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Mobile Security Industry News

[April 16, 2012]

Globes, Tel Aviv, Israel, Shlomi Cohen column

Apr 16, 2012 (Globes - McClatchy-Tribune Information Services via COMTEX) -- We have a busy week ahead. Leading banks, General Electric, IBM, and fifteen semiconductor companies, including Intel (INTL), the leader in computers, and Qualcomm (QCOM), the leader in telephones, will report. By the end of the week, we will know whether the first-half peak in the indices is already behind us, and we are heading for a deeper correction, or whether the rally seen in the first half will resume following better-than-expected results and guidance.

In the technology sector, the first of the gorillas to report was Google (GOOG), which disappointed last week, and not because of bad results. The company broadcast to investors, via its announcement of a complicated share split, that its growth engines may be exhausted, and that it needs to pull some of the old-style rabbits of the Wall Street magicians out of the hat.

When Google was floated in the summer of 2004, the message to the market from its two young founders, Larry Page and Sergey Brin, was that they would not behave according to decades-old Wall Street custom, and that they had their own way of running a company, a better way, in their view.

The flotation was by way of an auction, to the chagrin of the banks, and Google also refused to take part in the "game" of quarterly guidance. The company gave out that there would be no "tricks" such as splitting the share to make it look cheap to non-professional investors. They took the view that if someone didn't have the $700 that one Google share cost, he shouldn't buy.

The capital market hoped that Google would take a leaf out of Apple's (AAPL) book, and declare a first annual dividend, but instead of that we got the old share splitting trick, which only benefits the brokers, because of the commissions, and gives investors nothing. Google poured salt on the wounds when it announced that the new shares arising from the split would not carry voting rights, because the founders fear losing control. Investors responded by dicing the share, because the two things at once, fear of loss of control and a share split, radiate the distress of a stock that is liable to decline in the absence of growth engines.

From London to Nasdaq Yesterday, I visited a fairly large technology player by local standards, and one that is so far fairly unknown to most Israelis. The player in question is Telit Communications plc (AIM:TCM), traded on London's AIM market. The fact that the company moved to new offices this week in the crowded high-tech center of Ramat Hahayal in Tel Aviv, and its intention of becoming listed on a more active exchange, such as Nasdaq, later on, promise that we will hear more and more about it.

To give the big picture, Telit is in today's most talked about market, wireless communications, but in a less sexy niche than smartphones and tablets. The company's activity is in what is known as M2M (machine to machine), that is, wireless communications between one machine and another, or between a machine and the service provider. For example, in transport, the designers of the prestige Audi A8 car give the driver all the navigation, information and online entertainment services using Telit M2M solutions.

M2M technology facilitates remote reading of electricity, water, and gas meters. There are countless applications that are already based on two-way wireless communications, in shopping, medicine, transport, security, energy, and many other industries, and many more will become based on it in the coming years with the introduction of LTE networks with greater bandwidth.

Cisco (CSCO) estimated that the amount of information transmitted via M2M solutions would grow at an average rate of 109 percent a year between 2010 and 2015. This is the reason that Telit plans to expand its business this year, and to become a service provider, via a collaboration agreement it signed at the The Mobile World Congress 2012 in Barcelona with giant Telefonica, for the thousands of Telit's hardware customers.

Telit was founded more than a decade ago by Oozi Cats, who, over the years, as CEO, has turned it through internal growth and acquisitions into an international company with a presence on five continents, and sales that are expected to exceed the $200 million mark this year. The presence of the Israeli company grew substantially after it bought Motorola's M2M division last year, boosting its market share to 22 percent.

Telit competes with European company Gemalto, which has 29 percent of the M2M market, and with Sierra Wireless (SWIR) of Canada, which has 26 percent.

Telit currently has a market cap of about $100 million. Investment house Canaccord sets a target price for the stock of 82 pence, compared with a current price of 59 pence in London.

___ (c)2012 the Globes (Tel Aviv, Israel) Visit the Globes (Tel Aviv, Israel) at www.globes.co.il/serveen/globes/nodeview.asp?fid=942 Distributed by MCT Information Services

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