EZchip Jumps to Record as Competitors Acquired: Israel Overnight

Feb. 24 (Bloomberg) -- EZchip Semiconductor Ltd. soared to a record high in New York yesterday on speculation the Israeli chipmaker will be bought after competitors were acquired over the past two months.

The Yokneam, Israel-based company, whose biggest customers include Juniper Networks Inc. and Cisco Systems Inc., advanced 2.5 percent to $40.26, sending valuations to 30.6 times estimated earnings, nearly twice the average level for companies on the Nasdaq Composite Index. The Bloomberg Israel-US 25 Index of the largest Israeli companies listed in New York climbed 0.5 percent to 86.50, led by SodaStream International Ltd.

EZchip may become a buyout target even after forecasting that first-quarter revenue will remain steady from the fourth quarter, according to Chardan Capital Markets LLC. Marvell Technology Group Ltd., maker of the BlackBerry smartphone processor, bought Xelerated AB last month, and Broadcom Corp., which makes chips that help mobile devices connect to the Internet, acquired NetLogic Microsystems Inc. on Feb. 17.

“The reason the stock has had such a run up is that people are expecting that the company is going to be acquired,” Jay Srivatsa at Chardan, which has a “neutral” rating on EZchip’s U.S.-listed shares, said by phone in New York yesterday. “EZchip guided a very weak first quarter and it’s still very expensive. Still, it seems like investors don’t want to miss out on an opportunity.”

EZchip Chief Executive Officer Eli Fruchter declined to comment on a possible buyout when contacted by e-mail yesterday.

Smartphone Technology

EZchip, whose products allow for quicker data delivery, added 3.3 percent to 146 shekels in Tel Aviv yesterday, or the equivalent of $38.97.

The chipmaker has surged 40 percent in New York over the past year, outperforming the Nasdaq benchmark, which climbed 8.6 percent, after demand for its processors rose as an increasing number of consumers use smartphones and handsets to surf the Web, play games and download music and videos.

“This network processor company is poised to grow revenue and earnings rapidly as its next-generation product ramps up,” Andrew Uerkwitz, an analyst at Oppenheimer & Co. in New York said by phone. “There has always been acquisition pressure that has lifted EZchip due to the growth potential.”

Uerkwitz rated the shares “perform” saying the company is “fully valued” after the rally.

‘Flat’ Revenue

EZchip reported a fourth-quarter net loss of $5.95 million on Feb. 8, compared with net income of $4.03 million in the same period last year. The company incurred a one-time charge for repaying $9.9 million to the Israeli Office of the Chief Scientist, a government unit that support local companies’ research and development.

“With regards to guidance for the coming quarter, we expect revenues to be flat to slightly down,” CEO Fruchter told analysts on a call after reporting earnings.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

Gazit-Globe Ltd., the Israeli real estate company that listed shares on the New York Stock Exchange on Dec. 13, declined 3.9 percent to $9.99 after its shares in Tel Aviv retreated 2.6 percent to 37.81 shekels, or the equivalent of $10.09. Equity One Inc., the U.S. unit of Gazit-Globe, reported a net loss of 4 cents per diluted share during the fourth quarter, after posting a profit of 9 cents for the same period last year.

Convertible Bonds

SodaStream, an Airport City, Israel-based homemade soda machine maker, climbed 7.1 percent to $41.79, the most in more than a month.

Tower Semiconductor Ltd., a chipmaker, dropped 3.8 percent to 77 cents, declining 12 percent in the week. Shares in Tel Aviv retreated 4.2 percent to 2.91 shekels, or the equivalent of 78 cents.

The Migdal Haemek, Israel-based company raised $64 million from Israeli institutional investors in a convertible bond offering, according to a Feb. 20 statement.

--Editors: Marie-France Han, Emma O’Brien

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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Yandex Jumps on First Trading Day in Biggest 2011 Tech IPO

May 25, 2011, 11:20 AM EDT By Zijing Wu and Lee Spears

(Corrects date of Boston Consulting report in 10th paragraph in story that ran May 24.)

May 24 (Bloomberg) -- Yandex NV, owner of Russia’s most popular Internet search engine, jumped 55 percent in Nasdaq Stock Market trading after raising $1.3 billion in an initial public offering that sold above the proposed price range.

The shares, trading under the symbol YNDX, rose $13.84 to $38.84 at 4 p.m. New York time. The Moscow-based company sold 52.2 million shares, or a 16.2 percent stake, at $25 each, above the proposed range of $20 to $22, valuing the company at about $8 billion, Yandex said in a statement today.

Today’s debut for Yandex, which has almost triple Google Inc.’s market share in Russia, is the biggest technology IPO worldwide in 2011 as companies file for U.S. offerings at the fastest pace in seven years. The rally adds to evidence of a boom in demand for Internet stocks after Mountain View, California-based LinkedIn Corp. more than doubled on its first trading day last week.

“What you saw with LinkedIn really raised the temperature for these kinds of deals,” said Ryan Jacob, chief investment officer of Jacob Asset Management in New York. “Even though the market as a whole has been mixed, there is still an appetite out there to invest in early-stage companies.”

The company sold 15.4 million shares, and some of its investors offered 36.8 million shares in the IPO. Yandex has also given its underwriters an option to purchase an additional 5.2 million shares.

Yandex, Google

Based on the $21 a share midpoint of the initial offer range, Yandex had planned to sell shares at a price equivalent to at least 23 times next year’s earnings, two people involved in the sale said this week before pricing was announced. Google trades at about 13 times estimated 2012 earnings.

Online advertising in Russia climbed 51 percent from 2008 through 2010, when it reached 26.65 billion rubles ($940 million), according to the Moscow-based Association of Communication Agencies. Spending on print ads plunged 41 percent in the same period, while the radio and television segments fell 21 percent and 6 percent, respectively.

Yandex, co-founded by Chief Executive Officer Arkady Volozh and registered in The Hague, makes most of its revenue from advertising.

‘Huge Room’

“We still have huge room to grow,” Volozh said in an interview with Bloomberg’s “In Business with Margaret Brennan.” “The Russian advertising market is projected to triple in the next several years, and we also have nearby markets.”

Russia’s Internet industry, the largest in Europe after Germany by users, is experiencing “rapid growth” and may account for 3.7 percent of gross domestic product by 2015, more than double the industry’s contribution in 2009, the Boston Consulting Group said in a report released May 19.

“Search is the most easily monetizable part of Internet advertising, so the prospects actually look quite good” for Yandex, said Jacob, the portfolio manager.

Russian President Dmitry Medvedev, who posts to online blogs and visited the San Francisco offices of Twitter Inc. during a trip to California last June, has made “modernization” a priority of his administration.

About 70 percent of the stock in the Yandex IPO comes from existing investors, including Baring Vostok Capital Partners and Tiger Global Management LLC, according to the company’s filing.

‘Google of Russia’

Proceeds from the sale will be invested in technology, infrastructure and possibly acquisitions, the company said in the prospectus.

Morgan Stanley, Deutsche Bank AG and Goldman Sachs Group Inc. led the offering.

LinkedIn, the first major U.S. social-media company to go public, sold 7.84 million shares at $45 apiece in its IPO last week, raising $352.8 million. The exercised an option to buy additional shares two days later, boosting the offering size to $405.7 million.

At least 230 companies have announced plans for U.S. IPOs so far this year, more than the same period in any other year since 2004, when 232 companies were on file, data compiled by Bloomberg show.

“Yandex has picked a great time for an IPO for a tech company,” said Anthony Moro, managing director and head of emerging markets at Bank of New York Mellon Corp., which has about $1.1 trillion in assets under management. “For the longer term, they’re in the right spot. They’re the Google of Russia.”

--With assistance from Ryan Flinn in San Francisco, Maria Levitov in London, and Jason Corcoran in Moscow. Editors: Lisa Rapaport, Tom Giles

To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Justin Doom in New York at jdoom1@bloomberg.net.

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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