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EZchip Like Infineon as Outlook Hits Shares: Israel Overnight

EZchip Semiconductor Ltd. (EZCH) fell the most in three months in New York after the Israeli maker of network processors said sales will drop, joining chipmakers Texas Instruments Inc. (TXN) and Infineon Technologies AG in warning demand may weaken as Europe’s sovereign-debt crisis saps growth.

The shares retreated 8.4 percent to $31.81 on the Nasdaq Stock Market, the biggest decline since Aug. 8, after the Yokneam-based company that counts Cisco Systems Inc. (CSCO) and Juniper Networks Inc. (JNPR) as customers said fourth-quarter sales may drop 30 percent from the third quarter. EZchip lost 1.9 percent to 113.7 shekels, or the equivalent of $30.80, at 10:00 a.m. in Tel Aviv. Israel’s benchmark stock index, the TA-25, fell 2.4 percent.

Customers are holding off on investments on concern that the European sovereign-debt crisis will hurt global economic growth, EZchip said yesterday. The company posted revenue of $18.7 million in the third quarter, up from $16.4 million in the same period last year.

“The guidance is really what hurt them,” said Andrew Uerkwitz, a technology analyst at Oppenheimer & Co. in New York. “The semiconductor industry has been pretty decimated and the reason for that is mostly economy driven.”

The Bloomberg Israel-US 25 Index of the largest New York- listed Israeli companies rose for the first time in three days, led by Teva Pharmaceutical Industries Ltd. (TEVA) The measure gained 2 percent to 86.70 in New York yesterday. The shekel weakened for a fourth day, falling 0.6 percent to 3.6895 a dollar today, extending its drop for the year to 4.5 percent.

Teva’s Forecast

Teva, the world’s largest maker of generic drugs, climbed 1.7 percent to $39.76 yesterday after shares in Tel Aviv closed at the equivalent of $38.64. The New York shares’ premium was the second-biggest among the largest Israeli companies traded in New York. Tel Aviv shares gained 2.1 percent to 144.7 shekels, or $39.20, today.

The pharmaceutical company cut its sales and profit forecast for the year after fewer new U.S. generic-drug introductions led to the company’s first drop in quarterly earnings in four years.

Revenue will be $18.3 billion to $18.6 billion, and earnings excluding some costs will be $4.92 to $5.02 a share, the Petach Tikva, Israel-based company said yesterday in a statement. Teva in July had forecast sales of as high as $19 billion and earnings of up to $5.20 a share.

Teva stuck to its long-term target of $31 billion in sales by 2015 and said it’s considering returning more cash to shareholders.

Sentiment on the stock reversed following the declines in Tel Aviv as Chief Executive Officer Shlomo Yanai gave the new forecasts on a conference call with analysts, said Randall Stanicky, an analyst at Canaccord Genuity in New York, who has a “buy” rating on the shares.

Profit Outlook

“Investors’ expectations were already pretty low as they were struggling to find visibility in the company, and what management did was getting believable near-term numbers out,” Stanicky said. “The change in the capital allocation policy, that’s going to be different in how people think about Teva.”

EZchip, whose products allow for quicker data delivery, said yesterday that third-quarter net income increased to $7.7 million from $4.5 million a year earlier. Revenue rose to $18.7 million from $16.4 million, the company said in a statement.

Sales will probably drop by 25 percent to 30 percent in the fourth quarter from the last three-month period, it said.

“For the near term, the recent mixed market signals combined with discussions of a possible recession are leading contract manufacturers to reduce inventories,” EZchip Chief Executive Officer Eli Fruchter said.

Technology Investment

Alvarion Ltd. (ALVR), a maker of telecommunication equipment, slid 4.8 percent to 3.78 shekels, or $1.02, today. The U.S. shares dropped 5.5 percent to $1.03.

The company said it will probably post fourth-quarter revenue of $43 million to $48 million, below the $51.4 million median estimate of three analysts surveyed by Bloomberg.

Israeli technology companies raised $522 million in capital during the third quarter of 2011, $47 million less than in the second quarter, according to the Israel Venture Capital-KPMG Quarterly Survey released Oct. 24.

Israel, whose population of 7.7 million is similar to Switzerland’s, has about 60 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.

Retalix, Perrigo

Given Imaging Ltd. (GIVN), the maker of a pill-sized camera to diagnose digestive ailments, retreated 2.9 percent to 57 shekels, or $15.44, today. The U.S. shares climbed the most in almost a month, rising 3.7 percent to $15.70 in New York.

Third-quarter net income more than tripled to $3.8 million from $1 million in the same period last year.

Retalix Ltd. (RTLX) fell 2.3 percent to 53.13 shekels, or $14.39. The U.S. shares gained for the first time in three sessions, increasing 1.4 percent to $15.06.

The maker of software used by supermarkets said adjusted third-quarter net income rose 18 percent to $7.7 million.

Perrigo Co. (PRGO), the U.S. pharmaceutical company that began trading in Tel Aviv after buying Israel’s Agis Industries Ltd., dropped 1.4 percent to 322.4 shekels, or $87.34. The U.S. shares gained 1.9 percent to $89.86 yesterday.

The company filed a new drug application with the U.S. Food and Drug Administration for testosterone gel 1.0%. A similar product has annual sales of about $900 million, Perrigo said in a statement yesterday.

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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