War Clouds Forcing Exodus from Israeli-Connected Companies

TEL AVIV, Israel -- Israeli companies trading on U.S. exchanges are always striving to hide their blue-and-white markings. Every notice by Check Point Software (CHKP:Nasdaq - news - boards) or Comverse Technologies (CMVT:Nasdaq - news - boards) would begin with some American city, where they had located their U.S. headquarters. They almost never mentioned Israel.

Their rationale was mainly that foreign companies in general, and Israeli ones in particular, trade at a discount compared with comparable American counterparts. The avoidance of any signs of affiliation with Israel naturally meant that few broke into a hora when the Israeli legislator proposed to ease dual listing, enabling them to simultaneously trade in Tel Aviv.

Even if every second word in a Check Point announcement was "Redwood, Calif.," the moment it also trades in Tel Aviv -- it will be branded as an Israeli company. Its managers don't want that. Neither do the executives running Comverse or Amdocs (DOX:NYSE - news - boards). They aren't even registered as Israeli companies.

Nor are the boards of the smaller Israeli companies trading on Wall Street. But Thursday's trading session in New York is proving that the Israeli companies need more than an American branch in order to dissociate themselves from Israel, a locale not always seen as a plus by investors.

Most Israeli stocks dove by 10% Thursday's although the Nasdaq is pretty steady. Somehow, American investors figured out where these companies' hearts beat, despite their cover of incorporation elsewhere. Their reaction today could be just the beginning.

If the violence intensifies, if it turns into outright war, ECI Telecom (ECIL:Nasdaq - news - boards) or Nice Systems (NICE:Nasdaq - news - boards) -- which make most of their revenue from exports -- will be just as hard hit as totally local Tel Aviv Stock Exchange-traded food manufacturers such as Elite Industries (a Hebrew site) or Osem.

If the army rounds up the reserves, which it can do under conditions of national emergency, thousands of engineers and programmers who graduated combat units will find themselves back in khakis, along with high-tech entrepreneurs. The damage to companies as their staffs troop back into action for an indefinite period of time cannot be estimated.

Which is exactly what American investors dumping stocks such as Gilat Communications (GICOF:Nasdaq - news - boards) the day after it announced an IPO by its subsidiary Starband (formerly known as Gilat2Home) fear.

That's why they're selling off AudioCodes (AUDC:Nasdaq - news - boards) even though they know its results were excellent.

Once an Israeli, always an Israeli, and even if Comverse plants itself in New Jersey or Amdocs registers itself in Guernsey Island, it's Israeli, tried and true.

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Jonathan Nassie writes for the Israeli-based TheMarker.com, a TSC partner.