Mobile internet demand boosts

Allot Communications (ALLT.TA) (ALLT.O), which supplies technology that allows telecoms operators to monitor and allocate bandwidth, posted a forecast-beating rise in quarterly profit as revenues rose more than 40 percent, helped by surging demand for fast internet on mobile devices.
However, the initial positive reaction that sent Allot's Tel Aviv shares 2.7 per cent higher by the close was tempered by concern over deal flow and the company's simultaneous announcement of its second acquisition in four months.
Allot's Nasdaq-listed shares slid 7 percent to $22.96 in early trading after Chief Executive Rami Hadar told a conference call that while deal flow was healthy, the deal-closing process is taking longer because of pricing issues in a challenging economic environment.
"They had a great quarter," said Northland Capital Markets analyst Catharine Trebnick, who rates Allot as "market perform" with a $28 target. "But investors are confused."
She cited worries over longer contract negotiations as well as the announcement that it plans to buy Israeli start-up Oversi Networks for $16 million in cash.
Traditional telcos and mobile operators are experiencing high demand for bandwidth because of strong sales of iPhones, iPads and Android-based mobile phones and devices, but providers are seeing revenue declining as unlimited data plans have grown more popular.
"Allot is benefiting from growth in mobile data and growth in data traffic in general," Nachum Falek, Allot's chief financial officer, told Reuters on Tuesday, adding that much of the rise in investment in expanding networks' bandwidth comes from streaming movies and video clips.
Video, Falek said, is likely to account for 60 to 70 percent of traffic in the next few years, up from 42 percent currently.
Allot's equipment allows telecoms providers to monitor data traffic and allocate bandwidth to where it's needed most - users streaming video at the expense of a slightly longer wait for another customer expecting a large file via email, for example.
"You want to see streaming video without buffering, but you don't mind getting an email a second later," Falek said.
Europe is Allot's largest market, and it also sells to Asia and Latin America. However, the company sees the United States as a key growth driver after a U.S. court ruling two years ago that allowed Internet service providers to slow traffic to sites such as YouTube or Hulu.
"The United States is a huge market in terms of opportunity," Falek said.
Allot earned 15 cents per diluted share excluding one-off items in the second quarter, compared with 10 cents a year earlier. Revenue rose 43 percent to $26.4 million.
The Israeli company was forecast to earn 14 cents a share on revenue of $25 million, according to Thomson Reuters IBES estimates.
Its planned purchase of Oversi, a provider of media caching for Internet video, follows its acquisition of Ortiva Wireless in May and is expected to close in the third quarter.
In addition to cash, Allot will pay up to $5 million based on Oversi's performance in 2012. Oversi is expected to contribute $2 million to Allot's quarterly revenue and reduce earnings per share by 2 cents in the fourth quarter before breaking even by the first quarter of 2013, Allot said.

Russian Telecom Blames Apple's 'Dictatorship' For The iPhone Costing $1,000 In Russia

OAO Mobile TeleSystems, the iPhone’s biggest wireless carrier in Russia, criticized Apple Inc. for not cutting the device’s $1,000-plus price in the country and being too strict about how it’s sold.
The phone’s cost makes it a hard sell in a market where rival models go for as little as $120, executives from the Moscow-based company said at an event in New York. Apple also requires that the carrier’s retail locations meet its standards, imposing additional burdens, MTS said.
“They’re more in a dictatorship mode where they say, ‘This is what you have to do or you don’t get the iPhone,’” Vasyl Latsanych, the Russian company’s vice president of marketing, said at the event. “Being arrogant with your partners in big markets doesn’t pay off.”
The remarks exposed a rift for Apple in one of the largest emerging mobile-phone markets and added to concern that the iPhone maker is charging too much in developing economies. Chief Executive Officer Tim Cook faced questions after last week’s earnings report over whether the iPhone’s pricing was going to limit growth overseas. He responded that Apple’s focus on product quality trumped other considerations.
“I firmly believe that people in the emerging markets want great products like they do in developed markets,” Cook said during the call on July 24. The goal “is to make the very best product, and that’s more important and overshadows all other things.”
Natalie Harrison, a spokeswoman for Cupertino, California- based Apple, didn’t immediately respond to requests for comment.

Smartphone Demand

Apple would get a larger share of the Russian market by cutting the iPhone’s price or helping subsidize it, Michael Hecker, MTS’s vice president for strategy and corporate development, said at the New York event.
Unlike in the U.S., Russian consumers typically don’t sign up for long-term mobile-phone contracts. So it’s less practical for carriers to subsidize the phone’s cost themselves the way AT&T Inc. and Verizon Wireless do. The iPhone 4S, Apple’s latest model, costs $199.99 in the U.S. with a two-year commitment.
“If Apple showed more flexibility then they would have a higher penetration in our markets,” Hecker said.
Russians have a growing appetite for smartphones, he said. MTS -- the region’s largest carrier, with more than 100 million subscribers in Russia, Ukraine, Uzbekistan, Armenia and Belarus -- expects smartphones to have 60 percent penetration at the end of 2014, compared with 15.4 percent in the first quarter of 2012.
After making the remarks about Apple, MTS softened its criticism later in the day.
“While we have differences with Apple, we have a constructive relationship,” Joshua Tulgan, an MTS spokesman, said in a statement. “Smartphones like the iPhone are important to our customers and our economy and we want to get them into the hands of as many people as possible.”
In total, Apple sold 26 million iPhones last quarter, shy of the 28.4 million predicted by analysts. The shortfall caused Apple sales and profit to miss Wall Street estimates for only the second time since 2003.