Verizon Spending Plan Boosts EZchip Shares in Tel Aviv

EZchip Semiconductor Ltd. (EZCH), Israel’s second-largest chipmaker, climbed to a one-month high on prospects the company will benefit from Verizon Communications Inc. (VZ)’s capital spending plan.

Shares of the Yokneam, Israel-based developer gained 3.2 percent to 91.50 shekels, or $25.85. The New York shares advanced to $25.64 on Oct. 18.

Verizon, co-owner of the largest U.S. wireless carrier, said on Oct. 17 that spending on capital goods will be at the higher end of its $16.6 billion previous forecast. Spending by carriers will boost EZchip’s revenue, Chief Financial Officer Dror Israel said in a phone interview on Sept. 17 from Yokneam. The company will probably report next month the fastest third-quarter sales growth in six years, according to the mean estimate of seven analysts surveyed by Bloomberg.

“Any time that you’re seeing the service providers or telcos spending, it’s certainly going to be helpful for a company like EZchip,” Jeffrey Schreiner, an analyst at Feltl & Co. who rates the stock buy, said in a telephone interview from Minneapolis on Oct. 18. “Increases in spending will just validate our prior belief that the spending on edge routers that we have seen over the last quarter or two gaining momentum is still very much in play.”

Biggest Customer

EZchip sank 21 percent in New York on Sept. 12 after Cisco Systems Inc. (CSCO), its biggest customer, said it had developed its own nPower integrated network processor, similar to the Israeli company’s technology. The stock jumped the most in 10 months Sept. 24 as San Jose, California-based Cisco said that the in-home processor will be part of systems that neither previously used, nor were slated to use EZchip’s product, according to Feltl & Co.

Some of the world’s biggest telecommunications companies are upgrading networks as more consumers shift to mobile devices for computing once done on desktop machines.

The higher spending will come in the fourth quarter as the Verizon continues “fixing cities” with wireless upgrades, Chief Financial Officer Fran Shammo said on the earnings conference call. Verizon is refitting its wireless network to a faster phase of long-term evolution, or LTE, in cities where heavy user traffic has slowed network performance.

To contact the reporter on this story: Matthew Kanterman in New York at mkanterman2@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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