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Executives

Andrea Costa – IR, The Global Consulting Group

Amiram Levinberg – Chairman and CEO

Ari Krashin – CFO

Rachel Prishkolnik – VP, General Counsel and Corporate Secretary

Analysts

Jonathan Ho – Willaim Blair & Company

Eric Mazuko [ph] – Dominic & Dominic [ph]

Jonathan Art – Kaufmann Fund

Jonathan Benordin [ph] – Dominic & Dominic [ph]

Paul Glazer – Glazer Capital Management

Gilat Satellite Networks Ltd. (GILT) Q2 2008 Earnings Call Transcript August 25, 2008 9:30 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Gilat Satellite Networks, Ltd. Second Quarter 2008 Results Conference Call. All participants are present in listen-only mode. Following management’s formal presentation instructions will be given for the question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded August 25, 2008.

I would now like to turn the call over to Amiram Levinberg, CEO of Gilat. Mr. Levinberg, Please go ahead.

Andrea Costa

Yes, this is Andrea Costa. I am going to do a brief introduction. Good morning and good afternoon. Thank you for joining us today for Gilat’s second quarter 2008 results conference call. A recording of the call will be available beginning at approximately 12:00 PM Easter Time August 25, 2008 until August 27, 2008 at 12:00 PM. Our earnings press release and website provides details on accessing the archived call.

Investors are urged to read the forward-looking statements language in our earnings release, but essentially it says statements made on this earnings call, which are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements, including statements regarding future financial operating results involve risks, uncertainties, and contingencies, many of which are beyond the control of Gilat and which may cause actual results to differ materially from anticipated results. Gilat is under no obligation to update of alter our forward-looking statements whether as a result of new information, future events or otherwise and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our report filed with the SEC.

That said, on the call this morning is Gilat’s Chairman of the Board and Chief Executive Officer Amiram Levinberg, Ari Krashin, Chief Financial Officer, and also joining us is Rachel Prishkolnik, the Company’s General Counsel. Amiram, Please go ahead.

Amiram Levinberg

Thank you, Andrea. Good day everyone. I will start by giving you a short update on the status of the merger transaction. Then I will go over our business highlights for the second quarter, key financial indicators, and elaborate about our different market segments. After this, Ari will take you through the detailed financial results and I will summarize. We will open the floor for questions right after this.

As we have announced last week, the Company has met all conditions precedent to close the merger transaction. We informed the Purchasers of our readiness to close the transaction on August 5, 2008. Unfortunately, the Purchasers have verbally informed us that they will not close the merger transaction at the agreed upon $11.4 per share price. The Purchasers made a number of new verbal proposals, which were substantially different from the definitive agreement. These proposals were rejected by the Company’s Board.

The Purchasers also belatedly raised the claim that antitrust clearance was required from the German authorities and then failed to act promptly to obtaining such clearance. In any event such clearance is not condition precedent in the merger agreement. The Company has informed the Purchasers that they have 72 hours to complete the definitive merger transaction. If the conditions are not met, Gilat shall seek all remedies at its disposal, including legal action.

As you know, the merger agreement was entered into on March 31, 2008 by a consortium of investors comprised of Gores Group LLC, Mivtach Shamir Holdings, companies affiliated with Roy Ben-Yami, Ami Lustig, and Eytan Stibbe and DGB Investments, Inc. a company affiliated with Doug Bergeron. The merger agreement contains a guarantee by each of the investors that secures a termination fee in the aggregate amount of $47.3 million, payable to Gilat in the event of an intentional breach of the agreement by them.

I am, of course, very disappointed that the members of the consortium after 11 months of intensive due diligence and negotiations have chosen not to honor their obligations to complete this transaction. I hope that the consortium will meet its obligations without delay so we need not take legal actions to enforce the undertaking set forth in the agreement.

I will turn now the review towards the review of our quarter. Our financial results for this quarter were lower than second quarter 2007 mainly due to the continued delay in revenue recognition from the operations in Columbia, but also to some extent due to the lumpiness in GNS business. While we have a healthy funnel of deals, we have seen delays in many pending large projects throughout the world.

On the other hand, Spacenet had a good second quarter. Regarding Columbia, I am pleased to report that we have made progress in the negotiations with the Columbian government for a revised agreement, which will enable us to get back on track and recognize it. We believe that we will be able to sign a new agreement by as early as the end of the third quarter. Should this new agreement be signed we will be able perform under newly negotiated indicators and then starting in Q4 we will once again be able to recognize revenues for the (inaudible).

In the developed markets, we saw strong activity in the U.S. with significant deals in the enterprise and gaming sectors. These include both new deals and technology refreshes for existing customers. (inaudible) growth in the emergency management market and announced that a number of state agencies have chosen our satellite services.

Regarding GNS product sales I have often stated that inherent lumpiness of this market especially for product sales. In the second quarter, this lumpiness affected [ph] GNS more than in previous quarters. We primarily attribute this lumpiness to lengthened sales cycles, which we are seeing in many regions of the world. As I previously said, while we have a healthy funnel of large transactions, many projects have been postponed by government, operators, and other customers.

Our SkyEdge II platform is continuing to gain market tractions and we announced this quarter that Alldean has chosen to deploy SkyEdge II for the east African market. This quarter, we also signed our first large integrated WiMAX/VSAT deal. If you remember, we announced last quarter that we are (inaudible) for WiMAX products. I will discuss all these issues in more detail a bit later.

Moving to the financial indicators summary slide, quarterly revenues were $65.6 million in the second quarter of 2008 compared to $70.3 million in the comparable quarter in 2007. The net income for this quarter excluding $200,000 of merger related transaction expenses was $1.5 million compared to $5.5 million in the comparable quarter of 2007. The effect of our inability to recognize the revenues of our Columbian operations in Q2 results was $3.7 million in revenues, operating income, net income, and EBITDA in comparison to Q2 2007. Ari will provide a more in depth presentation of our financials a bit later.

Delving into a little more detail about our business during the second quarter, I will begin with the developed markets. Spacenet had strong quarter attaining result in bookings and profitability. Spacenet saw enhanced activity in the gaming segment in Q2 with major turnkey VSAT solution rollout for state lotteries. Spacenet is currently working on a number of state lottery rollouts that has over 25,000 sites.

On the enterprise front, Spacenet signed a number of contracts with existing clients for technology refresh as well as contracts with new customers. The recent awards include a major hotel chain, a big box retailer, and a restaurant chain for a total of over 10,000 sites.

Another growth area in the developed markets is emergency management. Spacenet has recently launched a new product for this market called ION. It is a ruggedized suitcase sized product that provide satellite network in a box and is designed for emergency response personnel. ION can be integrated into a mobile command vehicle and support coverage voice, video, and high speed data services. Two separate state agencies, Missouri Hospital Association and Missouri Department of Transportation are using our satellite service as part of an emergency response network. Both networks were deployed by one of Spacenet’s long-time channel partners, Orbital Data Net, and provide high speed satellite links to support digital data and voice communication, radio backhaul, and VPN Internet access in case of disaster or terrestrial connectivity failure.

Now, I would like to turn to the emerging markets. As I have mentioned, GNS product sales are deal sensitive and it is hard to forecast the exact timing of such deals. Since many of the deals that are (inaudible) are relatively large projects, their overall effect on the specific quarter are quite significant. In the first month, we have seen much longer cycles and many more delays in projects on the part of governments and operators. One such example is a large education project that was scheduled to close in the first quarter, then delayed to the second quarter, and now we hope to bring good news again in this project in the third quarter.

As a general rule, we do not see cancellations of projects or (inaudible) intensity in our competition and our (inaudible). Our SkyEdge II continues to gain the market traction. SkyEdge II high performance enables us to reach new high value markets that require high bandwidth and more throughput. In addition, SkyEdge II is very efficient in terms of satellite resources which translates to a better return on investment for our customers (inaudible). We have customers for SkyEdge II in the Americas, Europe, Africa, and Asia.

This quarter we received our first large integrated WiMAX deal, which includes both integration with satellite technology and turn-key network products. This is first phase for an even larger government project to provide Internet access to schools. We see this as a positive sign for synergy between the two technologies, WiMAX and satellite, as well as a vote of confidence for our core strength in rural regions which is (inaudible) WiMAX network (inaudible).

That concludes our business overview. Now I would like to turn over the call to Ari Krashin, our new CFO, who will review the financials. Ari has been with Gilat for the last eight years. In his last position he served as Gilat’s Director of Finance. I want to take this opportunity to congratulate Ari for his new position in the Company. Ari?

Ari Krashin

Thank you very much, Amiram. Good morning, and afternoon everyone. I would like to provide you with our second quarter results as well as offer some details on the quarterly financials. Before I dig into the numbers, let me remind you that our GAAP financial results include the impact of FAS 123R, the inclusion of equity based compensation expenses in the P&L. In our press release, we are presenting GAAP and non-GAAP results as well as reconciliation tables, which highlight this data.

Revenue for the second quarter was $65.6 million compared to $70.3 million in the second quarter of 2007, a decrease of approximately 6.7%. This decrease in year-over-year revenues is related mainly to the continued deferral of revenues relating to the projects in Columbia. Revenues of approximately $3.7 million were recognized in the same period last year. As mentioned in previous quarters, while we are not presently recognizing revenues from the projects in Columbia, we continue to record all related expenses.

Our gross margin for the second quarter was approximately 32% compared to 36% in the second quarter of 2007. As a reminder, our gross margin is affected quarter-to-quarter by the mix of (inaudible) and services, the region in which we operate, the size of our deals, and the timing in which transaction are consummated. As such, we are subject to lumpiness in our business, which can lead to quarter-to-quarter fluctuation. This (inaudible) together with expenses related to operation in Columbia had a negative impact on our gross margin this quarter. In addition, we are seeing more aggressive pricing activity in certain region of the world.

Gross R&D expenses increased slightly from $4.4 million in the second quarter of 2007 to $4.6 million this quarter. This – the increase was primarily due to additional headcount, which was in accordance with the Company strength (inaudible) focus on targeted investment in R&D.

Operating income for the quarter was $0.7 million compared to $4.4 million in the second quarter of 2007. Operating income for the quarter reflects the impact of our Columbian operation, the foreign exchange impact of (inaudible) for the decline in value of U.S. dollar versus the Israel shekel, as well as the decrease in revenues and gross margin.

During the quarter, the shekel declined in value of U.S. dollar. The Israeli shekels accounted for approximately $1.7 million.

Our net financial income for the second quarter was $0.9 million compared to financial income of $1.3 million in the same quarter of 2007. The reduction is attributed mainly to the decrease in the interest rates.

Our GAAP net income for the second quarter of 2008 was $1.3 million or $0.03 per diluted share compared to a net income of $5.5 million or $0.13 per diluted share for the second quarter of 2007.

At the end of the quarter, our cash balance, including marketable securities and restricted cash, net of short-term bank credit, amounted to $182.2 million. Our trade receivable at the end of this quarter were $58.1 million. The increase from the previous quarter is a result of longer payment terms primarily in small numbers of transaction with well established customer in certain region.

Our inventories at the end of the quarter were $24.5 million. The increase in our inventories is attributed mainly to (inaudible) that will be deployed during Q3 and Q4 of 2008. Our shareholders’ equity at the end of the quarter totaled $237.7 million.

Now, I would like to turn the call back to Amiram. Amiram?

Amiram Levinberg

Thank you Ari. To summarize, we are disappointed in the difficulties we face in closing the merger agreement, but I hope the Purchasers will honor their commitment. Our Spacenet in the United States is experiencing positive trends, evidenced by strong momentum in the second quarter. We believe that we will be able to sign a new agreement with the Columbian agreement by as early as the end of the third quarter. Our funnel is healthy and bookings in Q2 were double the bookings in Q1 and I estimate that all of these factors will bring a positive impact on our business beginning in Q4 2008.

That concludes our review. We would now like to open the floor for questions. Operator please?

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator instructions) The first question is from Jonathan Ho of William Blair. Please go ahead.

Jonathan Ho -- William Blair & Company

Good morning. When you say that the proposals you received were materially different, can you talk about how far apart we are talking about here?

Amiram Levinberg

Hi Jonathan.

Jonathan Ho -- William Blair & Company

Good morning.

Amiram Levinberg

Hi, good morning. On the advice of our litigation counsel, I cannot provide you with any specific at this time. But can tell you that until yesterday we were engaged in a verbal dialog with no firm proposal. The offer that has been raised orally were very far from what the Board was willing to recommend to our shareholders. Rachel, you can feel free, if you want to add anything here.

Rachel Prishkolnik

No, I think that’s enough.

Jonathan Ho -- William Blair & Company

In terms of if the deal closes or doesn’t close, do you think there are still sort of other interested parties I mean given the process that you guys went through to basically look at all the opportunities how do you think about that going forward.

Amiram Levinberg

Well, in this process, Jonathan, there were a few companies that have expressed interest. And there was a very orderly process that included a long due diligence process by these companies and by the consortium that eventually signed the definitive agreement with us. So I think it’s (inaudible) mature to say at this point and the only thing I would like to say as I have said before I would expect the investors consortium to honor the definitive agreement they have signed.

Jonathan Ho -- William Blair & Company

Did they give any reason as to why they won't close the deal? I mean you had mentioned sort of the German competitive board. Can you gives us more detail on what they specifically cite as reasons why they don’t think all of the conditions have been met?

Amiram Levinberg

It’s – I don’t really want to speak for them. The German one I just – I referred to okay, and one thing I – I think (inaudible) more on this unless Rachel you can put some color here on some more details, if you like, but other than that no coherent kind of message that came from them. But after this point (inaudible) obviously a mixture of comments and allegations on what they view and what they think now that I really don’t want to speak for them.

Jonathan Ho -- William Blair & Company

Okay, I will hop back in the queue then.

Amiram Levinberg

Yeah.

Operator

Thank you. The next question is from Eric Mazuko [ph] of Dominic & Dominic [ph]. Please go ahead.

Eric Mazuko -- Dominic & Dominic

good morning, good afternoon. I guess my question are similar. I guess we are trying to get a better understanding of what the buyer is claiming. I guess said there are some critical data they are referring to that wasn’t presented or some terms that the buyers are certain that you guys did not meet. Can you mention anything (inaudible)?

Amiram Levinberg

I generally have no idea what materials they are referring to. Somebody has showed it to me in the – in one of the newspapers just ten minutes before I walked into this room. I don’t know I mean but to get you some perspective for the – as a part of this due diligence, which the due diligence took many, many months and they were using professionals and advisors and we have built an electronic data room as part of this process. That meant management not only care for CEO but management really care the Company. They have done lots of work, and in depth work. They have asked for more material which we added to the data room. It was a very year [ph] long and tiring I would say process. So I generally don’t know what they are referring to.

Eric Mazuko -- Dominic & Dominic

Got you. On the topic of the Columbia contract, you said you guys are making progress there and you hope that’s (inaudible) signed by the third quarter. I guess can you talk a little bit about the difference of I guess the disclosure you made I guess last quarter in regards to Columbia as opposed to now and what’s really changed? Are you in much better place than you are, a much better position than you were last quarter or--?

Amiram Levinberg

I think that – I think there is a change. The change is at – it’s negotiations that go between us and the government and I would think like negotiations that we are in a fairly final stage so I hope that we can sign the agreement with them as soon as end of September.

Eric Mazuko -- Dominic & Dominic

Thank you. Is this – I mean this – is this the main issue with the buyer that is the Columbia contract or--?

Amiram Levinberg

When they first showed up with their hesitation to close, they talked a lot about Columbia. I don’t know what we talk about now and I can think of any material data that we didn’t give them, not only in the due diligence project, you have to understand that it’s – we were in contact with them not only in this tedious due diligence but also after the agreement has been signed. They kept a fairly close contact with the Company. We have updated them as per the agreement on any I would say development in the Company. So, I have no idea what – where they are coming from.

Eric Mazuko -- Dominic & Dominic

And how strong do you guys believe your case is?

Amiram Levinberg

Rachel is my lawyer. She is on the line. I think that our case is very strong

Rachel Prishkolnik

Yeah, I mean we feel confident that we have met all conditions precedent and answered their question and the agreement needs to be closed and that any decision not to close the agreement will constitute a breach, an intentional breach from the Purchasers of the agreement.

Eric Mazuko -- Dominic & Dominic

Thank you. And then I guess last question, just – I just noticed in the release that where as you mentioned 72 hours, three days. Is that number based on anything? Does that come with the merger agreement? Is that strategy or--?

Amiram Levinberg

It’s not – basically they have consumed all the time but since we want to work bona fide with them we want really to give them the best chances to close the deal if they change their mind. If they face some difficulties maybe in financing or whatever we want really to give them all the best chances to still come back and close the deal. So that is the reason why we actually have given them some additional time if they need this extra time in order to come and close the transaction.

Eric Mazuko -- Dominic & Dominic

And you are still in active discussion or--?

Amiram Levinberg

I think we have been in active discussion up until today. Today I had one telephone call with one person from the investors’ group. I don’t know how it will evolve from now on in the next few days. We have been in continuous dialog with them in the last I will say two weeks.

Eric Mazuko -- Dominic & Dominic

I see. And another – one other issue was there was the headquarters that were possibly for sale. Is that still – are you guys going to go ahead with that or it’s just the buyer going to go ahead with that post transaction?

Amiram Levinberg

Yes, you are talking about real estate now, excuse me--?

Eric Mazuko -- Dominic & Dominic

Yes, the real estate, yes.

Rachel Prishkolnik

Sorry. I will clarify. The real estate was not for sale. I mean I know there were rumors in the papers that the real estate was for sale and there may have been intentions on the part of the Purchasers but nothing like that came out of the Company and the Company hasn’t put this property [ph] up for sale at any point.

Eric Mazuko -- Dominic & Dominic

Okay. Well thank you very much.

Amiram Levinberg

Thank you.

Operator

(Operator instructions) The next question is from Jon Art of Kaufmann Fund. Please go ahead.

Jonathan Art -- Kaufmann Fund

Hi, good morning. I am wondering if you could go over divisional revenue and compare with the March quarter so we know specifically where the revenue shortfalls were. Perhaps you could start with Rural and talk about when the last time revenue from Columbia was recognized.

Amiram Levinberg

I will start and then Ari can fill in the blanks. The last time that we recognized in part revenues from Columbia was in Q3. in Q3 we didn’t recognize the full 3.7, we recognized just part of it. And then in Q4 ’07 we did not recognize the full amount of $3.7 million and that was the case for Q1 and Q2.

Jonathan Art -- Kaufmann Fund

And what is the expense in Columbia?

Amiram Levinberg

I would say roughly this – Ari?

Ari Krashin

And I would say roughly between one plus minus 1.5.

Amiram Levinberg

No, it’s roughly the same 3.7, slightly more than that—

Ari Krashin

Per month. Per quarter it’s approximately 3.7, right.

Amiram Levinberg

Yes, exactly.

Jonathan Art -- Kaufmann Fund

So, to break -- Columbia is a breakeven proposition?

Amiram Levinberg

Correct.

Jonathan Art -- Kaufmann Fund

And could you talk about how Rural and Spacenet did compared with the March quarter?

Amiram Levinberg

How Spacenet Rural did with – compared--?

Jonathan Art -- Kaufmann Fund

Yes, Spacenet – how the Rural businesses based in the U.S. did compared with March quarter in revenue and earnings contribution.

Amiram Levinberg

We – as much as we don’t provide kind of on a per business unit basis I guess you refer to Spacenet Rural, not to Spacent.

Jonathan Art -- Kaufmann Fund

No, I just referred to both, yeah.

Amiram Levinberg

Okay, to both. Ari will take up this?

Ari Krashin

Again, (inaudible) that’s not some kind of that we measure on quarterly basis, these are (inaudible) information that we provide (inaudible) yearly basis

Amiram Levinberg

(inaudible)

Ari Krashin

I think we can see some kind of a slight increase in (inaudible) basic operation in the U.S. a bit higher revenues, stronger booking, better impact on the profit, and Rural operation more or less the same as Q1. I mean no significant changes there.

Amiram Levinberg

Yes.

Jonathan Art -- Kaufmann Fund

So, the entire 5 million quarter-to-quarter decline from March would be entirely ascribed to the GNS operations?

Ari Krashin

A significant portion of – if you want to compare it to the previous quarter, I would say that significant portion of it comes from GNS.

Jonathan Art -- Kaufmann Fund

And are you willing to discuss backlog compared with year-end?

Amiram Levinberg

We generally don’t think that – we don’t discuss backlog on a quarter-to-quarter basis. The only thing I can tell is that backlog end of Q2 has increased from the backlog end of Q1, which we usually did not say but that is – it’s already said bookings were double as compared to the bookings in Q1 and (inaudible) but I really don’t want to reveal the numbers and I think that generally speaking measuring it quarter-to-quarter is somewhat misleading because it’s too short a period of time.

Jonathan Art -- Kaufmann Fund

Okay. And can you -- I guess one other question, where there any 10% customers in the quarter?

Amiram Levinberg

Hold on just a second. We don’t think so we want to really provide the answer.

Jonathan Art -- Kaufmann Fund

Okay. I guess well lastly could you discuss the WiMAX project in more detail, which is what do you think the total potential size of the WiMAX deal is?

Amiram Levinberg

No, we didn’t the say the magnitude of this deal and we at this point in time we don’t have an authorization to put out a press release with the name of the customer but which we might have done rolls (inaudible) it’s an educational project in Latin America and it starts with a combination of VSAT and WiMAX. It is scalable even now but could scale up like probably ten times down the road if further phases of this project will develop.

Jonathan Art -- Kaufmann Fund

Great. Thank you.

Amiram Levinberg

Thank you, Jonathan.

Operator

The next question is a followup from Jonathan Ho of William Blair. Please go ahead.

Jonathan Ho -- William Blair & Company

Hi, I am back. A quick question in terms of your cash. You guys have a substantial number – amount of cash on the balance sheet right now. Do you intend to do anything with it in terms of share buybacks or anything, moving forward?

Amiram Levinberg

We don’t have a share buyback program at this point of time, Jonathan. So, at this point of time, we don’t have such a program.

Jonathan Ho -- William Blair & Company

Just in terms of the balance sheet, taking a look at your inventories and also accounts receivable, we have seen it increase on that side quarter-over-quarter. Just wanted to get a sense of maybe what’s happening on that side.

Amiram Levinberg

I will start and Ari, you can fill in. Generally speaking, it’s change in kind of type of customers if you like. Last year we had many customers which are coming from specific regions of the world which were kind of pay-in-advance type of customers, which obviously skewed the cash to have lots of cash even before you recognize the revenues. This year we are kind of back to normal. Customers are good, solid customers. We don’t have doubtful accounts in any meaningful way. So, it’s just a change in working capital due to the fact that we are more regular if you like customers (inaudible) net plus 45 or net plus 60 or anything like that same as we pay our suppliers. And that is the main reason for increase in AR. We have good customers. They will pay. It’s not doubtful account in any way.

With regards to inventory, I would say it’s almost arbitrary. Depends on us being prepared for shipment. (inaudible) end of last year at the same level as now and then it went down at the end of Q1, and then it went up at the end of Q2 to the level it was at the end of last year and not very meaningful in my opinion.

Jonathan Ho -- William Blair & Company

With regard to your comments about the bookings doubling in Q2 versus Q1, can you talk or give us a little bit more3 color on where you are seeing strength and whether that trend is continuing into the third quarter?

Amiram Levinberg

I would – as a general comment I would say that generally speaking, Spacenet is doing well. And when it comes to GNS and the region that we feel at this point of view with kind of – the funnel is strong generally speaking. If I would have to categorize, I would think that Latin America is kind of the stronger part at this point of time.

Jonathan Ho -- William Blair & Company

And with regard to the sort of the trend in the bookings into Q3, how do you see that progressing?

Amiram Levinberg

I would think that are going in for Q3 and Q3 that is now – we have a strong funnel. The only question in my mind is I cannot blame [ph] the cycle and considerations like that. I think we have a very strong funnel at this point.

Jonathan Ho -- William Blair & Company

Great. Thank you.

Amiram Levinberg

Thank you.

Operator

Thank you. The next question is from Jonathan Benordin [ph] of Dominic & Dominic [ph]. Please go ahead.

Jonathan Benordin -- Dominic & Dominic

Hi, good morning and good afternoon.

Amiram Levinberg

Good morning.

Jonathan Benordin -- Dominic & Dominic

In the event of the buyer group breaches and this actually goes to litigation, will the damages you seek be limited or capped at the $47 million termination fee or would it be possible for the court to assess more for the intellectual breach -- intentional breach?

Rachel Prishkolnik

I’ll answer that. Obviously, we will assess all of the remedies with strong litigators in Israel and in the United States if it comes to that and we will do everything we can to recover all damages to the Company to the extent possible [ph].

Jonathan Benordin -- Dominic & Dominic

Sure. And is it possible for shareholders to have third-party beneficiary rights?

Rachel Prishkolnik

We’ll obviously look into that as well. It’s a little early to comment on the specifics.

Jonathan Benordin -- Dominic & Dominic

Got you. Thank you very much.

Rachel Prishkolnik

My pleasure.

Operator

The next question is from Paul Glazer of Glazer Capital Management. Please go ahead.

Paul Glazer -- Glazer Capital Management

Yes, thank you. I don’t know if there is truth but we read in the paper over the past week or two that the buyer was talking floating a $10.90 acquisition price down from the $11.40 that had been agreed upon. I have no idea if that’s true or not, but I did want to comment that that’s less than a 5% discount and it’s not necessarily clear that that would be substantially different than the $11.40. It’s a judgment call. And it is noteworthy that it is 40% higher than what your stock is trading right now. So I just wanted to make that comment.

Amiram Levinberg

Okay. Rachel, do you want to say anything about that?

Rachel Prishkolnik

No, I don’t think we should comment on rumors in the market, if that’s okay.

Amiram Levinberg

Okay.

Operator

The next question is a followup from Jon Art of Kaufmann Fund. Please go ahead.

Jonathan Art -- Kaufmann Fund

Yes. Could you comment as to what reasons the buyer group gave for breaching the clause and what viable reasons they would have under the mac [ph] clauses of your purchase agreement and whether the quarterly results in any way might be construed, having it down sequential quarter, as being such a mac [ph] clause.

Rachel Prishkolnik

I will respond to that, Jonathan. We don’t – first of all, we haven’t been given specific reasons by the buyers group. Second, we are of the opinion that there is no mac and that the financial results of this quarter would not constitute a mac and I think you can all look at the agreement, it’s part of the proxy and has been filed with the SEC and see that for yourself.

Jonathan Art -- Kaufmann Fund

Great. Thank you. And so would we expect that if 72 hours pass that litigation would begin fairly shortly thereafter?

Amiram Levinberg

Yes.

Rachel Prishkolnik

Our litigators will decide on the timing, obviously.

Amiram Levinberg

No, but, Jonathan, the answer to that is yes I mean if we, if time past it’s (inaudible) how to say it in English. Here in the – in courts in Israel so it takes a little bit more but other than that, yes, I mean we take all legal steps as we have said.

Jonathan Art -- Kaufmann Fund

Great. Thank you.

Operator

Thank you. There are no further questions at this time. Before I ask Mr. Levinberg to go ahead with his closing statement, I would like to remind participants that a reply of this call is scheduled to begin two hours after the conference. In the U.S., please call 1-888-326-9310. In Israel, please call 03-925-5947. Internationally, please call 9723-925-5947. Mr. Levinberg, would you like to make your concluding statement?

Amiram Levinberg

Yes, I just like to thank you for joining us for this quarter’s call. Good afternoon and good day.

Operator

Thank you. This concludes the Gilat Satellite Networks, Ltd. second quarter 2008 results conference call. Thank you for your participation. You may go ahead and disconnect.

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Source: Gilat Satellite Networks Ltd. Q2 2008 Earnings Call Transcript
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