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Merrill Lynch today issued a Buy rating for Radware (Nasdaq: RDWR), which lost 30% o fits value on Nasdaq during 2005.

This year the share price has rallied by 7.5%, rising to $19.50 and lifting the RAD group company's market cap to $386 million.

A week ago Oppenheimer upgraded Radware from Neutral to Buy and set its 12-month price target startup $23, which was 18% above its level on the market. A week before that Piper Jaffray gave it an Outperform investment rating and target of $22.

Merrill Lynch's price objective is $23.50, or 20% above Radware's closing share price on Nasdaq on Friday.

The analysts expect that trends in the Internet load management market will lead Radware to present fourth-quarter 2005 revenues of $21.3 million, at least, and profit of $2.4 million, or 12 cents per share. That would be one cent above the Wall Street consensus.

For the year 2006 Merrill Lynch's earnings per share guess is higher than the consensus by 4 cents, at 69 cents per share.

Merrill Lynch decided to factor the potential of OEM agreements into its pricing model. The Radware management has been talking about these "original equipment manufacturer" agreements for some time and has stressed its commitment to the move.

The investment bank also foresees Radware gnawing into Nortel's market share. The product cycle is nearing its end: old products will be replaced with newer ones, which could increase demand, especially in the second half of 2006 and first half of 2007, the analysts predict.

Despite their faith in the trends, Merrill Lynch doesn't see the fourth-quarter results providing an upside to the share in the short term. It believes the results will be in line with expectations, but with a multiple of 14 times estimated 2007 EPS, Radware is attractive, they say.

Radware stock from 2002