TMCNet:  Globes, Tel Aviv, Israel, Shlomi Cohen column

[February 04, 2013]

Globes, Tel Aviv, Israel, Shlomi Cohen column

Feb 04, 2013 (Globes - McClatchy-Tribune Information Services via COMTEX) -- Last week, share prices in three small companies I hold were very volatile. At Attunity Inc. (Nasdaq: ATTU) and AudioCodes Ltd. (Nasdaq: AUDC; TASE: AUDC) it was because of their financials and Attunity's investors conference in New York. The third share, Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR), jumped 25 percent last week, on rumors of a sale of the company.


I hope that the report about a reverse merger with a small private company DVtel Inc. is not true, because I think this would be a difficult transaction to pull off without a clear synergy between the companies, and the value cited for Alvarion seems very low to me. Alvarion, under president and CEO Hezi Lapid, recently put its Wi/MAX division up for sale and is now focusing on Wi-Fi solutions for communications providers. This follows what I think was the brilliant acquisition of Wi-Fi solutions developer Wavion Networks from Elron Electronic Industries Ltd. (TASE: ELRN) by Alvarion's previous CEO Eran Gorev.

Wavion's Wi-Fi solutions have been integrated with the technologies and know-how that Alvarion has accumulated over the years, and it now has something to offer even compared with major competitors like Cisco Systems Inc. (Nasdaq: CSCO) and Ericsson AB (NYSE; OMX: ERIC).

Before speculating about a possible sale of Alvarion, we should wait for the publication of the company's financials on February 20. It is quite possible that they will be a pleasant surprise, thanks to the sale of patents and payment of the Nortel debt -- around $24 million altogether -- and maybe also a large write-off on the hemorrhaging Wi/MAX division. After all, even following the latest rise in the share price, Alvarion has a market cap of just $35 million.

The sale of the Wi/MAX division will turn Alvarion into a very small pure play company with great potential in the hot field of Wi-Fi, which enables telecommunications providers to offer high-speed Internet access and avoid bottlenecks from traffic loads from viewing heavy video content on smartphones and tablets.

Anyone who doubts that Wi-Fi is also a hot item on Wall Street should see what has happened to a company which went public just three months ago: Ruckus Wireless Inc. (Nasdaq: RKUS). It's market cap has skyrocketed to $1.7 billion with a 12-month sales multiple of 6 and profit multiple of over 130. This company, rich in cash following the IPO, and with a share price that is currency for a very steep acquisition, would find it very worthwhile to acquire Alvarion, even for a lot more than the figures cited in the latest rumors.

Expectations killed Attunity Attunity, a small new player in the hot big data business, published strong fourth quarter 2012 financials. It reported more than $7 million in sales and a non-GAAP net profit of $1.5 million. But the share price fell 13 percent, because of sky-high expectations, especially among investors disappointed by the company's guidance of less than 20 percent a year; i.e. sales of $31 million in 2013.

Attunity chairman CEO Shimon Alon dared to say that the company's sales target was $100 million in 2015, after which the company would go on to the next stage. It did not help him. 40 percent of Attunity's sales come from maintenance and services, which grow by less than 10 percent a year. To achieve the target, it needs 20 percent annual growth and a lot more than that for software licenses sales -- the growth engine for every software company which hopes to reach the big leagues. Alon seems to be alluding to his previous success at Precise Software Solutions.

At the investors conference the day after the results were published, the share price partly corrected upwards, because of two important messages. First, an analyst from Nucleus and executives from Amazon.com Inc. (Nasdaq: AMZN) and EMC Corporation (NYSE: EMC) explained just how big the big data and cloud computing market is; and second, Attunity executives explained the company's potential in this market.

To conclude, AudioCodes' share price also plummeted for no logical reason after publishing its financials, but on Friday rebounded to over $4, a level not seen since early 2012, after which the share slid hard. AudioCodes founder and CEO Shabtai Adlersberg was very optimistic in the conference call about the company's growth potential and profit margins, after the bitter drop in results in the second half of 2012. The company's close connection with Microsoft Corporation's (Nasdaq: MSFT) Lync platform is AudioCodes' growth engine for the coming years. After contributing over $15 million to the company's sales in 2012, Adlersberg predicts that Lync will boost sales by 35 percent in 2013.

___ (c)2013 the Globes (Tel Aviv, Israel) Visit the Globes (Tel Aviv, Israel) at www.globes.co.il/serveen/globes/nodeview.asp fid=942 Distributed by MCT Information Services

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