Oct. 28--The current reporting season is one of the most surprising in a long time as far as the technology gorillas are concerned. After Google (Nasdaq: GOOG) broke through the glass ceiling of $1,000 a share on the strength of good results, Amazon.com (Nasdaq: AMZN) soon followed, hitting an all-time high of $360 per share on Friday.
If the surprises among the young Internet gorillas were expected, that was not the case with "aging" gorillas like Microsoft (Nasdaq: MSFT) that have also surprised us. This week's interesting results will belong to Facebook (Nasdaq: FB) on Wednesday, which only recently joined the gorillas club, with a market cap of over $100 billion, and the expectations from it are in the stratosphere.
Among the Israeli companies in my portfolio which published their results last week, Radware Ltd. (Nasdaq:RDWR), in addition to good results and guidance, had very interesting news in the hot field of software designed networking (SDN). Attunity Inc. (Nasdaq: ATTU) is on the right track of strong growth in the hot field of big data, and only Mellanox Technologies Ltd. (Nasdaq:MLNX) disappointed. However, anyone who listened to the company's analysts day in New York on Friday, would realize that there is a good chance that 2014 will open with very strong growth.
Radware published better-than-expected results, while its guidance was in-line, and the US market continues to drive its very impressive 30 percent annual growth rate, while the European market is stable. If Radware were to hold an offering today on the basis of its US growth rate and foundations in security, cloud, and SDN, the company would have a much higher valuation than its current market cap of only $635 million at a time when the company is profitable and its net cash reserves total $271 million.
The magic acronym SDN appears in almost every announcement these days by communications software developers, but Radware founder and CEO Roy Zisapel disclosed in the conference call that the company believes that it is the first to receive an order for its SDN security application from a leading US carrier. This carrier provides Radware's security software for enterprise data storage centers that use the carrier's network, saving the carrier costly installations of multiple security hardware platforms.
Before the markets open on Wednesday, an interesting bunch of Israeli companies in my portfolio will publish results: Ceva Inc. (Nasdaq:CEVA); LSE:CVA), which has already published a warning; AudioCodes Ltd. (Nasdaq: AUDC; TASE: AUDC), which has strong business momentum on the basis of Microsoft's Lync; SodaStream International Ltd. (Nasdaq: SODA), which will probably again teach short sellers a lesson; and Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI), which I believe is undervalued among its processor metrology solutions peers.
An arms race is underway between foundry subcontractors as they try to develop high-performance, low-power consumption processors in response to demands by smartphone and tablet makers, led by Apple (Nasdaq: AAPL). This means lower geometries and/or use of more advanced processor manufacturing technologies for apps, computers, and memory.
This race is very good for many equipment manufacturers, but it is especially prominent in the metrology niche, because as production lines become more sophisticated, they require more accurate metrology tests. There is one big company in the field, KLA-Tencor Corporation (Nasdaq: KLAC), which is also involved in many niches, and two small companies: Nanometrics (Nasdaq: NANO) and Israel's Nova. On the basis of KLA-Tencor's orders for the fourth quarter, as well as UBS's reports on Nova's orders from the world's largest foundry, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) (NYSE: TSM; TWSE: 2330), I am quite sure that Nova's guidance for the fourth quarter will be above expectations.
Nova's share price lost momentum with the resignation announcement by its successful CEO, Gabi Seligsohn four months ago, when the company had a double-digit share price. I believe that Seligsohn's successor, Eitan Oppenheim, slipped into his shoes very well. Since taking up the post, there has been a pick-up in orders from foundry's, led by TSMC, and in wins, because of Nova's technological edge over its rivals, among leading flash memory makers such as the SanDisk Corporation (Nasdaq:SNDK) Toshiba Corporation (TSE: 6502; LSE: TOS) ahead of major investments in 2014.
It is absurd that Nova's rival, Nanometrics, is traded at a market cap of $400 million, despite heavy losses in recent quarters, sales that are lower than the difference between the two companies' market caps, and fewer orders than Nova. Nova has a market cap of $245 million, it is profitable, and has $100 million in net cash reserves.
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