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Mind CTI Shows Big Growth but Remains Trapped at IPO Price

With the market dominated by giants like Amdocs (DOX - Get Report) and Portal Software (PRSF), life is hard for young Israeli billing companies. They can't compete with the aggressive pricing of their competitors or get a break with the large communications companies, which are firmly in the hands of the corporate dinosaurs.

Given these difficulties , investors have cooled their enthusiasm for downy billing firms. XaCCT has been handing in draft prospectuses for a Nasdaq IPO for six months, but has put it off time and time again. Narus has also drawn back from going public for now.

Then there's Mind CTI (MNDO - Get Report), which pulled off a Nasdaq IPO about three months ago. Mind CTI hasn't traded deep south from its IPO price. Unlike the unfortunate ClickSoftware Technologies (CKSW) and Nova Measuring Instruments (NVMI), Mind CTI is hovering around its $10 IPO level.

Mind CTI's third-quarter report published Wednesday shed light on the state of affairs among the smaller billing companies. Mind CTI continued to show solid revenue growth, reaching $4.2 million in the third quarter, double its results in the same quarter of 1999. It was also up 16% on the second quarter.

To understand why billing has lost its sex appeal, one only has to look at other Israeli companies that published third quarter reports Thursday.

Big Annual Growth

For a company that still has relatively low sales, Mind CTI is growing like a weed.

Israeli wireless communications companies such as Floware Wireless Systems (FLRE) and Ceragon (CRNT) have higher sales and are growing much faster at a pace of 50% to 100% from quarter to quarter.

Mind CTI is expected to grow by 80% in 2000, reaching revenue of $15 million. That's fast. But even mammoth Check Point Software Technologies (CHKP) will grow at a similar pace this year.

Mind CTI CEO Monica Eisinger said Thursday that the growth in revenues was a result of penetration into new markets in Switzerland, Austria, Spain and Italy. European sales now account for 54% of Mind CTI's total sales.

The company develops billing software for Internet protocol-based communications networks. So far, most of its revenue has come from companies offering phone services via the Internet. IP telephony is based on transferring voice as data packets. In regular phone calls, voice is transferred using switching technology, in which a circuit between two parties is closed.

The billing of IP-phone calls requires technology that can report, authorize and account the data. Mind CTI's software provides these capabilities, but so does Amdocs -- which bought Solect Technology Group expressly for this purpose -- and Portal Software.

To compete with the giants, Mind CTI has signed agreements with several communications companies. Eisinger says that Mind CTI entertains high hopes for its latest agreement with Clarent (CLRN), which will market Mind CTI products.

The difference between Mind CTI and other Israeli billing start-ups is that for several quarters in a row, Mind CTI has posted an operating profit.

Mind CTI ended the third quarter with operating profits of $774,000, double the figure for the parallel quarter of last year, but 12% less than in the previous quarter. Its added expenses went to research and development and general and management expenses. The company ended the third quarter with a pro forma net profit of $1 million, or 6 cents a share, up 230% from last year and 1 cent above analysts' forecasts.

Amdocs Negotiates With Bell Canada

Meanwhile, apropos the rivals and results, Ma'ariv, an Israeli publication, reported Thursday that Amdocs is negotiating a major deal with the telecom and Internet company Bell Canada.

Although figures haven't been released, market sources believe it will be one of the biggest deals in the Israeli communications equipment industry in recent years. The talks are reportedly in an advanced stage.

The paper reports that the deal is for five years, as are all of Amdocs' transactions, because they incorporate both the vase billing system and years of support. Most of Amdocs' deals are pricey, averaging about $15 million.

TheMarker is a leading source for technology and business news information in Israel. The site is a venture backed by the Israeli daily Haaretz and TheStreet.com. For more stories from TheMarker, go to http://www.themarker.com/eng/.

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