Technology: Communications & Networking

Equipment & Systems

Downgrading Stock

ALLOT COMMUNICATIONS LTD. (ALLT: $20.10)

Rating: Old - Buy; New - Hold

December 13, 2012

Price Target: Old - $27.00; New - $21.00

Market Data

12-18 Month Price Target

52-Week Range
ADTV - 90Day (000s)
Market Cap ($MM)
Shares Out (MM)
Public Market Float (MM)
Dividend

$21.00
$29.05 - $14.55
407.5
$618.0
31.0
26.7
NA

EPS ($)
FY DEC
Q1
Q2
Q3
Q4
YEAR

2011

2012

2013

Actual

Previous

Current

Previous

Current

$0.08A
$0.10A
$0.13A
$0.14A
$0.46A

$0.15A
$0.15A
$0.15A
$0.16E
$0.61E

$0.18
$0.22
$0.25
$0.79

$0.13E
$0.16E
$0.18E
$0.22E
$0.70E

Downgrading to Hold: Expect Tough Comparisons

Through Early 2013
Summary
We are trimming our forecast and price target for Allot Communications (ALLT)
while also reducing our rating to Hold from Buy. Our forecast revision anticipates
a lull in growth until mid-next year. By that time we expect more volume
from installed base capacity upgrades and adoption of adjacent technologies,
such as caching, video optimization, traffic steering and the load balancing that
the company has been working on organically and through acquisitions. In the
meantime we expect continued lengthening of sales cycle from H112 levels due
to economic conditions, LTE spending priorities and more competition. We have
also tempered our expectations for the U.S. market.

Key Points

Revenue ($)
FY DEC
Q1
Q2
Q3
Q4
YEAR

2011

2012

2013

Actual

Previous

Current

Previous

Current

$17.2A
$18.5A
$20.1A
$22.0A
$77.8A

$24.2A
$26.4A
$28.0A
$30.5E
$109.1E

$32.2
$34.9
$37.4
$133.5

$29.0E
$30.4E
$32.5E
$33.6E
$127.5E

Valuation Ratio
P/E
EV/S
FCF Yield
P/FCF

FY11
43.7x
6.1x
1.9%
51.5x

FY12
33.0x
4.3x
1.7%
59.4x

FY13
28.7x
3.7x
3.6%
27.8x

FY11
$159.40A

FY12

FY13

$11.9A
$10.5A
$187.8A
$5.4A
$197.1A
$2.7A
$28.8A
$34.5A
$162.6A

Balance Sheet
Cash and Marketable
Securities
Accounts Receivable
Inventory
Current Assets
PPE
Total Assets
Accounts Payable
Current Liabilities
Total Liabilities
Shareholders Equity

Company Description

Allot provides high performance, deep packet inspection

equipment for services gateways that enforce policy,
enhance network management, and optimize content.
Customer benefits include rapid return on investment
through network efficiency and revenue enhancement via
so-called smart charging according to content value.

Less urgency in the U.S. market. AT&T (T NR) backed away from tiered
pricing for FaceTime over cellular the day after the U.S. election. We believe
U.S. operators became more concerned about net neutrality and regard policy
enforcement of tiered pricing, which is a core function of Allot products, with
lower priority. Checks indicate U.S. mobile operator deployment of DPI tends
to focus on analytics, which does not require as much Allot equipment as policy
enforcement and can also be accomplished by other types of products.
Traffic off-load case less urgent amongst Cisco (Cisco - $19.73, Buy)
customers. The Cisco ASR5500 packet core router, which began to ship in
the summer, has significantly higher signaling capacity than the ASR5000
predecessor. This means that Cisco customers that have not deployed Allot
already, can wait because the need to offload DPI traffic is less urgent with the
higher capacity ASR5500. We believe this further slows the rate of adoption for
Allot, especially in the U.S. However, we expect current customers to continue
deploying Allot.
More offers stretching sales cycle. In addition to ASR5500 improvement,
other DPI suppliers have improved their products and Huawei has gained
traction through bundling. Though it is not a factor yet in the market we have
heard positive comments from those that have had an early look at the F5
Networks (FFIV - $94.20, Hold) offering. These developments may not mean
trouble for Allot with existing customers, but they could slow the sales cycle
for new ones.
LTE a wallet share distraction. There is nothing about LTE that reduces
the need for the traffic detection and policy enforcement functions provided
by Allot services gateways. However, we believe spending priority shift to
LTE deployment is likely to temporarily slow the rate of deployment for Allot
products.
Forecast & target trim - look to buy lower. Our new price target of $21,
revised from $27, reflects the trim to 2013 estimates as well as reduction on
our longer term growth rates. We believe the market for services gateways will
remain relatively high growth, but Allot must gain adoption for additional/new
features to counter market entry.

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

275 Battery Street
San Francisco, CA 94111

For Required Disclosures and Reg AC, please see page 6 of report
FINRA/SIPC

Allot Communications Ltd.

December 13, 2012

FIGURE 1 ALLOT COMMUNICATION LTD. SEGMENTS ($ MILLIONS) & CORE GROWTH EST.
2Q12 3Q12A 4Q12E 2012E
25.9
27.0
27.0 104.1
40%
35%
23%
34%

1Q13
26.5
10%

2Q13
27.1
4%

3Q13
28.6
6%

Acquisitions
Ortiva
0.5
0.5
1.5
2.5
Oversi
0.5
2.0
2.5
Source: Company data, Wunderlich Securities Inc. data

1.0
1.5

1.6
1.7

1.7
2.2

DPI/heritage
Yr./yr.

1Q12A
24.2
41%

4Q13 2013E
31.1 113.3
15%
9%
2.0
2.5

6.3
7.9

Previously we had forecast $119.3 (+15%

yr./yr.) for the core
(DPI/heritage) business of Allot.
Our forecast for the two recent
acquisitions is unchanged.
We have reduced our 3-5 year net income growth rate forecast to 25% from
28% and our 6-10 year net income forecast to 20% from 22%. We expect
the company to be growing in excess of our 3-5 year net income growth rate
forecast in H213, but between now and then comparisons are challenging.
FIGURE 2 ALLOT COMMUNICATION LTD. PRESENT VALUE OF LONG TERM FORECAST
Beta for required rate of return
3 - 5 Year Growth Rate
6 - 10 Year Growth Rate
Long-Term Growth Rate
Required Return on Equity

Growth rate
Income model (2012E)
Income model (2013E)
3-5 year
3-5 year
3-5 year
6-10 year
6-10 year
6-10 year
6-10 year
6-10 year
Long-term (perpetuity)

2.41
25%
20%
5%
15.0%

Published Beta (FactSet)

1.97
"Risk free" rate (10 year Treasury) 1.70%
Market Equity Risk Premium
5.50%
Shares Outstanding (millions)
33.8
Most Recent Quarter
4

Current value of future earnings Forward 12-month value of future earnings

Period Present value Future value
Present value Future value
0.0
$20
$20
$20
$20
1.0
$21
$24
$24
$24
2.0
$23
$30
$26
$30
3.0
$25
$37
$28
$37
4.0
$27
$47
$31
$47
5.0
$28
$56
$32
$56
6.0
$29
$67
$33
$67
7.0
$30
$81
$35
$81
8.0
$32
$97
$36
$97
9
$33
$116
$38
$116
10
$265
$1,067
$402
$1,067

Total
Per share

$545
$16

$707
$21

Source: FactSet data, Wunderlich Securities Inc. data

Our new price target is about a 5% premium to the peer group multiple. We
believe this is justified by the companys higher growth rate. Figure 3
applies FactSet data. Our new forecast is for 15.3% growth in 2013 non GAAP EPS. This is lower than consensus, but still well above the growth
of the peer group.

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

2

Allot Communications Ltd.

December 13, 2012

FIGURE 3 ALLOT COMMUNICATION LTD. PEER VALUATIONS

Application networking specialists and
networking industry leaders
Acme Packet
Cisco Systems
F5 Networks
Fortinet
Ixia
Juniper Networks
L.M. Ericsson
NetScout Systems
Palo Alto Networks
Procera
Radware
Riverbed Technology
Sandvine

EV /
TTM
3.9
1.6
5.1
5.9
4.0
1.8
0.8
2.6
11.0
3.5
3.5
3.0
1.4

EV /
FTM
3.9
1.5
4.4
5.0
2.9
1.7
0.8
2.3
7.2
2.8
3.1
2.5
1.2

TTM
P/E
34.6
10.4
21.5
39.6
22.3
22.3
11.8
19.2
273.6
31.6
19.4
18.7
-12.1

FTM P/E
53.3
9.9
18.9
34.1
18.0
19.6
15.4
18.2
200.4
39.3
16.9
15.8
417.6

Average (PANW & SVC not included in P/E or forward EPS growth)

3.7

3.1

22.0

23.6

3.1%

Average of Closest Peers - APKT, FFIV, FTNT, NTCT, PANW, PKT, RDWR,
RVBD, SVC (ex-PANW & SVC in P/E & fwd. EPS gr.)

4.4

3.6

26.4

28.1

2.1%

Allot Comm.

5.3

4.0

34.1

28.0

Symbol
APKT
CSCO
FFIV
FTNT
XXIA
JNPR
ERIC
NTCT
PANW
PKT
RDWR
RVBD
SVC-TSE

ALLT

12/12
$21.79
$19.73
$94.20
$20.19
$15.83
$18.97
$9.64
$24.38
$49.25
$17.09
$32.81
$17.98
C$ 1.32

$20.10

Mkt. cap.
Net
(millions) Cash/Sh.
$1,487
$5.33
$105,240
$5.38
$7,515
$6.67
$3,368
$2.25
$1,347
-$1.51
$9,950
$4.10
$31,291
$1.61
$1,032
$3.97
$3,291
$2.61
$338
$6.66
$765
$5.29
$2,911
$3.30
$190
$0.52

$673

$4.31

Dividend Forward EPS

yield
growth
-35%
2.8%
5%
14%
16%
24%
14%
2.7%
-23%
6%
NM
-19%
15%
18%
NM

22%

Current relative valuation

ALLT priced at avg. FTM P/E multiple - Closest
Peers

$20.15

28.1

Source: FactSet data

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

3

Allot Communications Ltd.

Figure 4 - Allot Communications Ltd. - Income Statement

2010A
Mar-11

($000, except per share data)

December 13, 2012

Jun-11

Revenue
$56,972
$17,183
$18,454
Y-Y Change
36.5%
37.8%
35.4%
Seq. Change
6.0%
7.4%
GAAP COGS (including SBC & amortization)
15,985
4,852
5,305
COGS from Amortization & SBC
215
53
57
Fair value adjustment for non-GAAP revenue in H212 and reserve in 2009
15,770
4,799
5,248
Non-GAAP COGS (no amort. or SBC)
% of Rev
27.7%
27.9%
28.4%
40,987
12,331
13,149
Gross Profit
Non-GAAP Gross Profit
41,202
12,384
13,206
72.3%
72.1%
71.6%
Gross Margin
10,912
2,879
2,996
Research & Development
% of Rev
19.2%
16.8%
16.2%
6,093
21,171
6,150
Sales & Marketing
% of Rev
37.2%
35.5%
33.3%
1,246
4,782
1,255
General & Administrative
% of Rev
8.4%
7.3%
6.8%
Stock-based compensation
1,894
494
520
M&A and unusual regulatory/legal exp.
Amortization of intangible assets
Non-GAAP Operating Expenses
36,865
10,218
10,401
2,228
1,619
2,228
GAAP Operating Income
Non-GAAP Operating Income
4,337
2,166
2,805
% of Rev
7.6%
12.6%
15.2%
Interest & Other Income
(195)
92
(63)
Capital Gain/(Asset Impairment)
(5,678)
1,711
2,165
GAAP Income Before Taxes
Non-GAAP Income Before Taxes
4,142
2,258
2,742
84
85
16
GAAP Income Taxes
Non-GAAP Income Taxes
84
85
16
Tax Rate
2.0%
3.8%
0.6%
(5,762)
1,626
2,149
GAAP Income After Taxes
Non-GAAP Net Income
4,058
2,173
2,726
Non-GAAP EPS
$0.17
$0.08
$0.10
Y-Y Change
NM
983.1%
220.6%
GAAP EPS
($0.24)
$0.07
$0.08
25,898
24,027
26,253
Diluted Shares Outstanding
26,035
26,400
Non-GAAP Diluted Shares Outstanding (if applicable)
Cash flow from operations
7,351
963
2,895
Capital expenditures
2,334
710
588
Depreciation
2,577
657
679
Free cash flow
5,017
253
2,307

Sep-11

Dec-12

2011A

Mar-12

Jun-12

$20,088
37.0%
8.9%
5,728
49

$22,028
35.9%
9.7%
6,290
65

$77,753
36.5%

$24,217
40.9%
9.9%
6,901
75

$26,405
43.1%
9.0%
7,755
314

5,679
28.3%
14,360
14,409
71.7%
3,368
16.8%
6,352
31.6%
1,416
7.0%
487

6,225
28.3%
15,738
15,803
71.7%
3,537
16.1%
6,951
31.6%
1,510
6.9%
651

21,951
28.2%
55,578
55,802
71.8%
12,780
16.4%
25,546
32.9%
5,427
7.0%
2,152

6,826
28.2%
17,316
17,391
71.8%
3,822
15.8%
7,437
30.7%
1,563
6.5%
672
1,045

11,136
2,737
3,273
16.3%
149

11,998
3,089
3,805
17.3%
238

43,753
9,673
12,049
15.5%
416

12,822
2,777
4,569
18.9%
462

7,441
28.2%
18,650
18,964
71.8%
4,842
18.3%
7,587
28.7%
1,705
6.5%
974
1,009
14,134
2,533
4,830
18.3%
187

2,886
3,422
13
13
0.4%
2,873
3,409
$0.13
151.5%
$0.11
26,184
26,287
3,381
740
712
2,641

3,327
4,043
(170)
(170)
-4.2%
3,497
4,213
$0.14
93.3%
$0.12
29,557
29,668
7,706
915
706
6,791

10,089
12,465
(56)
(56)
-0.4%
10,145
12,521
$0.46
174.8%
$0.38
26,973
27,098
14,945
2,953
2,754
11,992

3,239
5,031
3
3
0.1%
3,236
5,028
$0.15
82.1%
$0.10
32,924
33,079
4,402
703
645
3,699

22,175
224

Sep-12A
$28,026
39.5%
6.1%
8,464
698
258
7,766
27.7%
19,304
20,260
72.3%
5,647
20.1%
7,896
28.2%
1,958
7.0%
1,259
519

Dec-12E

2012E

$30,500 $109,148
38.5%
40.4%
8.8%
9,403
32,523
948
2,035

Mar-13

Jun-13

Sep-13

Dec-13

$29,025
19.9%
-4.8%
8,975
948

$30,350
14.9%
4.6%
9,324
948

$32,525
16.1%
7.2%
9,927
948

$35,560 $127,460
16.6%
16.8%
9.3%
10,817
39,042
948
3,792

2013E

8,455
27.7%
21,097
22,045
72.3%
6,150
20.2%
8,590
28.2%
2,250
7.4%
1,261

30,488
27.9%
76,367
78,660
72.1%
20,461
18.7%
31,510
28.9%
7,476
6.8%
4,166

8,027
27.7%
20,050
20,998
72.3%
6,175
21.3%
8,175
28.2%
2,300
7.9%
1,263

8,376
27.6%
21,026
21,974
72.4%
6,275
20.7%
8,250
27.2%
2,350
7.7%
1,265

8,979
27.6%
22,598
23,546
72.4%
6,500
20.0%
8,625
26.5%
2,400
7.4%
1,266

9,869
27.8%
24,743
25,691
72.2%
6,675
18.8%
9,180
25.8%
2,475
7.0%
1,268

35,250
27.7%
88,418
92,210
72.3%
25,625
20.1%
34,230
26.9%
9,525
7.5%
5,062

15,501
2,025
4,759
17.0%
382

16,990
2,846
5,055
16.6%
220

59,447
10,181
19,213
17.6%
1,251

16,650
2,138
4,348
15.0%
245

16,875
2,887
5,099
16.8%
269

17,525
3,807
6,021
18.5%
299

18,330
5,144
7,361
20.7%
334

69,380
13,976
22,830
17.9%
1,147

2,720
5,017
21
21
0.4%
2,699
4,996
$0.15
44.2%
$0.08
33,356

2,407
5,141
19
19
0.4%
2,388
5,122
$0.15
16.2%
$0.07
33,849

3,066
5,275
25
19
0.4%
3,041
5,256
$0.16
9.2%
$0.09
33,900

11,432
20,464
68
62
0.3%
11,364
20,402
$0.61
31.2%
$0.34
33,507

2,382
4,593
25
25
0.5%
2,357
4,568
$0.13
-11.5%
$0.07
33,950

3,156
5,369
25
25
0.5%
3,131
5,344
$0.16
4.9%
$0.09
34,000

4,106
6,320
25
25
0.4%
4,081
6,295
$0.18
22.2%
$0.12
34,050

5,478
7,694
25
25
0.3%
5,453
7,669
$0.22
45.1%
$0.16
34,100

15,122
23,977
100
100
0.4%
15,022
23,877
$0.70
15.3%
$0.44
34,025

4,790
766
645
4,024

150
1,528
645
(1,378)

4,953
900
645
4,053

14,295
3,897
2,580
10,398

4,320
900
700
3,420

5,096
900
700
4,196

6,047
900
700
5,147

7,421
900
700
6,521

22,885
3,600
2,800
19,285

Source: company reports and Wunderlich Securities, Inc.

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

4

Allot Communications Ltd.

December 13, 2012

Figure 5 - Allot Communications Ltd. - Balance Sheet & Performance Ratios

($000, except per share data)

ASSETS
Cash & cash equivalents
Short-term deposits, restricted deposit & cash
Marketable securities & restricted cash
Trade receivables, net
Other accounts receivable & prepaid expenses
Inventories
Total Current Assets
Property/Equip., At Cost
Less: Accum. Depreciation & Amortization
Long-term marketable securities
Severance pay fund
Other assets
Property & equipment
Goodwill
Total Assets

Mar-08 Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

23,938
6,062

26,946
3,062

31,947
4,267

40,029
2,121

35,851
4,058

35,323
4,120

36,667
2,320

36,470
2,324

36,349
5,386

49,391
5,968

49,928
6,303

50,421
9,028

43,857
17,096

46,116
17,382

6,103
4,580
4,196

6,382
1,820
3,924

6,427
1,708
3,991

6,163
1,959
4,259

6,586
1,578
4,109

8,122
1,356
4,737

7,992
2,619
5,633

7,842
3,618
5,046

5,372
4,282
6,111

7,096
2,428
7,531

7,538
2,920
9,679

10,739
4,913
10,830

13,506
5,691
11,644

$44,879 $42,134 $48,340 $54,531

$52,182 $53,658 $55,231 $55,300

$57,500 $72,414 $76,368 $85,931

33,185
3,571
1,175
4,883
3,791

14,161
2,987
889
4,731
3,727

14,116
316
430
5,834
3,607

32,016
3,794
996
5,034
3,761

18,159
3,891
911
4,851
3,788

15,319
3,402
874
4,970
3,755

$91,484 $87,735 $79,940 $82,851

15,364
3,295
887
4,733
3,698

13,764
3,407
421
5,192
3,667

14,490
3,410
430
5,674
3,639

$78,677 $81,635 $81,682 $82,943

264
424
5,793
3,577

295
292
5,448
3,546

162
340
5,193
3,516

$81,803 $82,472 $85,949 $95,142

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

48,666
18,000

116,682
42,718

11,142
6,763
9,724

12,799
4,063
9,048

11,926
5,950
10,501

140,902
6,000
18,535
16,313
5,839
10,652

70,083
71,000
18,692
17,454
4,387
11,673

25,668
94,000
24,427
21,739
4,946
11,059

$91,794

$91,127

$92,576

$187,777

178
343
5,218
3,486

188
341
5,115
3,455

179
246
5,144
3,425

$101,019 $100,226 $101,570

178
356
5352
3395
$197,058

$198,241 $193,289 $181,839

184
357
5,406
3,364

181
355
5,913
17,424

182
320
6,799
34,541

$207,552 $217,162 $223,681

LIABILITIES
Accounts payable
Deferred revenues
Other payables and accrued expenses
Liabilities of discontinued operation
Total Current Liabilities
Deferred revenue
Accrued severance pay

3,340
3,929
6,364

2,412
4,511
5,865

2,964
4,185
6,244

2,902
4,475
6,466

$13,633 $12,788 $13,393 $13,843

1,464
3,523

1,437
3,793

1,617
3,861

2,293
3,536

2,627
4,798
6,003

3,041
4,971
7,355

3,901
5,217
6,277

3,142
5,467
8,512

$13,428 $15,367 $15,395 $17,121

2,236
3,068

2,209
3,264

2,046
3,410

2,046
3,364

2,000
8,875
6,756

4,654
7,136
8,024

5,206
7,008
9,148

5,140
10,828
10,122

$17,631 $19,814 $21,362 $26,090

3,667
162

3,465
153

3,575
176

3,873
191

5,169
11,765
10,872

2,094
11,384
11,240

3,830
10,317
10,149

2,684
16,694
9,462

5,939
18,590
8,432

7,316
17,156
12,787

7,603
15,936
15,326

$27,806

$24,718

$24,296

$28,840

$32,961

$37,259

$38,865

4,396
210

4,381
223

4,065
213

5,430
219

4,745
219

5,135
229

4,632
229

$34,489

$37,925

$42,623

$43,726

Total Liabilities

$18,620 $18,018 $18,871 $19,672

$18,732 $20,840 $20,851 $22,531

$21,460 $23,432 $25,113 $30,154

$32,412

$29,322

$28,574

Shareholders' Equity

72,864

59,945

60,343

68,607

70,904

72,996

162,569

207,552

$2.65
$2.51
$60,953
$2.54
$2.35
-

$2.70
$2.57
$63,498
$2.62
$2.42
-

$2.79
$2.66
$66,666
$2.74
$2.55
-

$5.50
$5.39
$159,400
$5.75
$5.39
-

$6.30
$5.23
$5.32
$6.20
$4.71
$4.30
$165,437 $159,775 $144,095
$5.30
$5.01
$4.47
$5.02
$4.79
$4.26
1
1

69,717

61,069

63,179

60,795

60,831

60,412

59,040

60,836

64,988

174,439

179,955

Performance Ratios
Book value/diluted share
$3.30
$3.16
$2.77
$2.84
Tangible book value/diluted share
$3.13
$2.99
$2.60
$2.67
Net cash and marketable securities
$63,185 $62,024 $54,373 $57,469
Net cash and marketable securities/basic share
$2.86
$2.81
$2.46
$2.60
Net cash and marketable securities/diluted share
$2.86
$2.81
$2.46
$2.59
Debt
Current ratio
Quick ratio
AR days
AP days
Inventory turnover
Cash conversion days
Deferred revenue change - yr./yr.
Sequential

$2.72
$2.75
$2.74
$2.62
$2.55
$2.59
$2.57
$2.46
$54,070 $54,807 $52,751 $53,284
$2.45
$2.48
$2.37
$2.38
$2.45
$2.48
$2.37
$2.31
-

$2.63
$2.43
$2.51
$2.64
$2.47
$2.29
$2.36
$2.50
$55,851 $55,359 $56,231 $59,449
$2.49
$2.44
$2.53
$2.56
$2.43
$2.28
$2.32
$2.41
-

3.3
3.0
59
145
2.0
97

3.3
3.0
61
90
2.5
118

3.6
3.3
60
105
2.6
96

3.9
3.6
59
109
2.3
110

3.9
3.6
64
97
2.4
119

3.5
3.2
74
102
2.3
131

3.6
3.2
67
122
2.1
122

3.2
2.9
62
96
2.4
121

3.3
2.9
39
55
2.2
153

3.7
3.3
47
110
2.1
116

3.6
3.1
47
116
1.7
147

3.3
2.9
60
103
1.7
175

3.3
2.9
72
98
1.6
195

3.7
3.3
55
36
2.2
188

3.8
3.4
58
61
2.5
142

6.5
6.1
49
39
2.4
164

6.0
5.7
61
79
2.6
125

5.2
4.9
60
89
2.5
114

4.7
4.4
71
89
2.8
111

-9.7%
0.4%

-8.5%
10.3%

-23.1%
-2.5%

26.0%
16.6%

30.4%
3.9%

20.7%
2.1%

25.2%
1.2%

11.0%
3.4%

78.3%
66.9%

47.6%
-15.5%

45.7%
-0.2%

95.7%
38.9%

28.9%
9.9%

48.7%
-2.5%

35.9%
-8.8%

50.5%
53.8%

44.4%
5.5%

41.4%
-4.5%

43.0%
-7.7%

Source: company reports

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

5

Allot Communications Ltd.

December 13, 2012

Disclosures:
Analyst Certification
I Matthew S. Robison, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject companies and their underlying
securities. I further certify that I have not and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this research
report.
Valuation/Risks
ALLT trades at a P/E premium to the broader market and many peers in the networking industry, but had stronger secular growth fundamentals than most, in our opinion.
Company-specific disclosures:
Wunderlich Securities makes a market in the shares of Allot Communications Ltd..
Public Companies Mentioned in this Report:
Cisco Systems, Inc. (CSCO - 19.73 - Buy)
F5 Networks, Inc. (FFIV - 94.20 - Hold)
General disclosures:
Prices are as of the close of 12/12/12.
Ratings Distribution (in Percentages) & Investment Banking Disclosure Chart Information
Ratings Distribution & Investment Banking Disclosure
Rating
Buy -rated
Hold -rated
Sell -rated

Count

Ratings Distribution*

Count

Investment Banking**

149
94
1

61.07
38.52
0.41

29
11
0

19.46
11.70
0.00

* Percentage of all Wunderlich-covered stocks assigned an equivalent Buy, Hold, or Sell rating.
** Percentage of companies within Wunderlich-rated Buy, Hold, and Sell categories for which Wunderlich or an associated firm provided investment banking services within the
past 12 months.

Rating System:
There are three rating categories within the Wunderlich Securities Investment Rating System: Buy, Hold, and Sell. The rating assigned to each company is based on the
following criteria.
Buy a security which at the time the rating is instituted or reiterated indicates an expectation of a total return of greater than 20% over the next 12-18 months.
Hold - a security which at the time the rating is instituted or reiterated indicates an expectation of a total return of plus or minus 5% over the next 12-18 months.
Sell a security which at the time the rating is instituted or reiterated indicates an expectation of a negative total return of greater than 10% over the next 12-18 months.
The analyst(s) who prepared this report may be compensated in part from a bonus pool that is partially funded by fees received by Wunderlich Securities for providing
investment banking services.

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

6

Allot Communications Ltd.

December 13, 2012

To request further information regarding the companies discussed in this report, readers may send an email to research@wundernet.com or may write to the Wunderlich
Securities Research Department, Wunderlich Securities, Inc., 400 E. Pratt Street, Suite 710, Baltimore, MD, 21202.
Other Disclosures
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exercise of independent judgment. WSI may have issued, and may in the future issue, a trading call regarding this security.
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the linked site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to WSIs own website material) is

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

7

Allot Communications Ltd.

December 13, 2012

provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following
such link through this report or WSIs website shall be at your own risk.

Matthew S. Robison 415.661.0470 mrobison@wundernet.com

Wunderlich Securities, Inc.

8

Baltimore
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Equity Research
Director of Research
James L. Dobson
212.402.2059
Accounting and Tax Policy
Forensic Accounting
Mike Gyure, CPA
440.364.7473
Diversified Industrials
Environmental Services
Michael E. Hoffman
410.369.2620
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410.369.2614
Industrial Distribution
Brent D. Rakers, CFA
901.251.2236
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901.251.2238
Minerals & Mining
Michael E. Hoffman
410.369.2620
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410.369.2614
Transportation
Brian J. Butler, CFA
410.369.2614
Chaz Jones
901.251.2231
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901.251.2230
Energy
Exploration & Production
Irene O. Haas
713.403.3980
Mostafa Dahhane, CFA
713.403.3986
Oilfield Services/Exploration & Production
Jason Wangler
415.489.6806
Master Limited Partnerships
John R. Cusick
212.402.2057
Utilities/Power
James L. Dobson
212.402.2059
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Financial Services
Real Estate
Merrill Ross
703.307.9409
Regional Banks
Kevin Reynolds, CFA
901.251.2229
Healthcare
Medical Devices
Gregory J. Simpson, CFA
314.719.3467
Technology, Media & Telecommunications (TMT)
Cable/Satellite Entertainment
Matthew Harrigan
303.965.7966
Communications & Networking Equipment
Matthew S. Robison
415.572.0936
Information Infrastructure
Brian S. Freed, CFA
901.251.1353
Jeffrey J. Andry
901.259.9432
Software-as-a-Service
Richard K. Baldry, CFA
410.369.2633
Specialty Semiconductors and Components
William S. Harrison
410.369.2632
Blake T. Harper, CFA
410.369.2624
Institutional Equity Sales
Directors of Institutional Sales
Mark McCulloh
410.369.2619
Thomas S. Stephens
410.369.2602
Beth Adams
972.772.5066
Clifford Athey
410.369.2627
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303.260.7902
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901.259.9437
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901.259.9436
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617.892.7222
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901.259.9407
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303.260.7905
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901.259.9438
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410.369.2610
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901.259.9411
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