Allot, Ceragon Slump on Network Spending Plans: Israel Overnight
Stock Chart for Allot Communications Ltd (ALLT)
Ceragon Networks Ltd. (CRNT) and Allot Communications Ltd. (ALLT), two Israeli technology companies traded in New York, fell last week on concern telephone companies will cut spending on network equipment.
Ceragon, the Tel Aviv-based maker of wireless-networking systems, dropped 6.1 percent last week while Allot, Israel’s biggest maker of high-speed networking equipment, declined 8.7 percent after AT&T Inc. (T) of Dallas and New York-based Verizon Communications Inc. (VZ) said they’ll invest less than analysts had expected. The Israeli shares of Ceragon retreated 2.9 percent and Allot’s lost 5 percent at the 4:30 close in Tel Aviv today. The country’s TA-25 Index gained 1.8 percent to 1,143.14, the highest level since Aug. 4, after jumping 3.5 percent last week. The Bloomberg Israel-US 25 Index gained 0.5 percent in the period.
The U.S. telephone companies moved forward investment plans this year, which will reduce spending by the companies in the fourth quarter, when outlays usually peak, Miller Tabak & Co. analyst Alex Henderson wrote in an e-mail. Juniper Networks Inc. (JNPR), the Sunnyvale, California-based second-largest maker of networking equipment, said last week that sales to service providers will slow.
“People look at what Juniper said and what AT&T came out with and think if it’s happening in the U.S., it’s likely happening in Europe as well,” said Jay Srivatsa, an analyst at Chardan Capital Markets. “People are widely expecting that the weak macro conditions could impact service provider spending, which in turn could have some impact on Allot.”
Ceragon declined to 36.65 shekels, or the equivalent of $10.09, today. The shares slid 6.1 percent in New York last week to $9.90, the biggest drop since the period ended Aug. 5. Allot retreated to 43.86 shekels, or $12.07. The U.S. shares closed at $11.80 last week, while the Tel Aviv shares ended the week at about $12.68.
The 88-cent gap between Allot shares traded in Israel and the U.S. was the third-widest among members of the Bloomberg index. EZchip Semiconductor Ltd. shares in New York command a $2.03 premium, while shares of Mellanox Technologies Ltd. cost $1.57 more in Tel Aviv.
Israeli shares traded in New York trailed global stocks last week, with the MSCI World Index advancing 0.7 percent on optimism European policy makers will be able to contain the region’s debt crisis.
A slump in technology stocks weighed on both the Israel-US 25 Index and the S&P 500 Index. Mellanox, the Yokneam, Israel- based adapter maker that’s part owned by Oracle Corp., declined 5.5 percent in New York on the week, while Orbotech Ltd., the Israeli maker of quality-control equipment used for Apple Inc. (AAPL)’s iPhones and iPads, dropped 6.2 percent.
Mellanox declined 4.2 percent to 118.6 shekels, or $32.64 in Tel Aviv today.
Ericsson AB, the world’s largest maker of wireless networks, expects less investment in networks in North America in the second half of this year, Chief Executive Officer Hans Vestberg said in an interview on Bloomberg TV on Oct. 20.
Allot gets most of its sales from Europe where spending on its products may be limited by the sovereign debt problems, Srivatsa said. Warnings from U.S. companies about decreased investment in network equipment may be concerning investors as well, even as the company gets few sales there, Srivatsa said.
Allot’s “product line is really dependent on service provider spending,” Srivatsa said.
Lawrence Harris, an analyst at CL King & Associates, said European carriers haven’t been as quick to upgrade their networks to support faster wireless data transfers.
“People are watching what’s happening in the wireless infrastructure space,” he said. “We’re seeing some signs of moderation of spending in the U.S. Europe, of course, people have been concerned for some time.”
Allot may report third-quarter net income that more than doubled to $1.9 million on sales of $18.6 million when it releases results on Nov. 1, according to the average of analysts’ estimates compiled by Bloomberg.
Ceragon’s biggest customers are service providers in India and other developing markets where its wireless products are used in lieu of cables to connect telecommunications infrastructure, Henderson said. That means it isn’t affected by spending at AT&T and Verizon.
“They’re getting painted by that same brush but they’re really not exposed to that paint,” he said.
Ceragon declined to comment because the company is in a quiet period ahead of earnings, Karen Quatromoni, a company spokeswoman, said in a telephone interview. Ceragon reports results for the third quarter on Nov. 7.
Analysts estimate the company will report a net loss of $9.3 million in the third quarter as sales almost double to $114 million, according to the average of estimates compiled by Bloomberg.
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 a year earlier, according to the Israel Venture Capital-KPMG Quarterly Survey released July 13.
Israel, whose population of 7.7 million is similar to Switzerland’s, has about 60 companies listed on Nasdaq, the most of any country outside North America after China. It is also home to the largest number of start-up companies per capita in the world.
The shekel strengthened 0.6 percent against the dollar to 3.6339 last week, extending the currency’s winning streak to three weeks, the longest since the period ended June 3. The shekel was the top performer last week among 10 emerging markets in Europe, the Middle East and Africa tracked by Bloomberg.
SodaStream International Ltd., the Israeli producer of homemade soda machines, declined for the first week this month. The shares fell 4.4 percent to $33.67 in New York trading last week.
SodaStream’s drop followed Green Mountain Coffee Roasters Inc. (GMCR)’s retreat to the lowest level in five months. Green Mountain plunged after hedge fund manager David Einhorn said Oct. 17 the largest U.S. seller of single-serve coffee makers has a “limited” market for its products.
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