Investor's Business Daily, February 27th, 2007
Radvision's star is rising. The Israeli firm's expertise in video networking gear is getting it roles in new launches from tech stars such as Cisco CSCO and IBM IBM.
The run began in late October, when Cisco announced a "revolutionary new" face-to-face distance meeting solution known as Tele- Presence.
The system lets people in meeting rooms in different parts of the world communicate with each other in real time on high-definition TV screens.
Radvision RVSN provides the video connections at each endpoint.
Cisco's recommitment to video- conferencing via high-end HDTV could mean that the room conferencing business is getting a second wind, analysts say.
For Radvision, that's good news. More than 60% of its sales come from the room conferencing video market.
Radvision execs say their firm is gaining market share in room conference gear. They expect it to be a major growth engine in 2007, as it was in 2006.
Radvision held a 27.8% share of the market in videoconference gear in the fourth quarter, says analyst Rohit Chopra of Wedbush Morgan.
While that was up a bit from the third quarter, leader Polycom's PLCM share dropped nearly one point to 45.8%. No. 3 Tandberg, with 26.4%, gained a fraction as well.
Revenue Growth
Radvision's revenue in 2006 totaled $91 million, up from $74 million in 2005. Fourth-quarter revenue rose 19% over the earlier year's quarter to $25.3 million. Room conference sales in the quarter jumped 50%, mostly from its Scopia product line.
Earnings of 28 cents a share -- up 17% over last year -- beat Wall Street's consensus by 4 cents. Analysts polled by Thomson Financial expect 2007 earnings to grow 15% over last year and move up 15% in 2008.
Cisco is Radvision's largest single customer, and the ties are getting stronger. Sales to Cisco made up 33% of Radvision's revenue in 2006, up from 27% in 2005.
"John Chambers is talking about videoconferencing all the time," said Tsipi Kagan, Radvision's chief financial officer, referring to Cisco's chief executive. "HD takes it to a higher level."
Radvision expects TelePresence sales to ramp up in the second half of this year.
"Radvision will get some leverage out of Cisco's entry into TelePresence," Chipra said. "A second driver would be if Cisco moves a little bit downmarket to the desktop."
Video on the desktop would mean more endpoints and more need for Radvision's gear to connect all the points. "Cisco is one of the biggest IP telephone providers, but it doesn't have too much presence on the computer on your desktop," Chipra said. "We think this is where Cisco is headed."
He contends Radvision would be a "major component" of Cisco's desktop strategy.
"This is a market that has been bottled up for a long time. The bandwidth wasn't there to deliver video- conferencing in the way people would like," Chopra said. Now it is.
"It helps when one of the largest networking companies on the planet (Cisco) is pushing videoconferencing," he said.
Microsoft MSFT won't likely be a big customer. It recently said it would come out with its own video application.
IBM's new version of Lotus Sametime offers video functions on desktops. But IBM directs customers to Radvision's "Click to Meet" plug-ins. Sales have yet to ramp up much.
Radvision is involved in trials with several large Lotus Sametime customers, including a major oil firm in South America.
IBM in January showed Radvision's video gear at the opening session of the Lotusphere convention in Orlando.
Radvision got more buzz in mid-February at the annual 3GSM World Conference in Barcelona, Spain. This time it was for its new video products for next-generation 3G mobile phones.
Its hardware platform enables interactive services with multiple sources of video. Its software lets users create a live 3G video event or chat room using mobile phones, PCs "or whatever media you have," said Alon Barnea, GM of Radvision's mobile service unit.
Lack of video uses has held back the market. But, Barnea said, "every day we showed the system, people came up with their own ideas for using it."
During the meeting, IBM and Nortel NT said they would partner to bring new multimedia services to telecom firms. That includes video dating and "click to call" business meetings.
IBM says it will use several firms, including Radvision, for building services.
New Phones
Next-generation, or 3G, mobile phones with video still represent an emerging market. Most of Radvision's 3G customers are in Europe and Asia. Radvision sells to mobile-carrier partners such as Nokia NOK, Alcatel ALU, Nortel and Siemens SI. Sixty carriers use Radvision's gear.
Radvision's 3G mobile sales made up less than $10 million in 2006, or only 10% of total revenue. "But that's where we see the future," said CFO Kagan.
Radvision execs say Sprint S and Verizon VZ plan to launch new 3G formats later this year.
"We've been involved with them in trials, which makes us one of the candidates to provide them with services," Barnea said.
Radvision would likely sell the two carriers video gear through third-party partners.
"It's basically a waiting (game)," said Ehud Eisenstein, an analyst with Oscar Gruss, of the 3G market. New 3G mobile video uses are needed to get the market moving, he says.
Copyright 2007 Investor's Business Daily, Inc.
