Stock Preacher

TTI Team Telecom International Ltd. (NASDAQ: TTIL)

TTI Team Telecom International Ltd. (TTIL) is a provider of operations support systems (OSSs) to communications service providers (CSPs). The Company’s Netrac products deliver service assurance and service fulfillment capabilities. TTIL’s Netrac software speeds problem detection and resolution, streamlines work processes, improves quality of service, and maximizes network uptime and availability. Its software solutions enable communications service providers to maximize and leverage their investments in network infrastructure and to automate, simplify and manage the complex process of delivering multiple communications services over diverse networks. The Netrac suite of products supports multi-vendor voice and data architectures over wireline, wireless, Internet Protocol (IP), cable, digital subscriber line (DSL) and Voice over IP (VoIP) networks.

The Company is structured into five regional business units (RBUs), including the Americas; Europe; a dedicated business unit around France Telecom, which is one of the major worldwide service providers; Israel; and the Pan-Pacific region. Each RBU operates as a separate profit and loss unit and operates independently from a sales, marketing and service delivery point of view. In areas like R&D, all core products are developed by TTIL’s corporate development shop; engineering support and services are also provided by corporate.

The Company was founded in 1988 and is headquartered in Israel.

Source: Reuters.com, SEC Filings.

Financial Summary

The Company’s total revenues for the third quarter was $10.3 million, compared with $12.7 million in ‎the third quarter of 2008, and $10.7 million for the second quarter of 2009. Operating income for the third quarter was $0.7 million compared with an operating ‎loss of $0.4 million for the third quarter last year and an operating income of $0.6 million in the second quarter of 2009. Net income for the third quarter was $‎‏1‏‎.3 ‎million or $0.07 dollar per basic and diluted share, compared to a net loss of $1 million or ‎‎$0.06 dollar per basic share and diluted share in the third quarter of 2008, and net income ‎of $0.9 million or $0.05 dollar per basic and diluted share for the second quarter of 2009.

As of September 30, 2009, the Company had approximately $30.1 million in cash and ‎investments.‎

Source: Yahoo! Finance, SEC Filings.

Analyst Consensus

Analysts polled by Thomson Reuters recommend the “Buy” strategy for TTIL.

Source: http://markets.ft.com/tearsheets/analysis.asp?s=ttil

Investment Highlights

The Company’s line of Netrac products support fixed and mobile technologies and allow its customers to take a customer-centric approach to service management. TTIL offers a comprehensive suite of service assurance solutions that include fault management, performance management, service management, and service assurance mediation solutions, allowing real-time and centralized network management, service quality monitoring, and customer impact analysis. The Netrac line of solutions offers flexibility that allows its users to customize and tailor the system to fit their business needs. Sometimes the Company also does the integration of products that have already been sold; that is, it does the customization and integration on the customer site. In addition, being a smaller Company, TTIL is also more flexible than the larger companies that operate in this market.

TTIL sells its products directly in North America, Europe, Africa and the Asia Pacific regions; and through strategic partners and agents in Western and Eastern Europe, and the Asia/Pacific Rim. It has established offices in The Netherlands, South Africa, Australia, India, Sweden, Costa Rica, the Ukraine and in several locations in the United States. The Company’s customers include local exchange carriers, long-distance carriers, wireless service providers and resellers, and managed services vendors. To date, TTIL has approximately 50 customers of its software solutions in about 30 countries. Many of them are Tier 1 and Tier 2 communication service providers, including: AT&T, Orange, Bell, TeliaSonera, Nortel, Telstra, France Telecom and Hutchison Telecoms.

The Company strives to enhance and improve its product infrastructure and has recently introduced new tools and solutions to enable system consolidation, transformation, and service convergence in an attempt to reduce cost and improve efficiency. In August, TTIL announced that it is leveraging SAP® BusinessObjects™ business intelligence (BI) solutions to examine telecom data quickly and dynamically, promoting improved quality of service and increasing revenue.  The SAP BusinessObjects solutions combined with TTI Telecom’s Service Assurance solutions provide telecom users with a detailed view of the network and service performance. The new reporting capabilities are embedded into TTIL’s field-proven Fault, Performance, and Service Management Solutions.

Over the short term, because of the recession, most of the Company’s efforts go towards its balance sheet, ensuring that TTIL is in a good cash flow position. In regards to the long-term strategy, the Company would like to become the leader platform for the OSS market. TTIL’s management believes the Company can do it based on the technology and on the new applications for the next generation of customized products that TTIL is currently developing.

In recent years, communication service providers have been upgrading their networks introducing new technologies such as Internet Protocol Television, 3G and IP multimedia subsystems. These changes require adaptation of OSS systems to support new technologies and services. The global economic recession caused operators to defer spending on risky projects that pose technological challenges and offer uncertain return on investment. However, spending in the mobile service segment will increase each year as CSPs prepare to support mobile data growth and content-based services. This is being driven by the availability of smart phones, the completion of 3G RAN upgrades and the rapid growth in the number of subscribers signing long-term contracts for data services. According to Mason Group, Service assurance spending is forecast to grow from USD2.28 billion in 2008 to USD2.94 billion in 2013 at a CAGR of 5.3%.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui?s=TTIL

TTIL is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

The MACD for TTIL currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

The Company’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, TTIL is trading near its upper Bollinger Band. This suggests that the stock price is high relative to its recent price action.

Comparative Analysis

Currently, although the market still stands in light of the continuing recession, TTIL is continuing to invest in its infrastructure. In preparation for a market awakening, the Company has also decided to accelerate its investment in the building of a long term evolution (LTE) solution that will offer product capabilities and additional services for the LTE domain. These investments should strengthen TTIL’s market position. In addition, during the last year, the Company increased the size of its sales force and is looking to expand in markets where the economic impact has not been as severe, places like Central and Latin America.

The Company is traded with significant premium to peer P/E and P/S multiples.

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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