Top 10 Foreign Tech Stocks in 2010

NEW YORK (TheStreet) - The 10 best performing foreign technology stocks listed here posted gains in the range of 100% to 250% year to date. By contrast, the S&P 500 Index and the Nasdaq Composite Index scaled up around 12.9% and 17.3%, respectively.

Meanwhile, technology giants Apple ( AAPL), Microsoft ( MSFT), Google ( GOOG), IBM ( IBM), Oracle ( ORCL), Intel ( INTC), Cisco Systems ( CSCO), and Hewlett-Packard ( HPQ) returned in the range of -18% to 54% year to-date.

Most of the 10 best-performing stocks have favorable "Buy" recommendations, indicating analysts preference. Israel dominates the list with six stocks, while two are from China, and one each from Taiwan and Ireland.

India's Rediff.com ( REDF) is the 11th best-performing pick among foreign technology stocks. However, investors shied away from large-cap Indian IT companies because of higher valuations, and concerns related to operating margins, and increasing payrolls.

The stocks are stacked on 2010 returns, from great to greatest.

10. Ireland's Trintech Group ( TTPA) develops and markets financial governance, risk management and compliance software solutions for commercial, financial, and health care customers.

For the first six months of fiscal 2011 ended July 31, revenues were $17.6 million, up 9% year over year. Earnings per share were 15 cents, compared to 13 cents in the same period a year earlier.

Year to date, the stock gained around 101%, whereas Fiserv ( FISV), Pegasystems ( PEGA), Intuit ( INTU), and Ariba ( ARBA), returned around 22%, 8%, 62%, and 91%, respectively.

Analysts (two) covering the stock recommend buying.

9. Taiwan's ChipMOS Technologies (Bermuda) ( IMOS) provides semiconductor testing and assembly services to customers in the U.S., Taiwan, and Japan.

ChipMos returned to profitability during the third quarter on higher sales and gross margins. Earnings per share for the quarter were 2 cents, compared to a loss of 2 cents per share a quarter ago. Meanwhile, revenues reached $151.2 million, up 4.9% sequentially and 40.9% year over year. Gross margin levels rebounded to 9.3%, compared to 5.2% during the second quarter of 2010.

Reviewing the results, S.J. Cheng, Chairman and CEO of ChipMOS said, "The overall driver IC business appears to have bottomed and is improving going into 4Q10. Separately, demand for our chip-on-glass (COG) and gold bumping services remained strong through the end of the third quarter."

Year to date, the stock gained around 106%, beating Siliconware Precision Industries' ( SPIL) -16%, Advanced Semiconductor Engineering's ( ASX) 24%, Amkor Technology's ( AMKR) 4%, United Microelectronics' ( UMC) -22%, Taiwan Semiconductor Mfg.'s ( TSM) 7%, and Semiconductor Manufacturing International's ( SMI) 13% returns.

8. Israel's Silicom ( SILC) designs, manufactures, markets, and supports connectivity solutions for a range of servers and server-based systems.

Revenues for 2010 third quarter were $7.4 million, up 59% year over year and 10% sequentially. Meanwhile, operating income for the quarter increased 11% sequentially. Earnings per share were 21 cents, up from 5 cents per share for 2009 third quarter.

Shaike Orbach, the company's president and CEO said, "We are now benefiting from two independent growth avenues. First, we continue to expand our server adapter business through the addition of new customers, the sale of more products to existing customers, the penetration of new divisions of existing customers, and the securing of design wins into customers' new solutions."In parallel, we are more confident than ever about the potential of our SETAC business, which is developing more rapidly and successfully than we originally projected." He added ""We are therefore extremely optimistic as we look to the future. With markets that need our solutions, strong traction in our established business and growing acceptance of our new product lines, we feel well-positioned to generate continued growth."

Year to date, the stock jumped around 125%, whereas QLogic ( QLGC), Emulex ( ELX), ADPT ( ADPT), and Zoom Technologies ( ZOOM), returned around -10%, 6%, -13%, and -27%, respectively.

7. Israel's AudioCodes ( AUDC) designs, develops, and markets products for voice and data over packet networks.

For the third quarter of 2010, revenues were $38.3 million, compared to $36.5 million during the second quarter of 2010, and $32.1 million for the third quarter of 2009. Meanwhile, net income was $2.9 million, compared to $2.1 million for 2010 second quarter, and a net loss of $79,000 for the third quarter of 2009.

Commenting on the results, Shabtai Adlersberg, president and CEO of AudioCodes said, "AudioCodes has put in place a number of new growth opportunities for our business which are starting to ramp up as we look ahead to 2011 and beyond. These include our Mobile VoIP solutions which are expected to enable us to emerge as an early leader in mobile VoIP clients for the smartphone market and our Enterprise Session Border Controllers which are seeing solid demand".

Analysts polled by Bloomberg expect the company to report earnings of 9 cents per share in the current quarter, compared to 3 cents per share and 7 cents per share in the year-ago and quarter-ago periods, respectively. For 2010 and 2011, AudioCodes is expected to post earnings of 25 cents per share and 36 cents per share, in comparison to a loss of 5 cents reported for 2009.

Year to date, the stock zoomed around 131%, whereas LSI ( LSI), Sonus Networks ( SONS), Brightpoint ( CELL), Orbotech ( ORBK), Ceragon Networks ( CRNT), and RadiSys ( RSYS), returned around 1%, 23%, 20%, 34%, 7% and -5%, respectively.

Of the three analysts covering the stock, it has garnered a buy rating from two analysts and a hold from one. Consensus price target of $6.3 over the upcoming 12 months implies that the stock has an 8% upside.

6. China's Baidu.com ( BIDU) is the leading Chinese language Internet search engine.

For 2010 third quarter, Baidu's revenues and operating profits jumped 76.4% and 126.6%, respectively, driven by expansion in customer base with improved sales, and continued growth in search volumes and Internet users.

Going forward, the stock could provide attractive returns on improving computer literacy in rural China. In addition, given its dominant position, Baidu will benefit from increasing Internet advertising in China.

Year to date, the stock gained around 141%, whereas Google, Yahoo! ( YHOO), Akamai Technologies ( AKAM), NetEase.com ( NTES), and Sohu.com ( SOHU), returned around -3%, -2%, 88%, -3%, and 12%, respectively.

Of the 26 analysts covering the stock, 17 recommend buying, 7 advise holding, and 2 rate selling. The stock has an upside potential of 21% from current levels.

5. Israel's Radware ( RDWR) provides integrated application delivery solutions that allow enterprise and carrier clients to deliver business-critical applications between data centers and remote locations.

For 2010 third quarter, Radware reported record revenues of $29.2 million, up 4.4% sequentially and 25.8% year over year. Earnings per share were 17 cents, compared with 11 cents per share during 2009 third quarter. Commenting on the results, Roy Zisapel, CEO of Radware, said, "This year is proving to be a very significant year for Radware solidifying our position as a key influencer in the application delivery and network security markets."

Analysts polled by Bloomberg expect Radware to report earnings of 21 cents during the fourth quarter, compared to 17 cents and 9 cents in the quarter-ago and year-ago periods, respectively. Analysts see the company reporting earnings of 55 cents per share for 2010 and $1.01 per share for 2011, a significant turnaround from a loss of 31 cents during 2009.

Year to date, the stock zoomed around 154%, whereas Juniper Networks ( JNPR), Citrix Systems ( CTXS), F5 Networks ( FFIV), McAfee ( MFE), Polycom ( PLCM), and Aruba Networks ( ARUN), returned around 39%, 65%, 152%, 14%, 57%, and 99%, respectively.

The company's market share has improved during the past few quarters following the acquisition of Alteon and launch of key solutions including its OnDemand Switch platform.

Of the four analysts covering the stock, two recommend buying, while two rated holding.

4. Israel's Allot Communications ( ALLT) is a provider of intelligent IP service optimization solutions for fixed and mobile broadband operators and large enterprises.

For the third quarter of 2010, revenues reached $14.7 million, an 8% increase sequentially and 36% year-over-year. Earnings per share were 3 cents, compared to a loss of 10 cents per share in the third quarter of 2009, and a loss of 33 cents per share for the second quarter of 2010.

For the current quarter, Allot Communications is expected to report earnings of 3 cents, a significant turnaround from a loss of 7 cents recorded a year earlier, according to analysts polled by Bloomberg. Analysts foresee the company reporting a loss of 26 cents per share for 2010 and earnings of 21 cents per share for 2011, compared to a loss of 35 cents registered during 2009.

Year to date, the stock gained around 164%, beating SAIC's ( SAI) -16%, Blue Coat Systems' ( BCSI) 6%, CEVA's ( CEVA) 59%, and Procera Networks' ( PKT) 46% returns.

On December 20, analysts at Wunderlich raised the price target on Allot Communications to $12 from $9.50, implying an upside of 12% from current levels. Three analysts covering the stock recommend a buy.

3. Israel's VocalTec Communications ( CALL), inventor of VoIP including the softphone and magicjack, is a global provider of carrier-class multimedia and voice-over-IP solutions (VOIP) for fixed and wireless communication service providers.

On December 17, VocalTec raised revenue guidance to $117 million to $125 million for this year from an earlier forecast of $110 million to $125 million. Recently, the company announced free calls with the launch of its magicTalk service. Given the recent downtime issues with Skype, magicTalk will likely gain market share during the upcoming months.

Year to date, the stock price returned over 219%, whereas AT&T ( T), Verizon Communications ( VZ), Alcatel-Lucent ( ALU), and Ditech Networks ( DITC) returned around 11%, 22%, -7%, and 9%, respectively.

2. China's Spreadtrum Communications ( SPRD) is a fabless semiconductor business that designs, develops, and markets baseband processors, radio frequency transceivers and turnkey solutions for wireless communications and mobile television markets.

For 2010 third quarter, Spreadtrum's earnings per share were 37 cents, a remarkable improvement from earnings per share of 1 cent and 13 cents, reported for 2009 third quarter and second quarter 2010, respectively. For the third quarter of 2010, revenues soared 35% sequentially and 151% year over year to $96.2 million, exceeding the company's guidance of $88 million to $96 million. For 2010 fourth quarter, Spreadtrum guided revenue to jump further to $118 million to $125 million.

Commenting on the results, Shannon Gao, Spreadtrum's CFO, said, "While our high quality products and customer service have enabled us to sustain a solid trajectory of top-line growth, our focus on optimizing our cost structure has helped maximize profitability. We remain committed to leveraging economies of scale in the fourth quarter and anticipate both R&D and SG&A expenses as a percentage of revenue will decline on a sequential basis."

Year to date, the stock gained around 237%, beating Qualcomm's ( QCOM) 10%, Texas Instruments' ( TXN) 26%, Broadcom's ( BRCM) 39%, Himax Technologies' ( HIMX) -20%, and Cogo Group's ( STM) 18% returns.

Of the 11 analysts covering the stock, six favored buying, four holding, and one selling.

1. Israel's Magic Software ( MGIC) develops, markets, and supports software development and deployment technology.

For the first nine months of 2010, operating income more than doubled to $6.3 million from $2.5 million recorded during the same period last year. For the third quarter, revenues zoomed 66% year-over-year and operating income jumped more than three-fold to $2.5 million, compared to $0.8 million for the earlier year period.

Commenting on the robust growth and continued operations of the company, CEO of Magic Software Guy Bernstein said, "This has been driven by greater demand for our professional services and improved license sales of our uniPaaS RIA application platform that among enterprises and independent software vendors worldwide." The company recently raised $21.2 million by selling shares through a private placement to institutional investors.

Year to date, the stock price returned over 241%, whereas SAP AG ( SAP), Forty Systems (1985) ( FORTY), CA ( CA), Tibco Software ( TIBX), Compuware ( CPWR), and Progress Software ( PRGS), gained around 18%, 61%, 9%, 105%, 62%, and 48%, respectively.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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