Why Ceragon Networks Is Assured of Long-term Growth

Ceragon Networks Ltd. (CRNT) is just one of a number Israeli companies that attended the C.E. Unterberg, Towbin Emerging Growth Opportunities Conference opening yesterday at the Mandarin Oriental Hotel in New York.

Its managers told investors about the strong surge in the wireless backhaul solutions provider's business, a surge that has sent its stock up by 133% since the beginning of the year. It is my hunch, judging by the massive turnover in the stock, that the company has, in recent months, moved from Israeli to American hands. That's what usually happens. We Israelis hang on to a certain stock for years, and once it finally makes the big breakthrough, we say "thank you and good riddance" and sell to the Americans.

Once US institutionals enter the scene, they check out the company thoroughly, and on the basis of these comprehensive assessments of its business, they take it to levels that we never dreamed of, since they're not interested in where it came from, but where it could go from here. I have already been through this once with Check Point Software Technologies Ltd. (CHKP) back in mid-1999 when the Americans showed us how little we knew, after they eagerly snapped up all the shares the Israelis sold them, long before the bubble imploded.

Incidentally, they can also show us a thing or two when they exit a stock. Once they have identified problems, something they often spot even before management has abandoned its state of self-denial, they account to no one. It is of no interest to them where the stock was when it reached its high, just as its low is of little interest once it has begun to climb. I encountered this in Scitex's first crisis at the beginning of the 1990s, when its owners, Clal Industries and Investments Ltd. and Discount Investment Corporation (DISI), bought a ton of Scitex shares from the Americans at around $30, after they had already plummeted from the $45 high. The stock finally came to a halt at just $10-15.

Returning to Ceragon, the massive infrastructure investments now being made by cellular companies worldwide assure the company of substantial growth over an extended period. I believe, for example, that it will have a share in the $900 million contract that Nokia-Siemens (NOK) (SI) won in India last week. I could also easily see Ceragon joining the list of companies that stand to benefit, indirectly, from iPhone mania (AAPL). The only thing that everyone is in agreement about regarding this phone is that surfing with it on the AT&T network rather than through a WiFi system is hopeless. There is a very good chance that Ceragon will also contribute to the urgent upgrade that this network will shortly undergo, through its OEM agreements with a number of telecommunications equipment giants.

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.