Israeli technology companies, the worst performers among the nation’s U.S.-listed stocks this year, are poised to post the slowest sales growth since 2009 as Europe’s recession cuts spending on phones to computers.
Allot (ALLT:US) Communications Ltd. and EZchip Semiconductor Ltd. (EZCH) are driving a 4.9 percent slide in a group of 11 technology stocks on the Bloomberg Israel-US Equity Index. The measure of the largest Israeli companies traded in the U.S. fell 2.6 percent last week, trimming its annual advance to 1.8 percent. Syneron Medical Ltd. (ELOS:US) plunged 9.8 percent in the five-day period.
Revenue for technology companies on the Israel-US gauge rose 5.9 percent in the first quarter, the least since April- June 2009, according to analysts’ estimates compiled by Bloomberg. Verizon Communications Inc. (VZ:US) to SAP AG say corporate demand for technology is waning as businesses cut spending amid the global slowdown. Europe, Israel’s second-largest trading partner, accounted for 23 percent of the listed companies’ sales last year, data collated by Bloomberg show.
“Europe is still a big drag on the market,” Jay Srivatsa, an analyst at Chardan Capital Markets LLC in New York who covers companies including EZchip and Tower Semiconductor Ltd., said by phone April 19. “Spending is just not there. Many large companies don’t know if they’re completely out of the woods or when the overall market’s going to turn.”
The euro-zone economy contracted 0.9 percent in the first quarter, according to the median of 33 economists’ estimates compiled by Bloomberg.
Allot’s 38 percent plunge and EZchip’s 35 percent tumble contributed the most to this year’s 4.9 percent slump in the group of Israeli technology companies, compared to a 0.7 percent retreat in the Standard & Poor’s Information Technology Sector Index.
The benchmark TA-25 Index (TA-25) was little changed at 1,203.37 at the close today in Tel Aviv.
SAP AG, the largest maker of business-management software, projected on April 19 a difficult market for its government business amid spending cuts. Verizon Communications Inc. said on a conference call April 18 that corporate services, such as voice and data transport, were declining.
Microsoft Corp. reported no gains in Windows sales in its latest quarter, as International Business Machines Corp. said it’s struggling to boost hardware sales. PC shipments plummeted 14 percent in the first quarter, the worst decline since researcher IDC began tracking data in 1994.
Orbotech Ltd. (ORBK:US), maker of gear used to test televisions and smartphones, will see the biggest sales drop among technology companies on the Israel-US Index in the first quarter, with revenue slipping 9.8 percent from a year ago to $90.4 million, according to the mean estimate of four analysts compiled by Bloomberg.
Allot, which has the worst year-to-date performance on the Israel-US Index, will post sales increasing 13 percent, the slowest since the third quarter of 2009. EZchip’s sales will increase 4.9 percent in the first quarter, according to the mean of eight analysts compiled by Bloomberg. The Israeli chipmaker has dropped 35 percent this year.
Radware Ltd., maker of network technology, has dropped 26 percent after the company reported first-quarter profit that was at least 10 cents a share below its forecast on April 5. The Tel Aviv-based company’s $45 million revenue in the first three months of the year was below projections as sales from China and the Europe, Middle East and Africa region declined, Radware said in a statement.
Check Point Software Technologies Ltd. dropped to 12.9 times estimated earnings on April 19, the lowest since Nov. 16. The Tel Aviv-based security networks maker is the first company in the gauge to report earnings on April 22.
Neither of the analysts who cover Ituran Location and Control Ltd. (ITRN:US) publishes earnings estimates, so the Azur, Israel- based company was not included in the industry data.
The last time sales were slower than they’re projected to be in the this year’s first quarter, shares of the 11 technology companies in the Israel-US Index gained an average of 31 percent in the following three months, data compiled by Bloomberg show.
Analysts from Oppenheimer & Co. to Needham & Co. say that revenues should improve in the second half of the year.
“The first quarter is seasonably low,” Andrew Uerkwitz, analyst at Oppenheimer said by telephone on April 19. Within the Israel-US Index, he covers Orbotech and EZchip and rates them both the equivalent of buy. “The Israeli companies are well- positioned to capture any uptick in the economy. There’s nothing inherently wrong with these companies. It’s really macro-driven right now.”
Israel, whose population of 8 million is similar in size to Switzerland’s, is home to more startups per capita than the U.S. and has 54 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China.
The Bloomberg Israel-US Equity Index (ISRA25BN) dropped 2.6 percent last week, the biggest decline since July, to 87.95.
Syneron Medical Ltd. fell 9.8 percent to $8.87, the largest drop on the gauge. The maker of skin treatment devices announced on April 17 that co-founder and Chairman Shimon Eckhouse will replace Louis Scafuri as CEO.
Caesarstone Sdot Yam Ltd. dropped 2 percent last week to $22.30, the lowest since Feb. 8. The maker of quartz-based countertops will continue with plans to expand globally after Tene Investment Funds Ltd. sold most of its stake, Chief Executive Officer Yosef Shiran said April 19 in an interview from New Orleans.
Prolor Biotech Inc. had the biggest gain last week, advancing 2.6 percent to $5.56. Shares in Tel Aviv today added 2 percent to 20.57 shekels, or $5.66.
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