Tech Earnings Concerns Sinks Ezchip: Israel Overnight

EZchip Semiconductor Ltd. (EZCH) and Allot (ALLT) Communications Ltd. sank in Tel Aviv and in New York on concern slower global growth is curbing corporate profits.

EZchip, the technology company that supplies network processors to Cisco Systems Inc. (CSCO), dropped 4.3 percent to 134.2 shekels, the lowest since Feb. 7. Shares slid 1.4 percent to $33.26 by 4:30 p.m. in New York. Allot, the maker of software to regulate traffic on networks, tumbled 6 percent, while the U.S. stock retreated 0.5 percent to $22.57. Israel’s benchmark TA-25 (TA-25) Index fell 0.7 percent today.

Technology stocks and telecommunications stocks led the Nasdaq Composite Index (CCMP) to the lowest level in two weeks as weaker demand in Europe and China for computers drove Applied Materials Inc. (AMAT) to slice its earnings forecast as Acme Packet (APKT) Inc. reported an unexpected decline in preliminary sales. Global server sales fell 2.4 percent in the first quarter, driven by a 14 percent decline in western Europe, according to a Bloomberg Industries report released this week.

“There is growing concern that macro-economic conditions are going to mean slower growth for these high-tech companies,” Joseph Wolf, an analyst for Barclays Plc in Tel Aviv, said today by phone.

The TA-25 has fallen 1.7 percent in 2012, compared with a decline of 4.7 percent for the Bloomberg Israel-US Equity (ISRA25BN) Index.

“Earnings commentary from technology companies has many investors fearing that telecommunication and Internet technology spending is weak and appears to be decelerating,” Andrew Uerkwitz, an analyst at Oppenheimer & Co., said by e-mail from New York yesterday. “In the short term this is bad for all technology companies including EZchip.”

Applied Materials

Shares on the Nasdaq Computer Index (IXK) fell 1.2 percent, paring the advance to 11 percent this year. EZchip closed at the equivalent of $33.78 in Tel Aviv today. Allot, based in Hod Hasharon, Israel, dropped the most since February to 90.32 shekels, or $22.74, in Tel Aviv.

Net sales for Applied Materials, a chip-making equipment provider, won’t reach the previous outlook of $9.1 billion to $9.5 billion, the Santa Clara, California-based company said in a statement on July 10. Earnings per share excluding some items will be less than a previous projection of 85 cents a share to 95 cents a share, the company said.

Applied Materials Chief Executive Officer Mike Splinter, speaking at a conference July 10 in San Francisco, said demand in Europe and China is ebbing.

‘Poor Earnings’

Data on July 13 is expected to show China’s economy expanded 7.7 percent in the second quarter, the slowest pace in three years, according to the median estimate of 38 economists surveyed by Bloomberg.

Federal Reserve minutes from a June meeting released yesterday showed comments of members who said strains in global markets stemming from Europe’s debt crisis have increased since their April gathering. More action may be necessary to boost the labor market, a few members said.

“China is suffering from serious economic problems and the European situation is very severe,” Harry Edelson, partner at venture capital firm Edelson Technology Partners, said by phone from Woodcliff Lake, New Jersey, yesterday. “This signals we’re going to see more poor earnings for technology companies and that’s putting a drag on the stocks.”

Weaker Demand

Acme Packet, a maker of computer-networking technology, reported preliminary revenue of between $66 million and $68 million in the second quarter, citing weaker demand from service providers, according to a July 6 statement.

EZchip, based in Yokneam, Israel, will probably say sales fell 10 percent to $15.5 million in the second quarter, according to the median estimate of eight analysts surveyed by Bloomberg.

Allot (ALLT) will probably say sales increased to $25 million from $18.5 million in the year-earlier period, according to the mean estimate of 11 analysts surveyed by Bloomberg.

To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net; Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

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

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