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Orbotech Tumbles as TV Demand Weakens: Israel Overnight

Orbotech Ltd. fell for a third day in New York, capping the longest losing streak in a month, on mounting concern slowing television sales will crimp demand for the Israeli company’s quality-control equipment.

Orbotech, the Israeli maker of equipment used to test screens for televisions, smartphones and tablets, dropped 1.7 percent to $9.27 yesterday in New York, extending its three-day decline to 3.4 percent. Shares of the company are headed for the first quarterly retreat since the three months ended September 2011. The Bloomberg Israel-US Equity Index of the biggest Israeli companies traded in New York lost 1.2 percent to 81 yesterday, the lowest level in three weeks.

Samsung Electronics Co., the world’s biggest maker of flat screens, had its profit estimate cut at Taurus Investment & Securities Co. yesterday, which cited weaker-than-expected demand for televisions. Orbotech said this month that a criminal investigation of engineers in its South Korean unit could result in fines of $1.3 million. The company will probably say on Aug. 1 that second-quarter sales fell 34 percent, according to the mean estimate of four analysts surveyed by Bloomberg.

“The numbers are looking relatively weak for televisions and smartphones and that causes worry about what’s going to happen in the next six to nine months,” Andrew Abrams, an analyst at Avian Securities Inc., said by phone yesterday from New York. “Then you have uncertainty about the fines from the investigation. Those two issues combined are causing investors to throw in the towel and sell the stock.”

Product Sales

Israel’s benchmark TA-25 Index fell 0.1 percent to 1,064.68 at the 4:30 p.m. close in Tel Aviv, taking its quarterly decline to 5.4 percent, compared with a slide of 9.8 percent for the Israel-US Equity Index. Shares of Orbotech have fallen 20 percent in the second quarter.

Yavne, Israel-based Orbotech will probably say sales fell to $101 million in the three months ended June 30, down from $153 million in the year-earlier period, according to the mean estimate of analysts surveyed by Bloomberg. The company reported a 25 percent first-quarter slump in revenue to $100 million.

Orbotech specializes in equipment such as printed-circuit boards and flat panel displays, which test for physical and visual defects in smartphones, televisions and tablets.

Sales of flat panel displays were $11.8 million in the first quarter, compared with $43.2 million in the year-earlier period, Doron Abramovitch, chief financial officer of Orbotech, said in a May 7 earnings call. Printed-circuit boards generated $48.5 million in sales in the first three months of the year, compared with $57.1 million in the first quarter of last year, he said.

Samsung Forecast

Samsung Electronics and LG Display Co., the world’s second-largest flat-panel maker, are among Orbotech’s biggest customers, according to data compiled by Bloomberg.

Taurus Investment cut its operating profit estimate for Samsung Electronics to 6.9 trillion won ($6 billion) from 7.2 trillion won, citing weaker-than-expected demand, after JPMorgan Chase & Co. said June 22 that earnings may fall short of estimates.

Goldman Sachs cut the 2012 growth forecast for smartphone units to 38 percent from 42 percent in a June 24 report. The biggest drivers of the downward revision were western Europe, North America, China and Latin America, the report showed.

Perrigo Premium

Perrigo Co., the largest U.S. over-the-counter maker of drugs, added 0.2 percent to $115.40 in New York yesterday, swelling the premium versus the Tel Aviv shares to $1.20, the most of dually-traded Israeli companies.

The drugmaker’s stock gained 1.6 percent to 455 shekels in Israel today, the equivalent of $115.43. Perrigo expects a faltering economy to support the company’s double-digit growth as consumers buy cheaper store-brand products, John Hendrickson, the head of global operations, said in an interview yesterday.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

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