Gilat Take Two: Anteing Up Again

In the turmoil of the last few weeks, 'there is an under the radar' story (pun intended) that is worth recalling. A story that could change the world as we know it.

The majority of folks on the planet still lack telephones. They lack the basic services that telecommunications makes possible. The internet and computers are still the stuff of science fiction in these areas.

Laying telephone lines or cables in many of these remote areas is not cost effective. Fixed ground based systems require too much maintenance and takes too long to install. That is where satellite communications comes in. When you talk satellite communications, the biggest little company in the world is Gilat Satellite (GILT).

Gilat makes the hardware, called VSAT (very small aperture) terminals, and provides the signal encryption technology used to encode the signals. Gilat currently controls fifty percent of the global VSAT market. Gilat technology has been improved to the point where weather no longer interferes with transmission or reception. Like the US Postal Service it delivers rain or shine. In fact, the USPS uses Gilat Satellite technology in all of its offices.

Five years ago I began building a stake in Gilat buying shares form $6 to $9. Then not long ago Gilat agreed to be taken over by an Israeli VC firm for $11.40 a share. I was disappointed because I thought the company was worth twice as much. In fact in Dec. 2007, this Forbes article confirmed my view.

Being a realist I sold at $10.90 and decided to move on. Then the 'you know what' hit the fan.

The Israeli VC company decided to re-negotiate the price. Gilat refused. Both companies are in court. Charges and counter charges could go on for years. Did the VC companies financing from Lehman Brothers have anything to do with the problem? Maybe. In any case you can drudge through all the info on your own. Since the deal's implosion, Gilat's share price has fallen by fifty percent.

So what's the big news?

September 9, 2008: O3b Networks, with support from Google, Liberty Global and HSBC, to deploy world’s first high-speed, low-cost satellite system to transform communications access for billions

and this...

September 22, 2008: O3b Networks and Gilat announce Gilat’s new line of satellite ground-segment equipment for O3b Networks’ "fiber performance over satellite" network

Gilat Satellite once sold for close to $3000 a share. That's not a typo. Three Thousand Dollars a share! Will it ever see such a price again? I don't know. However on Thursday I dove in once again. The shares are selling at less than $6. If you think HSBC (HBC) knows a little about financing and Google (GOOG) know a little about networking, you may want to check out a little company called Gilat Satellite.

Disclosure: Long GILT and HBC

Comments

[ManAboutDallas:]

Sorry, Mr. Yakov, GILT never - repeat, NEVER! - sold for $3000 a share, or anything close to it. As happens to so many, you've fallen for and into the "reverse split trap" when looking at a stock's chart. GILT had a 1:20 reverse split

16-Apr-03 4.70 4.80 4.36 4.50 14,600 4.50
16-Apr-03 1 : 20 Stock Split <==================
15-Apr-03 0.25 0.25 0.22 0.22 1,439,700 4.40

on April 16th, 2003. Its TRUE trading high was

22-Feb-00 175.50 176.00 160.00 160.00 299,800 3,200.00
18-Feb-00 162.25 181.50 162.00 172.00 645,700 3,440.00 <======
17-Feb-00 153.00 162.50 152.50 159.00 661,000 3,180.00

February 18th, 2000 at a TRUE TRADING PRICE of $181.50

All info from Yahoo Historical Quotes, which shows TRUE prices along with split-adjusted prices.

2008 Oct 06 12:04 PM

[ManAboutDallas:]

That said, I share your enthusiasm for GILT. Perhaps even more so.

2008 Oct 06 12:05 PM

[Menachem Be...:]

ManAboutDallas, You are 100% correct! I should have labeled my figure as the " adjusted price ". I appreciate your taking the time to set the record straight and I am heartened that an investor as astute as yourself shares my enthusiasm for Gilat Satellite.
Menachem Ben Yakov

2008 Oct 06 12:18 PM

[ManAboutDallas:]

You're welcome, Mr. Yakov. As you, yourself, remarked to another poster on Sept 09, "Nothing is as impressive as a person who admits an error and thanks the person who corrects them."

I will be reading *your* posts with a new enthusiasm, as well.

Regards,
M.A.D.

2008 Oct 06 12:33 PM

[arbtrader:]

From memory, Lehman was only the investment banker and an Israeli bank was providing financing. A crucial difference. There are also no SEC filings about any court actions that I can find, and IR is not responsive despite multiple inquiries.

This is a good price to buy in. They have assets of around 4-5$ a share so you are getting the business side for very little.

2008 Oct 06 01:01 PM

[Menachem Be...:]

Thank you for your comments arbtrader. The VC company I mentioned is Mivtach Shamir. A quick search will provide numerous articles on the deal , the fallout and Lehmans' involvement.
MBY

2008 Oct 07 12:56 PM

[arbtrader:]

Menachem, I did a quick google search under 'Mitvtach Shamir' and did not get any relevent hits. Are the articles all in Hebrew? That was a problem when the deal went sideways- very little info in English.

IR also refused comment on a lawsuit or even if there was one filed, and indicated no news forthcoming till the next conference call. Perhaps your resources are better than mine, I just prefer a more open management....even a comment like 'we continue to negotiate' is fine. Regards.

2008 Oct 09 04:27 PM

[Menachem Be...:]

Sorry for delay arbtrader.

www.google.com/search?...=

2008 Oct 15 09:43 AM