It was a manic-depressive trading week as Wall Street too reacted strongly, in both directions, to the political goings-on in Washington, as the threatening date of October 17, on which the US is liable to default on its debt, approaches. It's well known that politicians reach agreement only at the last moment, but Wall Street, as always, can't tolerate uncertainty.
The results season has begun, but the main wave of company reports starts only this week, which could generate a perfect storm, negative or positive, on one of its days. There will be a market crash if, for example, the negotiations in Washington break down at the same time as there is disappointment at the results of this or that major company, and the opposite, a great upsurge, if the political negotiations are successful and there is euphoria at company results.
The reporting season for the September quarter in the technology sector will be opened tomorrow by Intel (INTC) and Yahoo! (YHOO). Expectations of the former, as they have been for many quarters, are low, because of the fading of the PC market, while of the latter they are sky-high, in line with the share price, which has soared by 120% since Marissa Mayer took charge in the summer of 2012.
Later in the week, in the semiconductors sector, there will be results from SanDisk Corporation (Nasdaq:SNDK), TSM (TSMC) of Taiwan, the world's largest semiconductors manufacturing sub-contractor, ASML of the Netherlands, which has the largest market cap of any semiconductor production equipment manufacturer in the world, and another half-dozen smaller companies.
Among Internet companies, the most interesting reports will be those of eBay (EBAY) on Wednesday, and the following day of Google (GOOG), where Mayer made her name and whose share price has not managed to break through the $1,000 level as several analysts thought it would in the summer.
The huge field of information systems infrastructure and communications networks is in a transition period that will last years, because of the gradual adoption of cloud computing and software defined networking (SDN). Investors are concerned about the effects of these changes, chiefly on two gorillas, IBM in information systems and Cisco in networks. Big Blue's share price touched an eighteen-month low last week. It will report on Wednesday, and then we will know a great deal more about its situation, against the background of the great changes in its market.
In my opinion, last week's profit warning from tiny ClickSoftware Technologies Ltd. (Nasdaq: CKSW) indicates what is liable to happen at many software companies, large and small, that, like ClickSoftware, are in transition. These days, this sector is selling fewer platforms installed at the customer, on which payment is immediate and in full, and selling much more on a model of using platforms via a public cloud, on which the payment, as in leasing, is spread over a long period.
Amazon (AMZN), which will report next week, is a leader in public cloud services, and on Wednesday we will hear about IBM's progress in this area, after its acquisition in the summer of SoftLayer, which operates eight large data storage sites in the US, Europe, and Singapore. What happened on a miniature scale to ClickSoftware could happen on a large scale to IBM, that is, the more its customers opt for SoftLayer's public cloud, the more its sales line is liable to be hit in the short and medium term.
Cisco, as mentioned, faces the threat of SDN, which some say will lead in the long term to a big drop in sales of the switches and routers that are Cisco's mainstay. The company is making very great efforts to demonstrate that it is actually a leader in SDN, and in this respect the tension will rise as we approach November 6, the launch date for a new system that is meant to reassure Cisco's customers and investors that the company has no real competitor even in SDN.
As far as the Israeli angle of the technological changes now happening is concerned, I must again mention EZchip Semiconductor Ltd. (Nasdaq: EZCH; TASE:EZCH), which this week, at two important technology events, in Europe and the US, will present the advantages of its NPS family of processors in the SDN age. If, a month ago, we were being threatened that Cisco was developing its own processors, today I am convinced that the pressure on Cisco to produce something new in SDN is so great that it is praying for the success of EZchip's processors, and for their launch in Cisco systems as soon as possible.
Another Israeli company that looks like fitting well into SDN, particularly in the security niche, is Radware Ltd. (Nasdaq: RDWR). An IBM blog reported earlier in the month of the conclusion of integration of Radware's DefensePro platform with IBM's security management platform. Furthermore, Cisco is examining integration of Radware's DefenseFlow security system, which was presented at a large Cisco conference in the summer.
Published by Globes [online], Israel business news - www.globes-online.com - on October 14, 2013
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