Globes, Tel Aviv, Israel, Shlomi Cohen column
Feb 25, 2013 (Globes - McClatchy-Tribune Information Services via COMTEX) --
The coming week will be crowded with professional technology gatherings. Such events sometimes lead to movement in share prices, because many companies release important announcements at them about new products or agreements. The largest of them is the Mobile World Congress, taking place in Barcelona, with every company that has anything to do with mobile telephony participating, except for Apple (AAPL), which, as usual, is leaving the Spanish arena to rival Samsung.
Actually, there is hardly a single technology company that does not portray itself a having something to do with mobile, which covers the entire range, in both software and hardware, from the smartphone in your hand, via cellular networks, most of them integrated with fixed-line networks, to "clouds", where content is stored and from where it is downloaded.
Another large gathering, the RSA Conference held by storage giant EMC, and considered one of the most important information security conferences, is taking place in San Francisco.
The connection between Barcelona and San Francisco arises from the fact that, without the highest possible level of information security, there is no prospect for the mobile industry, in both the enterprise and consumer sectors, to grow substantially in the coming years. Every day, we hear of hacker attacks on mobile companies like Apple, eBay (EBAY), Facebook (FB), Twitter, and many others, not to mention financial institutions, which have built and are still building mobile infrastructures based on "cloud computing", and which see security as their chief concern.
Radware Ltd. (Nasdaq: RDWR), which I hold in my portfolio here, will be at both conferences. On the one hand, it is a provider (if not all that well known) of security solutions, and on the other hand, it provides load balancing solutions at the application level, including in cloud computing, to the telecommunications carriers that will be at Barcelona this week.
At the RSA Conference, Radware security expert Ziv Gadot will present what is happening today at stock exchanges, which are particular favorites for hackers, and where any slight disturbance to normal trading costs a great deal of money, and makes huge headlines.
Security stocks have been in favor recently, particularly after President Obama raised the subject in his recent State of the Union address. Check Point Software Technologies Ltd. (Nasdaq: CHKP), for example, which published fairly disappointing results and guidance, and basically grew only by a few percentage points, has consolidated again above a price of $50. Sourcefire (FIRE), which the US government prevented Check Point from acquiring when it was still a private company, shot up 14 percent last week on the basis of strong results and guidance. On Friday, financials are due from Palo Alto (PANW), which is expected to report a sales line showing annual growth in the tens of percentage points.
Security stocks are being given very high p/e ratios, especially those with market caps of up to $4 billion, which are considered classic candidates for acquisition by IT giants, chiefly Cisco (CSCO), IBM, EMC, or Oracle (ORCL). In my view, Check Point, with more than $3 billion cash, can be added to the list of potential buyers, rather than the list of acquisition targets as rumor sometimes has it.
Radware hopes that perhaps this week, following the RSA Conference, it will catch the high p/e ratio contagion among mid-cap security stocks, not to mention the fact that it has always been a classic candidate for acquisition by one of the giants. Whether it will be because of a higher p/e ratio, or because of acceleration in its business later in the year, Radware's management is broadcasting to us that we should expect a higher share price, or else it Is not clear why it is convening a special shareholders' meeting next month to approve a 2 for 1 share split.
This move will double the quantity of shares on the market, allowing the stock to become more liquid, something that the large institutions like, and this may encourage them to buy more of it. On the other hand, no management will make a share split unless it is confident that business is going to be better than it is today, because a worsening of the business after a split would be liable to send the share price down to single-digit levels, somewhere no company likes to be.
A third professional gathering, though not as sexy as security and smartphones, but certainly important, will take place in San Jose in California, namely the SPIE Advanced Lithography Conference and Exhibition. There is a close connection between the Mobile World Congress in Barcelona and this conference too, because without substantial progress in the manufacture of processors, it will not be possible in the future to improve the performance of the smartphones and tablets while at the same time reducing their battery consumption.
Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI), which has some of the world's most advanced solutions for metrological inspection in processor manufacturing, will be at the conference, presenting the capabilities it is developing for both the short and the long term. Among other things, it will present solutions for 3D production jointly with Toshiba, one of the NAND processor giants.
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