what CEO Zisapel said when asked about the takeover speculation in a conference call ...
Takeover Alert: Buyout or Parnership at Radware (RDWR) November 4, 2010 by Gene Marcial
TAKEOVER ALERT: BUYOUT OR PARTNERSHIP AT RADWARE (RDWR) 11-3-10
By Gene Marcial
At Tel-Aviv-based Radware (RDWR), nobody is commenting on a rumor that either International Business Machines (IBM) or Hewlett-Packard (HPQ) is preparing to launch a bid to buy the leading global provider of integrated application delivery and network security solutions. Nonetheless, the betting is there could be a kernel of truth to the rumor, or at least, a partnership may be in the offing. This isn’t based on inside information but on my own instincts, after writing about Radware several times over the past several years.
The company’s management team, led by CEO Roy Zisapel and CFO Meir Moshe, both of whom I have had occasion to interview several times in recent years when they visited New York, remains tight-lipped over the speculation that was first reported by Globes, a financial newspaper in Israel.
On Wall Street, analysts are generally bullish on Radware, whose stock has been in an upswing, accentuated by a 38% jump, to $38 a share, within a few minutes on Sept. 14, 2010, when the rumor hit the market. The stock has since slipped to $34, reflecting early profit taking by traders.
Here is what CEO Zisapel said when asked about the takeover speculation in a conference call with analysts on Oct. 27, 2010: “The company policy is not to comment. We intend to keep on growing. However, in keeping with our fiduciary duties, we keep our eyes and ears open for opportunities which may increase value for our shareholders.” He did not directly or specifically say that there was no truth to the rumor.
But the setting seems just right – and ripe — for Radware to do either a buyout or partnership deal, after reporting solid third-quarter results on Oct. 27, beating Wall Street forecasts. With margins continuing to expand and quarterly revenues hitting $36.8 million (which exceeded management’s previous guidance of $35.5 million to $36.5 million), Radware demonstrated that business has picked up and that it is on the way to a substantial rebound. That’s a good position to be in when a company is looking for a buyout or partnership deal.
The positive third-quarter results prompted some Wall Street analysts to boost their sales and earnings forecasts for all of 2010 and 2011. “While management did not comment on recent takeout speculation, we think momentum on partnerships is building, and we believe an OEM announcement is likely in early 2011,” says Rohit Chopra, analyst investment firm Wedbush, who rates Radware as outperform. The analyst has a 12-month price target of $37 a share, based on fundamentals alone.
Companies that could likely form partnerships with Radware include Oracle (ORCL) IBM, Hewlett-Packard, Dell (DELL), and Cisco Systems (CSCO). These companies are currently doing a lot of business with Radware.
What’s Radware’s worth in a takeover deal? Some investors believe the stock could fetch $950 million, or about $45 a share in a buyout. Certainly that kind of money is peanuts for the likes of IBM or Hewlett-Packard. But will they bite and come to an agreement with Radware? At this point, no one knows. And it isn’t at all certain that a deal will come to fruition, although my instincts, as I said, tell me that Radware may be ready to do some kind of a deal. But of course I could be wrong. So stay tuned..