ISRAEL 
HIGH-TECH & INVESTMENT REPORT
from the April 2001 issue

ISRAEL HI-TECH MODEL PORTFOLIO

Earnings Revisions and Changes in Recommendations in Portfolio Holdings
Goldman Sachs cut Orbotech Ltd. (Nasdaq: ORBK), announced that it has removed Orbotech from its U.S. recommended for purchase list as it sees the automated optical inspection equipment maker's business slowing faster than expected. It lowered its 2001 earnings per share estimate to $2.53 from $2.80. It also lowered its 2001 revenue outlook to $420 million from $444 million. Goldman Sachs added that it believes inspection equipment revenue could see sharper slowdowns than initially forecast. The brokerage said its longer-term view is very positive

BreezeCOM Revises Outlook to Below Wall Street Estimates
BREEZECOM (Nasdaq:BRZE) revised its quarterly and yearly revenue projections, which fell significantly below Wall Street consensus estimates, and said the U.S. economic slowdown had temporarily impacted growth. BreezeCOM said it expects break-even earnings and revenues of $23 million to $26 million in the first quarter, an increase of between 47% and 67% over year-ago revenues. The company posted a per-share loss of 1 cent in the first quarter of 2000. Earnings for the entire year 2001 should come in at 15 cents to 20 cents per share, the company said in a press release. BreezeCOM said it expected $120 million in sales in 2001 as compared with an earlier announced expectation of $150 million in revenues for all of 2001.

AudioCodes Revises its Forecasts Downwards
AUDIOCODES LTD. (Nasdaq:AUDC) warned that its first-quarter results will be lower than anticipated due to the economic slowdown. AudioCodes, based in Yahud, Israel, said in a release that it now expects earnings of 5 to 7 cents a share. Analysts' consensus forecast is 13 cents per share, according to a survey by research firm First Call/Thomson Financial. The company also said it sees first-quarter revenues of $13.5 million to $15 million, compared with its previous estimate of $20 million. The company is currently in several trials with several customers for the media gateway product and revenues from this line could steadily increase in 2001. Growth in the VoIP gateway area has historically come from the replacement market, although implementation within the switching market and within digital-loop carriers is a high-growth market and has the potential to make solid contributions to VoIP gateway revenues

. Comverse Beats Estimates and is Optimistic as to Future
Comverse Technology (Nasdaq:CMVT) reported 4Q EPS of $0.41 vs $0.30 in the prior year period, on revenues of $347 mln vs $252 mln in 1999. Analysts' mean estimates were $0.39, according to First Call. 2000 FY EPS were $1.47 vs $1.09 in the previous year. It announced for the fourth quarter of fiscal year 2000, ended January 31, 2001, net income growth of 48%, to a record $76.9 million ($0.41 per diluted share), compared with $51.9 million ($0.30 per diluted share) for the fourth quarter of fiscal 1999. The company posted record sales of $346, for the fourth quarter of fiscal 2000, an increase of 37% over the fourth quarter of fiscal 1999. For fiscal year 2000, ended January 31, 2001, net income was $264.0 million, or $1.47 per diluted share (excluding one-time acquisition charges, net of tax, of $14.8 million, or $0.08 per diluted share), an increase of 51% over the net income, excluding one-time acquisition charges, of fiscal 1999. Sales for fiscal 2000 were $1.22 billion, an increase of 35% over fiscal 1999. Kobi Alexander, Chairman and CEO of Comverse Technology, stated, "Our fourth quarter results reflect our leadership position in our major markets. More than 360 wireless and wireline telecommunications network operators have selected Comverse's enhanced services systems and software, which enable the provision of revenue-generating value-added services including call answering, wireless data and Internet-based information services, prepaid wireless services, Internet-based unified messaging (voice, fax, and email in a single mailbox), one-touch call return, voice-controlled web portal and other speech recognition-based services, and additional personal communication services. And despite the U.S. economic slowdown, Comverse raised its outlook for its current fiscal year. "As communication providers face increasing competition and the commoditization of connectivity and transmission, enhanced services will continue to play an increasingly important role in the generation of revenues in our company," Comverse Chairman and Chief Executive Kobi Alexander said during a conference call with analysts. For the three months ended Jan. 31, the Israeli-based company said earnings rose 48 percent to a record $76.9 million, or 41 cents a diluted share, from $51.9 million, or 30 cents, in the same period a year earlier. Analysts had expected the company to earn 39 cents a diluted share, according to First Call/Thomson Financial. Revenues rose 37 percent to $346.6 million from $252.1 million in the fourth quarter 1999. Comverse supplies enhanced services systems and software, which allow its 360 wireless and wireline telecommunications service providers to offer their customers revenue-generating value-added services including call answering, wireless data and Internet-based information services. Customers can also be offered prepaid wireless services, Internet-based unified messaging (voice, fax, and e-mail in a single mailbox), one-touch call return, voice-controlled web portal and other speech recognition-based services, and additional personal communication services.

Sales for fiscal 2000 rose 35 percent to $1.225 billion. "With strong sales and orders, good visibility, expanding market share and favorable market trends we are optimistic about our future," Chief Financial Officer David Kreinberg. With that, the company raised estimates for next fiscal quarter and the year and gave additional guidance for each of the quarters within the year. Comverse now expects revenue for the fiscal first quarter ending in April "not to exceed" $356 million and earnings "not to exceed" 42 cents a share, above analysts' current expectations. The company traditionally uses the expression "not to exceed" to guide published research. However its goal, which it almost always achieves, is to beat the guidance. For fiscal year 2001, the company says it expects earnings not to exceed $1.518 billion and earnings of $1.78 per share. Analysts had expected the company to earn 41 cents a share in the fiscal first quarter and $1.47 a share for the year, according to First Call/Thomson Financial.

The company said it ended the quarter with cash and cash equivalents, bank time deposits and short-term investments of $1.735 billion, working capital of $1.86 billion, total assets of $2.6 billion and stockholders' equity of $1.24 billion.



Reprinted from the Israel High-Tech & Investment Report April 2001

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