What Clicks With ClickSoftware, and What's the Deal With Radvision?

Includes: CKSW, RVSN
by: Shlomi Cohen

Traders on Wall Street will be glad to see the back of the turbulent month of October, although it will continue to torment them right up to the last minute since at 8:15pm Israel time, the US Federal Reserve Board will announce its decision on the interest rate following two days of discussions.

After the surprising 50 basis point cut in mid-September, whatever the decision is today, I feel it will send markets into a tailspin, since this time round there is no real consensus and everything is open. There are those who predict the interest rate will be left on hold, while a few others even predict a further 50 basis point cut, since according to them the Fed may see things that others don't see with regard to potential troubles at yet more leading banks. On the macro scene the all-important US labor figures due out on Friday will have a pivotal effect on future interest rate decisions.

According to the forecasts, the sub-prime crisis has yet to reach its peak. It will only be in March 2008, when there will begin to be a reduction in the number of ARMs whose interest payments are adjusted upwards. These ARMs were taken out at initially low rates during the real estate bubble. Until then, the dollar volume of these mortgages will double, and there are fears that many more borrowers will be unable to meet their payments, and turn the apartments over to the banks, a trend that will merely exacerbate the crisis in areas where demand is weak.

A good many small companies are unveiling their results this week, and of those in my portfolio, which is tracked by "Globes", I will be paying particularly close attention to workforce optimization solutions company ClickSoftware Technologies Ltd. (NASDAQ:CKSW), which again reached a high in excess of $7, a price it last saw briefly in the summer of 2000, just after it floated.

The share has gained 24% since the beginning of the month and 130% since the beginning of the year, so the sky's the limit for expectations. I believe that should investors not be pleasantly surprised by the company results and estimates tomorrow, we could see a sharp sell off. As is usually the case with this stock, if that happens it will provide a convenient entry opportunity for those people who have not invested it so far.

The massive turnover that the share has been seeing and the highs it has broken this year are a sign, I feel, not only of the company's strong business, but also of the likelihood of it being sold sooner or later. ClickSoftware, it will be recalled, passed an amendment to its articles of association this year, under which a resolution proposing a transfer of ownership or merger will require a 50% majority of a shareholders' meeting instead of the 75% mandated by Israeli company law.

ClickSoftware has one large US institutional investor called Austin Marxe with 2.3 million shares, 8% of the company, and judging by his behavior over the past year, he appears to be selling off his shares. As a consequence, sometimes the share falls fairly sharply on large volume for no discernible reason. Incidentally, this investor also has fairly large holdings in a number of other small Israeli companies, such as the 2.4 million shares, or 12.4% of Ceva Inc. (NASDAQ:CEVA), and 2.7 million shares or more than 18% of RIT Technologies Ltd. (NASDAQ:RITT).

Bugs in the house

Video conferencing network solutions company Radvision Ltd. (NASDAQ:RVSN), which at the beginning of the month cut its third quarter revenue guidance by $4.5 million to $20.5 million from $25 million, will unveil its results before the opening bell on Thursday. The warning sent the share tumbling and it is currently traded at around half of the $25 high it reached in March. Its fate will be determined on Thursday by the company's guidance for the fourth quarter, and its forecast, if any, for 2008 as a whole.

With $6 net cash per share, and a field - video conferencing platforms over IP and 3G cellular networks - that is clearly still in its infancy, this is a most interesting stock. I have always felt that one should be wary of companies that issue a warning after a long interval, since the saying in Wall Street goes that if you find one bug in a house, a lot more will be crawling out of the woodwork before long, but I do not believe this is the case with Radvision. It has collaborations with giants such as Cisco Systems Inc. (NASDAQ:CSCO), and IBM Corp. (NYSE:IBM), and yesterday it announced yet another collaboration, this time with BEA Systems Inc. (BEAS).

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.