Another order for wireless products obtained by ECI's Innowave division for $20 million, has drawn our attention to an interesting point. Since Doron Inbar was appointed executive vice president of ECI, replacing David Rubner, the company's share has risen by an impressive 38%.
What sort of astounding change has taken place at ECI since Inbar's appointment six weeks ago? We cannot find one. The point is that the capital market feels a change has been made, and the stock exchange, as we all know, is fueled by expectations and forecasts. The ECI of six weeks ago is the same company that earned such harsh criticism of the absence of handsome growth, a problem Inbar will still have to deal with.
Why is the share climbing? Perhaps the market likes to be treated seriously. Rubner said, "I see no problem for a quarterly 2% growth," while Inbar said this was unacceptable to him. Inbar set an annual growth target of at least 20% within less than two years. Everyone who is acquainted with Inbar knows him to be conservative and calculated. He would not have made this statement lightly.
What can be done? Ilanot-Batucha telecom equipment analyst Tobi Fischbein and a devoted believer in ECI said two weeks ago that he does not foresee any pyrotechnics or financial stints.
NC general manager Yair Lapidot told us that winning three contracts for $100 million and more in the ADSL and wireless communications fields will open a window for ECI to make a tremendous comeback. It hasn't yet happened, but the share is soaring. Sometimes, market sentiment is all the back wind a share needs.
What about the $20 million deal? ECI's WLL (wireless local loop) communications products are designed to connect local exchanges with the customer's house without any need for regular telephone lines. This is an alternative technology designed for communications providers interested in competing with established monopolies (such as Bezeq in Israel, and British Telecom), and its main advantage lies in its cheap and rapid deployment. The cost of installing a subscriber communications line is estimated at $500, about half the cost of a telephone company's new subscriber. On a national basis, duplication of Bezeq's deployment in Israel is estimated at $2.5 billion, with most of the cost, more than 60%, stemming from the need to dig up roads and pavements and connect homes to local exchanges.
Atlantic Telecom, interested in biting off whatever share it can from British Telecom, uses ECI systems, providing the company with its third significant order in the past four years..
This does not mean, however, that it will be easy for ECI. The wireless communications market is expected to become extremely competitive, with a considerable number of enterprises eyeing its forecast worth of $18 billion in the next five years. In this context, the $20 million deal (ECI did not bother to note the period of time involved), appears in a different perspective.
There will be a number of solutions and players here, such as Netro, which operates in LMDS, wireless communications designed for corporations and organizations requiring high broadband (from 10 Mbps); BreezeCoM and RDC, which develop wireless communications technology based on Wireless Lan; and RADWin, of the RADBynet group, showing a WCDMA-based technology, with 2 Mbps broadcasting capability.
All these are aimed at the home and small office market, and we should not forget that Nortel, Lucent, Motorola and other communication giants are also dipping their feet in these waters.
$20 million sounds exemplary, but ECI is a company with annual revenues of $1.2 billion - which shows just how long the road still remains.
Published by Israel's Business Arena on January 11, 2000