Israel: Telecom Opportunity Trumps Political Anxiety

TEL AVIV, Israel -- At the annual Israel Business Conference earlier this month, scores of high-ranking politicians, top telecom executives and analysts expressed confidence in the continued success of Israeli companies operating in the forefront of the global telecom industry.

But many in Israel's business community who gathered in Tel Aviv's luxurious David Intercontinental hotel expressed uncertainty regarding the nation's upcoming election and the effects of the changing political forces on its economy. Politics and geopolitics are always a major consideration for investing in Israeli companies, arguably more than ever heading into 2006. But barring a total unraveling of Israel's domestic political scene or a drastic deterioration of Israeli-Palestinian relations, investors at the conference were enthralled with the prospects for Israel's high-tech community.

In a rare public appearance, Dov Baharav, chairman and chief executive officer of Amdocs (DOX Quote), the giant Israeli software maker, told conference attendees that the "world was on the brink of a drastic change in the way people communicate." Telecom carriers across the globe are rushing to invest in multiple services, Baharav said, adopting third-generation technologies -- such as voice-over-Internet protocol (VoIP), wireless, video and data streaming -- and adding them to their existing service platform.

Amdocs helps large carriers such as Comcast (CMCSA Quote), AT&T (T Quote) and Sprint (S Quote) integrate their customer management systems to accommodate additional services in a way that is transparent to the user, according to Baharav.

Amdocs' earnings grew 27% to $2.039 billion, or $1.45 a share, in fiscal 2005. Baharav estimated that 2006 earnings will reach $2.4 billion, or $1.65 a share. Analysts on average estimate Amdocs will earn $1.68 a share in fiscal 2006, according to Thomson First Call.

"Everybody is investing in additional services," said Tal Liani, telecom analyst at Merrill Lynch, who spoke at the conference. "Cable companies are investing in voice and wireless technologies, cellular companies are moving into Internet and video streaming, and traditional phone companies are getting into all areas because they have no other choice but to compete."