Radvision: A Video View

11/11/2005 12:00 am EST

Focus:

When it comes to understanding the ever-changing technologies involved in the wireless sector, few are as knowledgeable as Nikhil Hutheesing, whose sole focus is analyzing the developing trends in this arena. Here he looks at a favorite play in video-conferencing.

"Radvision (RVSN NASDAQ) has been a well-run, profitable company since 2001 and its shares have been on a slow steady rise. Over the years, the company has been building its video-conferencing technology, developing partnerships with companies like Cisco and Microsoft, and quietly getting ready for what it believes will be a revolution in the way we collaborate and communicate. The company's vision: that video telephony is finally on the verge of becoming a reality for millions of people tethered to their desktops and cell phones.

"Since the 1964 World's Fair in New York City, the world has been waiting for the videophone. Now, with 3G wireless networks and IP based networks being deployed, the videophone is arriving, though in a very different format. The difference between now and 1964: The notion of seeing people while you talk to them has expanded to being able to collaborate with them as well. Now, with the convergence of voice, video and data over IP networks, Radvision is focused on providing middleware to emerging collaboration markets.

"In the future, believes Radvision, most of us will use our phones and computers to not just communicate, but to also see each other while we are communicating and to collaborate on documents. This kind of ability will be embedded into our applications and reaching out to others will become easier than ever. The idea is that you'll be able to hook into an application, schedule a meeting, invite participants, and access their control, and provide authentication. If such collaboration becomes as simple as clicking on an icon, this kind of video-conferencing technology will suddenly become very powerful with a widespread base of users.

"Of course, Radvision can't make any of this happen itself. The company is small with just 350 employees. Its success hinges on the successful deployment of high-speed IP-based networks as well as high-speed broadband wireless networks such as 3G and WiMax. However, Radvision does create the tools and software necessary for carriers to provide applications where collaboration can take place between different networks. For investors, Radvision has been a wait-and-see game. But it looks as if we're finally getting to the point where video-conferencing will pick up and Radvision's vision could become a reality.

"Microsoft is working with Radvision to promote its Live Communications Server.  Radvision sells its products for Microsoft through Microsoft's sales and marketing teams. The company does seminars with them and sells its products through Microsoft's resellers. For about five years, Cisco has been one of Radvision's key partners probably responsible for generating some 20% or so of Radvision's revenues. In addition, Radvision's products are part of Cisco's MeetingPlace product, which provides voice and Web conferencing. Radvision adds an integrated video option.

"Radvision's chairman obviously thinks the time is right to buy the stock. In August, Zohar Zisapel acquired 247,000 shares of RVSN for prices ranging around $11 per share. As video-conferencing moves away from conference rooms to desktops and handhelds, more people will use Radvision's technology to communicate and collaborate. In the process, Radvision's business should prosper. Given that prospect and its reasonable valuation, I believe it is an excellent time to accumulate shares of Radvision. I am a buyer of the stock at these levels. At 25 times 2006 expected earnings, shares of RVSN should reach $21 in twelve months."

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