Thursday, December 14, 2006

Calls of Note Part 4

- Merrill Lynch notes they continue to see efforts by Radware (NASDAQ:RDWR) to revamp its sales force and refocus its R&D resources on product development. They also believe that Radware may be in the final phases of signing a small OEM agreement with a large European vendor, which could lead to additional opportunities in the future.

As discussed on its 3Q conference call, the US sales force is being pruned, leaving only the most productive people on board. Firm expects minimal near-term disruption since senior executives mainly manage the large accounts. Given that transition takes time, they do not expect to see material sales improvement in the US in 4Q, but this should be compensated by stronger trends in Europe and Asia.

Radware has the potential to secure new carrier opportunities in Q4 and 2007. After being engaged in several carrier-related RFPs for nearly 12-months, ML expects there should be at least one deal that will contribute to revenue over the next few quarters. Besides the well documented IBM partnership announced in October, additional strategic relationships and alliances should create opportunities in the enterprise and wireless verticals. However, these positive developments mentioned above are largely reflected in the recent share performance (up 8% since reporting 3Q results).

Maintains Neutral.

Notablecalls: Not actionable but good to know category.

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