29 October 12 18:05–Israeli technology companies had a very bad start to the reporting season. The first to report, Check Point Software Technologies Ltd. (Nasdaq: CHKP), dropped by more than 13%, and the second, Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX), plummeted more than 20%. The third to go, Radware Ltd. (Nasdaq: RDWR), actually rose on its results and guidance, which were around the estimates. This is a rare phenomenon in the third quarter reporting season, and so its share price rose nearly 4%.

It’s not clear why, but Radware chose to report by the “stealth bomber” method, releasing its financials on Friday afternoon, a very unusual time for an Israeli company, certainly considering that it held a conference call on the Sabbath eve. On the face of it, Radware had nothing to hide, but rather the opposite: in its field, it bested all its rivals with its results and guidance. F5 (FFIV), for example, the market leader, missed, and so its share price is currently wallowing at a year-to-date low of around $80, which compares with a high of $140.

It could be that Radware’s management wanted to evade the radar of the short funds, which to my mind laid a well-planned ambush for it on the second quarter results. At that time, the funds brought about a collapse of the share price on huge volumes, even though then too the company reported and guided at around the estimates.

The trigger that the short players pulled was Radware’s refusal to reveal its software code to its partner Juniper (JNPR), in exchange for additional revenue potential.

For the third quarter, Radware reported sales of $47.5 million and earnings per share of $0.45, and its balance sheet is stronger than ever, with $265 million cash, no debt, and deferred income of tens of millions of dollars. Two things stand out very prominently in Radware’s results: the growth in the US, a market that was problematic for it for many years; and security, which gathers momentum from one quarter to the next, and about which we will yet hear a great deal.

The person responsible for the US market is the founder and CEO himself, Roy Zisapel, who has gone to live there, and who is compensated separately for his extra work there. This market contributed 32% of sales in the quarter, compared with 27% in 2011. The growth in the US in the third quarter was by more than 33% in comparison with the corresponding quarter last year. In its conference call, the company mentioned that it was not only wining new customers in the US, but also winning market share from its rivals…Read More>>

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