for competitor Polycom and the 52 of WebEx when it was purchased by Cisco (CSCO). Radvision believes its stock is a bargain - it has been consistently buying back shares.
Speaking of Cisco, they are Radvision’s largest customer, and have been increasing orders since 2000. There has been speculation that Cisco’s recent acquisition of WebEx will hurt Radvision, likely the reason for Radvision’s languishing stock price. In fact, I believe the opposite is true. Cisco CEO John Chambers has repeatedly stressed that his company’s future is largely tied to video. WebEx’s strength lies in its web-based collaboration software and desktop presence, while Radvision specializes in the “behind-the-scenes” video architecture. To support this point, Cisco has placed orders for new Radvision products for delivery in the second half of ‘07.
Although Cisco is a major part of Radvision’s plans, the company also has strong relationships with IBM and Microsoft, among others. They are expanding relationships with 3G providers such as Nokia and Siemens. With the demand for video conferencing only increasing, I believe that this is a good time to buy Radvision.
Disclosure: SmartGuyAB is long RVSN
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