Tue: Magic's magician - David Assia

Magic Software has risen from the ruins for the second time. They say it's too late to buy Optibase shares. Too late for what?

Shlomo Greenberg, 26 Aug 03 16:32

It may very well be that Optibase (Nasdaq: OBAS) is indicating the IT market trend. After all, it has a connection with IT through digital video streaming. Optibase announced that it had signed an agreement with Venus Telephone, which deals in cable and wireless telecommunications for customers in parts of Pennsylvania, which has more telecommunications companies than any other US state. Why? I have no idea, but those are the facts.

Optibase began March at $2, and wound up yesterday at $6. If Audible (Nasdaq: ADLB.OB), which transmits voice, and Optibase, which transmits images, start showing a positive direction in sales and profits, as they have in the past two quarters, then today's prices are low. Otherwise, the shares will go back down to their low point. To say at this point, "It's too late to buy Audible and Optibase," is nonsense. Too late for what?

People have been saying for the past 10 months, "We missed the boat for shares like M-Systems Flash Disk Pioneers (Nasdaq: FLSH)." What does that mean? Some analyst gave a "Hold" recommendation for M-Systems yesterday, so the share tumbled 6%. Yes, if someone bought the share at $4, they're certainly justified in selling half of the purchase. If you're looking at M-Systems for the first time, however, the price is only relevant if you believe that the company's market is going down. If what Amnon Portugali wrote about the Kfar Sava-based company in the "Globes" Hebrew edition is reasonable, and I really don't see why it isn't, the only question is when to buy the share. The fact that the share was at $4 a year ago is irrelevant.

Magic Software Enterprises (Nasdaq: MGIC) picked up another 12.5% yesterday. The share is touching $3, after leaping 330% since early March. Yesterday's rise matches the improved results of the Formula Systems (Nasdaq: FORTY) group, which probably reminded the investors that Magic Software is emerging from its long depression. Magic Software is doing just as well its second time around as it did the first time, after the experts had already consigned the company to the grave. In both cases, it was David Assia who came in from the cold, and led the company back to greatness.

The share was issued at $6.50 per share in 1991, and was one of the hottest issues by an Israeli company on Wall Street not because of the quality of its product, but because CNNFN, CNN's business news channel, said, "In boring week, there's a small California software company that looks interesting." That was enough to keep me from getting as much as a single share for my clients at that time. Magic Software went through the survival course followed by all Israeli technology companies, with one minor difference it started earlier, and its efforts were more serious.

The company has been through two serious crises, and under the leadership of Assia, who was recalled for the purpose, twice met the challenge successfully. The first time was the economic crisis in Japan, and the second time was in 1999, when Formula became the largest shareholder in Magic Software.

The share was still hovering around $1.50 in July, but has since forged ahead. The surge has not been based on renewed dreams; but on reported facts. Magic Software has improved its business situation, and the market is signaling its approval. The company recently signed a five-year contract with Vadim Software, which provides software solutions for local councils and municipalities in the US. The share was above $30 in 2000, but all that means is that it was there, nothing more.

For my daily farewell, I'll mention that my e-mail inbox has been filled with questions about Pharmos (Nasdaq: PARS). What's happening? I think that 90% of yesterday's small turnover was in the final 10 minutes of trading. Did they expect someone to publish something after the close of trading? Anything's possible, but nothing was published; maybe it will happen today.

Published by Globes [online] - www.globes.co.il - on August 26, 2003