"Israeli tech companies under our coverage generate over 95% of total revenue
in dollars, while 20%-50% of total expenses are shekel-based. While it is difficult
to predict the specific impact of the shekel move on individual company results,
we believe the current direction of the shekel versus the dollar is generally
positive for margins among companies under our coverage," the investment
bank said.
The companies with the highest percentage of total operating expenses in
shekels included Comverse (Nasdaq: CMVT) with roughly 50%, Orbotech
(Nasdaq: ORBK) with 35%, Check Point (Nasdaq: CHKP) with 25% and
AudioCodes with 25%.
"While we expect some companies to leverage the devaluation in order to report
higher operating profits, we would not be surprised if others use the benefit by
investing more (in shekels) in sales and marketing as well as R&D, and in some
cases lowering prices. In doing so, the companies can attempt to gain market
share and potentially enhance distribution and their product portfolio without
negatively impacting profitability beyond current 2002 plans," the analysts noted.
Goldman Sachs said today that Israeli technology companies could experience
a modest impact to profitability in 2002 if the shekel's exchange rate remained at
current levels, or weakened further.