Saturday, December 17, 2005

Back to the Future: RVSN

When it comes to investing, staying behind the technology curve is equivalent to financial suicide.

We've never gone astray by investing in young, unknown companies who abruptly sign major contracts with the US government.

Shares of Radvision (RVSN) are up 16% since we brought you the stock at $12 on September 10.

Israel-based Radvision specializes in video conferencing services and equipment.

If The Jetsons are any predictor of what the future will really look like, we should be buying RVSN right now.

Radvision just struck a deal with the Pentagon, who is revamping its networking systems and included Radvision among the few lucky companies contracted to coordinate the military's communications & IT efforts abroad.

That's just the tip of the iceberg.

Radvision is a company that quicky found its niche and is quickly penetrating an explosive, underserved market.

Being the financial statement junkies that we are, we were pleasantly startled by Radvision's squeaky clean balance sheet.

Radvision has $100 M in the bank and no debt.

We see revenues topping $70 million this year and jumping to $100 million in 2006.

With only four analysts covering the stock and just 20 M shares outstanding, Radvision could pop on even the faintest of news.

Trading at just 5 X sales (industry trades at 8 X sales), Radvision and its growth prospects are too hard to pass up, in other words.

We forsee double digit growth and possibly, a takeover deal.

RVSN already has tech stalwarts Microsoft (MSFT) and Cisco (CSCO) as clients -- just this week we learned that Hewlett Packard (HPQ) has made a splash in the videoconferencing space vis-a-vis its $500,00 a year Halo system.

This could prompt either Cisco or Nortel to snap up a first mover like RVSN.

We're upping our price target to $30, based on projected 2006 EPS of $1, a 25 P/E multiple, and $5 a share in cash.

2006 will be the year of videophones and Radvision, who's got the technology down to a T, should be one of the companies who benefit most.

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