October 26, 2010
Shares of wireless infrastructure specialist Ceragon Networks (Nasdaq: CRNT ) soared on Monday after it reported a blowout quarter. Sales jumped 39% year over year to $62.3 million, and GAAP earnings ballooned to $0.13 per share from $0.03 per share. As great as the numbers look, the bigger reason for Ceragon's boost today comes from the underlying reason: The new security regulations that put a stranglehold on Ceragon's new orders in the previous quarter are clearing up.
New rules intended to keep India's data networks free of spyware and viruses forced some of Ceragon's largest customers to stop ordering new equipment over the summer. Those customers started coming back at the end of the third quarter, explaining the strong sales and concomitant earnings boost, and management expects order patterns in that region to get back to normal in short order.
This should also help some of Ceragon's network equipment rivals in the Indian market, and also give a boost to the network installers that buy and install Ceragon's and competitors' equipment. For example, LM Ericsson (Nasdaq: ERIC ) signed a major installation deal for India in July. Vodafone (NYSE: VOD ) picked installation partners for its 3G network in India two weeks ago. These projects, and others like them, seem to be moving ahead now. "Underlying demand is quite robust" in the area, says Ceragon CEO Ira Palti.
In short, Ceragon is telling us that the vowel of the crucial BRIC bloc is open to telecom infrastructure business again. If I owned shares of companies like DragonWave (Nasdaq: DRWI ) or Alvarion (Nasdaq: ALVR ) -- small wireless equipment makers with a focus on next-generation technologies LTE and WiMAX -- I'd pop a bottle of hard cider over this catalyst.