Gilat Satellite Networks (NASDAQ: GILT), a small Israeli company that develops and produces very small aperture terminals for satellite-based communications networks, posted very strong earnings today.
Gilat's Chief Executive Officer and Chairman of the Board Amiram Levinberg said, "The quarterly and annual results show a thriving core business, with record quarterly and annual revenues. We met our management financial objectives for 2007 with double digit revenue growth of 14% and, excluding the non-cash impairment, an expansion of our operating margin to 6.2% and net income margin to 7.9%."
"Our GNS business unit has grown by winning large projects in Africa, Eurasia and Latin America. In the U.S., Spacenet, has successfully penetrated the government market with new deals in this sector as well as in its core customer base of enterprises. In the fourth quarter, we introduced our SkyEdge II, an advanced VSAT platform based on next generation technology. The product has already begun to receive high market acceptance and enhances our technology leadership in the market. Based on this technology platform, our strong position in the international market and our successful penetration into new markets in the U.S., we are well positioned to continue our growth and meet our management financial objectives for the coming year."
Gilat has been mentioned as a takeover target. As my friend Zack Miller wrote at IsraelNewsletter, "Competition in the satellite industry is heating up. Media companies, along with cable and wireless companies, have declared their desire to enter the satellite communications market. Instead of building an entire division dedicated to this, some of these companies are looking to either partner with, or acquire,an existing firm with good sales distribution. Gilat, with its focus on emerging markets and strong balance sheet, could be a good acquisition candidate."
While an M&A of some sort continues to be an option, with the numbers the company reported today along with their outlook for the rest of '08, this may be a company that would be better off going it alone for the time being, continuing to grow earnings and holding out for a much higher valuation.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has a position and owns stock in GILT and is long the stock. He has no positions in any other stock mentioned as of 2/21/08.
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