EZchip Surges as Juniper Drop Offset by Cisco: Israel Overnight

EZchip Semiconductor Ltd. (EZCH) rose the most in two years after the Israeli maker of network processors said a drop in revenue from Juniper Networks Inc. (JNPR) will be countered by sales to Cisco Systems Inc. (CSCO)

EZchip gained 16 percent to $33.89 on the Nasdaq Stock Market in New York, the biggest increase since November 2008. The Yokneam-based company’s shares in Tel Aviv advanced 5.3 percent to 108.10 shekels, or the equivalent of $31.22. The $2.67 premium for the New York shares was the biggest spread for the largest Israeli companies that trade in the U.S.

Shares of the Israeli chipmaker lost 15 percent in the week after Sunnyvale, California-based Juniper reported on July 27 quarterly sales and profit that fell short of analysts’ estimates as some customers postponed buying gear. EZchip reported record second-quarter sales of $17.3 million yesterday, exceeding the average estimate of $16.9 million among eight analysts surveyed by Bloomberg.

“Other customers such as Cisco are piling up, offsetting any kind of drop that Juniper had,” said Jay Srivatsa, an analyst at Chardan Capital Markets LLC in New York, who has a “buy” rating on the shares. “Their overall business is pretty strong and new products begin to ramp up.”

The Bloomberg Israel-US 25 Index of the largest Israeli companies traded in New York rose 0.8 percent yesterday to 92.46. The measure has dropped 11 percent this year. Israel’s benchmark TA-25 Index fell for a sixth day, the longest stretch of declines since May, dropping 0.8 percent to 1,178.21. The Tel Aviv measure has lost 11.2 percent this year, or 9.4 percent in dollar terms, data compiled by Bloomberg show.

Record Sales

EZchip, whose products allow for quicker data delivery, reported adjusted second-quarter earnings of 33 cents per share, beating the 28-cent average estimate of eight analysts surveyed by Bloomberg. The company said net income more than doubled to $4.77 million from $2.25 million a year earlier.

Sales to San Jose, California-based Cisco grew 35 percent in the period to $5.3 million, reaching 31 percent of revenue, while sales to ZTE Corp., a Guangdong-based maker of video conferencing systems, jumped 48 percent to $2.2 million, or 12 percent of revenue, Chief Executive Officer Eli Fruchter said yesterday on a conference call with analysts. Revenue from Juniper fell 35 percent to $3.4 million.

“We do expect the full year 2011 sales decline to Juniper versus 2010,” Fruchter said. Still, the drop will be “more than offset” by revenue stemming from next generation network processors sold to other customers, he said.

EZchip was the biggest gainer among companies in the Bloomberg Israel-US 25 Index today and is up 52 percent over the past year.

Technology Investment

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 is also home to the largest number of startup 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.

The nation’s stock market was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation.

The Bank of Israel cut on Aug. 2 its forecasts for economic growth to 4.8 percent in 2011 from a previous forecast of 5.2 percent and to 3.9 percent in 2012 from a previous projection of 4.2 percent, saying debt reduction plans in developed countries may lead to a global slowdown.

Shekel Weakens

The shekel fell to the weakest level since May 27, dropping 0.1 percent to 3.4641 per U.S. dollar as of 4:30 p.m. in New York yesterday. The currency has increased 7.1 percent versus the dollar over the past six months, the second-best performer among 10 emerging markets in Europe, Middle East and Africa tracked by Bloomberg.

Teva Pharmaceutical Industries Ltd. (TEVA), the world’s largest maker of generic drugs, rose for the first time in three days, increasing 0.7 percent to $42.37. The Tel Aviv-traded shares declined 3.4 percent to 146.50 shekels, or the equivalent of $42.30.

Investors should sell Teva’s December $40 puts and buy March $45 calls to position themselves for a positive resolution of the litigation involving the company’s multiple sclerosis treatment Copaxone, UBS AG analysts, led by Marc Goodman, wrote in an e-mailed report yesterday.

Magic, Retalix

Magic Software Enterprises Ltd. (MGIC) gained the most in almost a month, rising 4 percent to $5.52. The Tel Aviv shares surged 10 percent, the most since March 24, to 20 shekels, or the equivalent of $5.77.

The Israeli software developer said second-quarter net income soared 84 percent to $3.55 million.

Retalix Ltd. (RTLX) gained for the first time in three sessions, increasing 0.4 percent to $14.30. The Tel Aviv shares added 0.9 percent to 49.86 shekels, or the equivalent of $14.40.

The maker of software used by supermarkets said second- quarter net income rose 81 percent and that 2011 revenue was tracking to the “high end” of its outlook.

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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