Investment banks Merrill Lynch and Lehman Brothers (NYSE:LEH) have responded to the fourth quarter results of Gilat Satellite Networks (Nasdaq:GILTF) with neutral responses, saying nothing's new at Gilat, and that the company has a long way to go.

Merrill Lynch reiterated its Long-Term Buy rating. The bank continues to view Gilat as a central payer in the satellite communications market. The bank commends management's ability to fulfill its cost-cutting commitments. However, the bank said that almost nothing has changed at Gilat.

Among other things, the bank noted the continuing slump in the telecoms market, and that management expects a sales slowdown in 2002. The bank noted that this slowdown decreases visibility levels for future revenue, and said it seems there aren't many new future deals.

Lehman Brothers reiterates Market Perform rating

Lehman Brothers reiterated its Market Perform rating. The bank said that despite Gilat's positive recovery measures, there is a long way to go, and many more measures are required in order to feel a turning point is at hand. Like Merrill Lynch, Lehman Brothers notes the tough market conditions. Investors must remain cautious about satellite equipment companies, Lehman Brothers said.

Analyst William Kidd noted that Gilat posted good results for the fourth quarter, which reflect efforts for financial recovery. Kidd noted two positive factors: improved burn rate, and gross profit margin, which in the fourth quarter came to 32%.

Kidd related his reiterated Market Perform rating to the long recovery process that still lies ahead. In addition, the analyst remains concerned about Gilat's inability to compete with Hughes Network Systems. The analyst believes that while HNS can manage without earnings, Gilat can't because of their different financial resources.

Another obstacle is new product ArcLight, which rival Via Sat (Nasdaq:VSAT) is about to launch.

All these factors, including adverse market conditions, lead Kidd to the conclusion that Gilat will find it hard to return to profitability levels of former years. Kidd reminds investors that the firm's recovery is important mainly given its big debt of $160 million.

Kidd noted that Gilat's financial reports are increasingly detailed, indicating the firm's growing awareness of the need to provide details in order to revive investor support. The analyst mentions that in the past Gilat hadn't been keen to answer questions about its quarterly consignments, but today it provides detailed information.

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