ECI Telecom

(Nasdaq:ECIL) announced that it had completed its demerger into five separate companies on January 1. But its restructuring is apparently not over.

CIBC Oppenheimer analysts Dan Zuk and Shaul Eyal believe that Israel's ailing telecom giant

ECI Telecom

(Nasdaq:ECIL) will begin selling its 75% position in


(Nasdaq:ECTX) as early as this year. Meanwhile,


reports that ECI is in talks to sell its optics company Lightscape Networks according to a company valuation of about a billion dollars.

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In a conference call ECtel held with analysts following the release of fourth quarter financial results, ECtel CEO Aharon Shech said that ECI is considering selling its stake in the company.

ECI holds 75% of ECtel, which is traded at a market cap of almost $300 million. At that valuation, ECI's stake is worth $225 million. But according to Oppenheimer, ECtel's target price for the next 12 months is $30 a share as opposed to $18 today. ECI's income potential if it exits at the right time is $375 million. That is a nice amount of cash for ECI, which is suffering from liquidity strains. The bank believes that one of the factors that derailed ECI stock was limited liquidity.

The bank was quite impressed with ECtel results for fourth quarter 2000. The company reported earnings of $16.9 million compared to earnings estimates of $16 million, or 19 cents a share, beating forecasts by 1 cent. Oppeheimer subsequently raised the earnings estimates for 2001 from 76 cents to 84 cents a share, and its revenue estimate to $80.4 million. The report stresses that those estimates are conservative because of the general market sentiment.

The report says that ECtel's improved profit line is partially due to the change in market mix. The percent of sales to government was reduced and sales to telecom have increased.

ECtel develops and markets monitoring systems that enable organizations to maintain quality communications over telephony lines as well as on Internet Protocol lines. The company products help monitor and detect fraud on fixed and cellular networks, and enable carriers to bill for data and voice transmission.

Optics division on the block

ECI is in advanced stages of negotiating to sell its optics division, renamed Lightscape Networks, to an electronics multinational,


reports. The companies reportedly hope to close the deal before ECI publishes its annual statement for 2000, in mid-February.

Lightscape Networks, managed by Eran Dariel, is considered to be ECI's most promising asset, and to have the greatest growth potential of all the group's companies.