Bloomberg News

EZchip Surges on Marvell Acquisition Bets: Israel Overnight

September 13, 2011

Sept. 13 (Bloomberg) -- EZchip Semiconductor Ltd. rose the most in a month in New York on speculation Marvell Technology Group Ltd. will buy the Israeli maker of network processors to stave off growing competition.

EZchip gained 11 percent to $32.65 on the Nasdaq Stock Market, the most since Aug. 3, as Benchmark Co. and MKM Partners LP said Broadcom Corp.’s plan to acquire semiconductor company NetLogic Microsystems Inc. for $3.7 billion will compel Marvell to buy EZchip. Shares of EZchip rose the most yesterday among members of the Bloomberg Israel-US 25 Index of the largest Israeli companies traded in New York.

The gauge fell to the lowest level in a month as speculation Greece is moving closer to default added to concern that the global economy is sinking into recession. Alon Holdings Blue Square Israel Ltd., the nation’s second-largest food retailer, led declines. Israel’s benchmark TA-25 Index fell yesterday below 1,000 for the first time in almost two years and the cost to insure government debt against default soared on concern about regional political upheaval.

“EZchip is in a position of strength right now,” Gary Mobley, an analyst at Benchmark in New York, said by telephone. “Marvell needs to step up its acquisitions to keep the pace. EZchip would be very complementary to their portfolio.”

Ehud Helft, who handles EZchip’s investor relations in New York, and Daniel Yoo, a corporate communications manager at Marvell, declined to comment on a possible acquisition.

Higher Value

Broadcom, the Irvine, California-based maker of communications chips, agreed to buy Santa Clara, California- based NetLogic to gain processors used in data networks, the companies said yesterday in a statement.

NetLogic shareholders will get $50 a share, or 57 percent more than the semiconductor’s closing price on Sept. 9. The company’s shares surged 51 percent yesterday, the most on record.

The deal “increases the value that investors should be putting on EZchip given what Broadcom was willing to pay for NetLogic,” Jeffrey Schreiner, an analyst at Capstone Investments in San Diego, California, said by telephone.

EZchip, whose products allow for quicker data delivery, reported adjusted second-quarter earnings of 33 cents per share, beating the 28-cent average estimate of eight analysts surveyed by Bloomberg. Net income more than doubled to $4.77 million from $2.25 million a year earlier, the Yokneam, Israel-based company said in a statement on Aug. 3.

Marvell, based in Hamilton, Bermuda, had $863 million in cash and near cash items at the end of the second quarter, according to data compiled by Bloomberg.

“The most logical deal in this space would be Marvell for EZchip,” Daniel Berenbaum, an analyst at MKM Partners in Stamford, Connecticut, wrote in an e-mailed report.

Biggest Premium

EZchip shares rose to a record high of $37.74 in New York on July 7, and have retreated 13 percent since then.

The Tel Aviv shares gained 3.6 percent yesterday to 111 shekels, or the equivalent of $29.79. The premium of the New York stock climbed to $2.86, the biggest difference among the largest Israeli companies traded in the U.S.

Israel, whose population of 7.7 million is similar to Switzerland’s, has 57 companies traded on the Nasdaq, the most of any country outside the U.S. after China. It is also home to the largest number of startup companies per capita in the world.

Israeli technology companies raised $569 million in capital during the second quarter of 2011, the most in two years and up from $343 million in the same period last year, according to the Israel Venture Capital-KPMG Quarterly Survey released July 13.

Export Data

The nation’s stock market was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation.

Israeli exports dropped in August to their lowest this year, widening the trade deficit, amid signs of slowing global growth. Exports fell 5.7 percent to $3.58 billion, the Jerusalem-based Central Bureau of Statistics said on its website yesterday.

The shekel fell to the weakest level in a year, dropping 0.5 percent to 3.7290 per U.S. dollar as of 4:30 p.m. in New York yesterday.

Palestinian Authority President Mahmoud Abbas said he will ask the United Nations to accept the state of Palestine as a member at the annual General Assembly meeting that starts Sept. 20. Netanyahu has been lobbying allies to oppose the measure for months and the Obama administration says it will exercise its veto if the measure reaches the UN Security Council.

Egyptian Relations

Egypt’s ruling military council declared on Sept. 10 a state of emergency to restore order after protesters attacked the Israeli embassy in Cairo. Netanyahu told his nation the previous day that the incident had damaged “the fabric of peace” between the two countries while declaring his commitment to the 32-year alliance.

Israel’s TA-25 benchmark stock index fell 2.5 percent to 999.46. Five-year credit-default swaps rose nine basis points, or 0.09 percentage point, to 180, the highest since June 2009, according to New York prices from CMA, which is owned by CME Group Inc. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

The Bloomberg Israel-US 25 Index fell for a third day, dropping 1.1 percent to 80.21.

Given Gains

Alon Holdings retreated 9.8 percent to $5.05. The Tel Aviv shares lost 8.4 percent to 18.46 shekels, or the equivalent of $4.95.

Given Imaging Ltd., the Israeli maker of pill-sized cameras for digestive diagnosis, climbed 5.3 percent to $15.01. The Tel Aviv shares added 0.6 percent to 52.01 shekels, or the equivalent of $13.96.

The company was raised to “buy” from “hold” at Maxim Group after shares fell to the lowest level in a year in New York last week.

Partner Communications Co., Israel’s second-largest mobile- phone operator, declined to the lowest level in almost five years, dropping 2.9 percent to $9.64. The Tel Aviv shares retreated 1.9 percent to 35.30 shekels, or the equivalent of $9.47.

Partner is planning to fire 150 employees as an efficiency measure, financial newspaper TheMarker reported on its website yesterday, without saying where it got the information.

“As part of its standard business practice, Partner considers from time to time its costs structure, including that of manpower,” the company said in an e-mailed statement.

Ceragon Networks Ltd., the Tel Aviv-based maker of wireless-networking systems, climbed for the first day in three, rising 1 percent to $9.71 in New York. The Israeli-traded shares dropped 1.2 percent to 35.17 shekels, or the equivalent of $9.44.

The company received two follow-on orders from a major operator in Brazil, valued at “several millions of dollars,” according to a statement distributed by PRNewswire yesterday.

--Editors: Brendan Walsh, Marie-France Han

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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