AudioCodes Sees Microsoft Deal Driving Sales, Market Share

AudioCodes Ltd. (AUDC), a maker of technology to enable Internet phone calls, is seeking to triple sales within five years, helped by a tie-up with Microsoft Corp. (MSFT)

The company aims for a 10 percent share of what it estimates to be a $5.4 billion market for its Voice over Internet Protocol Call technology, Chief Strategy Officer Jeffrey Kahn said in a phone interview yesterday. About 200 Microsoft resellers are including Lod, Israel-based AudioCodes as part of their telephone solutions package, he said.

“The real growth of the voice-over-Internet market is ahead of us, and the real opportunity in unified communications, the contact centers and the mobile voice is just starting,” Chief Financial Officer Guy Avidan said in a phone interview.

AudioCodes’ sales of products that bridge fixed-line and Internet calls are growing after Microsoft introduced Lync last year to offer corporate phone services. The Redmond, Washington- based company, the world’s biggest software maker, has said Lync may generate sales of more than $1 billion a year.

“They are grabbing market share and we are piggybacking on their success,” Avidan said.

AudioCodes rose 2 percent, the biggest jump since July 19, to 18.67 shekels at the 4:30 p.m. close in Tel Aviv today. The shares have fallen 8.9 percent since the beginning of the year while the benchmark TA-100 Index has dropped 11 percent. New York-listed stocks of AudioCodes have lost 6.8 percent this year.

“Investors are not getting that AudioCodes is a growth company, well-positioned partner-wise and market-wise,” Avidan said.

Ashok Kumar, an analyst at Rodman & Renshaw LLC in New York, said he expects revenue from partnerships and the networking bridge products begun last year to drive sales.

‘Remain Optimistic’

“We remain optimistic on the overall AudioCodes growth story,” Kumar wrote in a July 28 investor note.

The premium investors were willing to pay for AudioCodes earnings was 36 percent compared with what investors are willing to pay for the earnings of the TA-100, down from a February high of 141 percent. The shares trade at 11.9 times estimated 2011 earnings, compared with an average of 18.6 times for 22 peers, according to data compiled by Bloomberg.

Israel, whose population of 7.7 million is similar to Switzerland’s, has 57 companies traded on the Nasdaq, the most of any country outside the U.S., after China. It’s also home to the largest number of start-up companies per capita in the world.

Israeli technology companies raised $569 million in capital during the second quarter of 2011, the most in two years and up from $343 million in the same period last year, according to the Israel Venture Capital-KPMG Quarterly Survey released July 13.

‘Five-Year Plan’

AudioCodes also provides Voice over Internet Protocol technology to companies including Alcatel-Lucent SA, France’s biggest telecommunications-equipment maker.

“Our current five-year plan is to triple our current sales and to grow that to 10 percent and beyond,” Kahn said.

Revenue at San Jose, California-based Cisco Systems Inc. (CSCO), the world’s largest networking-equipment company and an AudioCodes competitor, increased about 40 percent between 2006 and 2010, according to data compiled by Bloomberg.

Amir Argaman, an analyst at CIBC Oppenheimer Tel Aviv Ltd., wrote in a July 28 report that AudioCodes’ trend is positive.

“It seems that the consolidation process in the market is increasing the company’s market share,” Argaman said.

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net.

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