Join        Login             Stock Quote

Radvision (NASDAQ: RVSN): Cisco Goes From A Friend To A Foe

 October 01, 2009 09:02 AM

Radvision (NASDAQ:RVSN) is getting downgraded today after Cisco (CSCO) announced it will acquire Tandberg, a key competitor of RadVision.

- RBC Capital is downgrading RVSN to Underperform from Sector Perform and lowering their target to $7 from $10.

According to the firm, the move will pressure RVSN as the company loses its prime channel partner (~40% of sales) and in essence the former friend is becoming a foe. Furthermore, the move undermines Radvision's positioning and will marginalize its market share. Last, Tandberg deal puts to rest the view RadVision is a natural acquisition target for Cisco; if M&A was to occur as final attempt to salvage value, it would be at lower multiple off a lower revenue base in our opinion. They expect the deal to take a toll on numbers towards spring 2010 and they're directionally cutting FY10 estimates by ~25% Y/Y.

RBC expects sales to diminish in coming 9 months as the deal progresses as distributors and customers will likely wait for Tandberg-powered products and the focus of Cisco sales force will shift.

- Cantor Fitzgerald is lowering RVSN to a Sell from Hold with a $6.50 price target (prev. $11) noting Cisco is RADVISION's largest customer, accounting for about 34% of total revenue in FY:07, 35% of total revenue in FY:06, 27% of total revenue in FY:05 and 21% of total revenue in FY:04. Tandberg is directly competitive with RADVISION and thus they believe that the company's Cisco-based revenue stream is at risk in the intermediate to longer term as a result of the announced acquisition of Tandberg.

Firm notes they have not updated our model to account for this development nor have they had a chance to speak with the management of RADVISION. As such, their price target is simply based on tangible book of $6.52, which includes $6.05 in net cash. They will refine their thoughts regarding valuation once they gather additional details regarding the situation.

Notablecalls: RVSN will get slashed this morning. I don't think there is a trade left here (some lucky shorts got some shares in the $7.50 range) but still something to watch & learn from.

PS: Given the lack of premium (around ~10%) in the Tanberg deal and the fact a major player like Cisco is now entering the space, this can't be good for Polycom (NASDAQ:PLCM) either.


Comments Closed

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.