M-Systems Rings In Happy New Year

Sometimes a good product announcement can overshadow even the direst political news.

Concerns over Israeli Prime Minister Ariel Sharon's hospitalization hurt many of that country's stocks on Thursday. But one Israeli company, flash-memory maker M-Systems(FLSH Quote), bucked the trend by setting a 52-week high Thursday and possibly bettering that mark on Friday (its shares were recently up 23 cents to $35.44).

The recent stock gain has capped a six-month period that has seen M-Systems' stock price rise 85%. The company earned $13.9 million in net income in its third quarter, with quarterly sales up more than 50% year over year at $133 million.

Based in Kfar Saba, Israel, the company is subject to many of the same uncertainties as other businesses in the country. M-Systems' headquarters and research and development facilities, along with most of its staff, are in Israel. But investors seemed less concerned about how the latest developments in Israel might affect the company than they did about the news coming out of Las Vegas.

The company has unleashed a blizzard of announcements from the Consumer Electronics Show over the past three days. Key among them is the news that XM Satellite Radio(XMSR Quote) chose M-Systems' embedded flash drive for use in a new line of handheld satellite radios produced by Samsungand Pioneer(PIO Quote).

The significance of the announcement is less about the immediate impact it will have on the company's revenue and more about the potential market it creates for M-Systems' flash drives beyond cell phone handsets, says Daniel Gelbtuch, an analyst at CIBC World Markets, who rates the company a sector outperformer.

"This is a product that can stretch across a lot of platforms," says Gelbtuch. "It's opening up people's eyes." CIBC has had an investment banking relationship with M-Systems in the past 12 months.