In a first response to the fourth quarter results released by VoIP technology company AudioCodes (Nasdaq: AUDC; TASE: AUDC), US investment house Merrill Lynch AudioCodes reported $25.2mn/$0.06 in the Dec Q, which beat our and street expectations of $25 million/$0.05, mostly due to better-than-expected gross margins. While no specific guidance was provided we expect the strength to continue into 2005, as AudioCodes is well-positioned to take advantage of 40-50%+ annual growth, per our estimates, of Voice over IP," write analysts Vivek Arya, and Tal Liani.
Arya and Liani maintain AudioCodes at "Buy", with a 12-month price objective of $18. AudioCodes shares closed at $14.47 in New York yesterday, giving the company a market cap of $547 million. On the Tel Aviv Stock Exchange, the stock is currently up 1.23%, at NIS 65.72, widening the opening negative arbitrage gap of 2.44% to 3.63%.
"Overall strong quarter, with better than expected sales, margins and EPS. We expect to provide more details and analysis following the conference call, but highlight the following positives," say Arya and Liani.
"Sales of $25.2 million modestly ahead of our $25 million estimate. In our view Nortel continues to be a 20%+ customer, after a somewhat weaker September quarter contribution. Our checks show Lucent also contributed meaningfully to the quarter, although it is not yet a 10% customer.
"Gross margins came in at a record 59.2%, stronger than our expectations of 58%, and also better than company’s long term model of 58-59%. We expect higher systems sales to drive gross margins.
"While the cash flow statement is not reported on a quarterly basis, we estimate the company generated ~$2 million of positive cash flow during the quarter.
"We are modeling March quarter sales at $27.26mn, up 8% sequentially, with EPS at $0.07. We maintain our sales and EPS estimates for FY05 ($125 million/$0.40) and FY06 ($173 million /$0.61) pending more details from the conference call," the note concludes.
Published by Globes [online], Israel business news - www.globes.co.il - on January 25, 2005