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Actionable news in RDCM: Radcom Ltd.,

Radcom: Profitable, Pure-Play NFV Software Player And Capturing Share From Incumbents

Summary

RDCM reported Q2 revenues up 49% YoY and 18c EPS.

The company has $46.5 million in cash to support trials/negotiations with additional large CSPs across the globe. RDCM is in discussions with 9 CSPs, up from 5 a quarter ago.

The AT&T contract is going well, and RDCM announced AT&T expanded the deal for a "high 7-digit figure" into a new NFV category.

Even though the shares have appreciated substantially, the company remains a compelling risk/reward opportunity at $190m market cap. Strategic players like Cisco likely value the asset far above $190 million.

Cisco announced 5,500 layoffs and indicated it is redirecting resources to software units, further indicating growing value of pure-play NFV software players.

Radcom (NASDAQ:RDCM) remains my favorite long idea at just under $17 per share (~$190 million market cap, fully diluted) as it is the only public, pure-play NFV (and profitable) software player I'm aware of that is implementing a mega-NFV software contract with a Tier-1 communication service provider ("CSP"). AT&T (NYSE:T) announced earlier this month that it is using RDCM's MaveriQ solution to power its NFV service assurance program.

The company also completed a ~$20 million capital raise in May 2016, and is now sitting on $46.5 million in cash to support its continued growth and discussions with Tier-1 players around the world. RDCM is also attracting institutional holders, such as AWM Investments and Putnam Investments which disclosed 265k and 115k share stakes, respectively.

G2 Investment Partners increased its stake to nearly 1.1 million shares as of June 30, 2016. To that end, I consider RDCM an under-owned and early-innings opportunity on the NFV theme which appears to be accelerating in 2016 as CSPs flush out their NFV roadmaps.

While there is risk and uncertainty in terms of the size, timing and competitive threat of new contract awards with CSPs, there is enough evidence to suggest to me that RDCM will take at least some portion of new NFV transformation deals given the AT&T reference account, and RDCM's participation in AT&T's ECOMP platform along with Amdocs (NYSE:DOX) as technology integrator.

Followers of the RDCM story should be very familiar with the Amdocs relationship. Zohar Zisapel, RDCM's co-founder, board member and 30% owner, also sits on the DOX board as lead director of the Technology & Innovation Committee. Moreover, CEO Yaron Ravkaie, CBO Harel Givon and CFO Ran...


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