Wall Street felt the earth literally move on Tuesday, and small-cap stock investors were leading the way amid rumblings that Federal Reserve Chairman Ben Bernanke will create a possible financial earthquake later this week.

The Russell 2000 Index rose 4.87 percent and the Standard & Poor's Small Cap 600 Index closed an even stronger 4.94 percent higher, as traders began bidding up stocks on the hopes that Bernanke will announce steps to further stimulate the economy.

The Russell 2000 (NYSE:IWM) navigated choppy trading today as investors waited on specifics surrounding the U.S. government’s plan to aid the housing and financial markets. Large financial firms Citigroup and JPMorgan Chase answered a call from lawmakers and regulators made on Thursday and temporarily halted foreclosures today until the government’s plan emerges.

Unclear details made for an unclear trading day, and stocks see-sawed on high, rudderless volatility. In the end, small caps closed down 2.06, or 0.46%, to 448.36, while the Dow closed down 1.04% and the S&P 500 fell 1%.

Aside from the financial rescue plan currently being voted on in the Senate front, bad news was thrown into the trading mix before the opening bell, when a sudden freefall in Lloyds Banking Group sparked a pullback off pre-market highs in stock index futures and pulled down sentiment into the U.S. stock market open. At one point, Lloyds was approaching 40% losses after saying that they would post a bigger loss than expected. Shortly after, Wells Fargo & Co. weighed on bank stocks further when the large cap reported a Q4 loss that was wider than expected.

Many small cap banks suffered on the sour news, especially Allied Irish Banks (NYSE:AIB), which tanked 19% on the close.

Crude oil prices rose 11.27%, or $3.83, to $37.81 per barrel, supported by enthusiasm for the anticipated approval of the U.S. stimulus program. Elsewhere on the commodities front, gold prices were taking a breather today, but have clearly benefited from safe-haven buying recently. Gold is currently at $942 per ounce.

Earlier this morning, the University of Michigan consumer sentiment survey came in at 56.2, which was well below the forecast of 61, and which appeared to trigger a mild selling extension in the stock market. A sub-index of the report on consumer expectations tumbled to the lowest level since May 1980.

Individual small caps on the move today included Savient Pharmaceuticals Inc. (Nasdaq:SVNT), which fell 19% on news that an FDA review of its gout . . .

Small-cap stocks extended the rally into midday trading, boosted by a bounce in financial and energy shares after those sectors were drummed during Monday’s massive rout. Oversold conditions, bargain hunting and optimism about a bailout for beleaguered automakers fueled the upside pop.  Some of today’s small-cap gainers are Colonial Properties Trust (NYSE:CLP), Deltek Inc. (Nasdaq:PROJ) and Williams-Sonoma Inc.  (NYSE:WSM).

Other Market Watch highlights today included:

• Automaker remained higher into midday as investors waited word on progress for an aid package to stave off potential failure for the Big 3.  
• Airline stocks were up 5.5%, outperforming the broad market.
• The ISE Homebuilders Index was up 7% also a sign of relief after all of the economy worries pounded stocks Monday.  
• Among S&P sectors, REITS, wireless telecoms, broadcasting firms and diverse financial services companies were the best performers.


Small Cap Gainers:

• Colonial Properties Trust jumped 38% after the multifamily real estate investment trust announced dividends. See (NYSE:CLP).
• Deltek Inc. rose 34% as the software designer generated a big outside bullish reversal on daily charts following Monday’s swoon. See (Nasdaq:PROJ). 
• Williams-Sonoma Inc. jumped nearly 25% as the retailer operator of Pottery Barn received analyst upgrades. See (NYSE:WSM).  
• Advanced Medical Optics Inc. rose 22%, reversing a sizable decline from Monday. See (NYSE:EYE).  
• US Airways Group Inc. and Alaska Air Group Inc. were both up about 8%, as airline stocks are flying high today. See (NYSE:LCC) and (NYSE:ALK).

Small Cap Losers:

• Palm Inc. tumbled 34% as the smart phone maker lowered quarterly projections. See (Nasdaq:PALM).
• Clearwire Corp. tumbled 20% on reports that the firm may slow its high-speed WiMax wireless network progress because of the tight credit market situation. See (Nasdaq:CLWRD).  
• Skyworks Solutions Inc. gapped lower and slumped 13% after the analog semiconductor firm lowered guidance. See (Nasdaq:SWKS).

Small-cap stocks extended the rally into midday trading, boosted by a bounce in financial and energy shares after those sectors were drummed during Monday’s massive rout. Oversold conditions, bargain hunting and optimism about a bailout for beleaguered automakers fueled the upside pop. At 12:30 p.m. ET, the Russell 2000 (NYSE:IWM) was up 20.74, or 4.97%, at 437.81.

Now that the Russell pushed through the first short-term resistance line at 433.50, the next test will be up at 442 if the market can hold above 433.50 through the afternoon. A pullback should find mild support along 424, then down at 413.50 if things deteriorate.

General Electric Co. (NYSE:GE), seen as a proxy for the overall economy because of its diverse group of products, was up 10% at mid-session, providing a lift not just to large caps, but a ripple through to small caps as well.

In addition, commodity markets were on a rising tide today after getting clobbered Monday, which bolstered commodity shares. Even though crude oil prices were hovering near steady levels, energy stocks were up about 2.5%. Among S&P sectors, REITS, wireless telecoms, broadcasting firms and diverse financial services companies were the best performers. The ISE Homebuilders Index was up 7% also a sign of relief after all of the economy worries pounded stocks Monday. Airline stocks were up 5.5%, outperforming the broad market, with small-cap carriers US Airways Group Inc. (NYSE:LCC) up nearly 8% and another small-cap firm Alaska Air Group Inc. (NYSE:ALK) also up about 8%.

Automaker shares remained higher into midday as investors waited word on progress for an aid package to stave off potential failure for the Big 3. Ford Motor Co. (NYSE:F) submitted a plan calling for $9 billion in loans. The plan would also cancel global executive bonuses, would cut dealers and include development of electric cars. Ford stock was up 10% on the news, leapfrogging (on a percentage basis) General Motors Corp. (NYSE:GM), which was leading Ford overnight, but which . . .

Small caps remained lower into midday trading, unable to draft off support from moderate gains in large caps as investors still have risk aversion on their mind. Energy stocks were providing a lift to large caps, but financial shares were struggling, pulling down lots of small banks in the small-cap universe. Today’s small-cap gainers are Silver Standard Resources Inc. (Nasdaq:SSRI), Exterran Partners (Nasdaq:EXLP) and Deltek (Nasdaq:PROJ).

Other Market Watch highlights today included:

• The Financial Select Sector SPDR was down 4.3% at midday.  
• Financial shares remain a big drag on the market, with Citigroup Inc. extending the freefall.  
• Small caps remained lower into midday trading, unable to draft off support from moderate gains in large caps.  
• Researchers at Goldman Sachs today said that the upcoming November employment report will be the worst yet for 2008. 

Small Cap Gainers:

• Gold and silver companies dominated the top percentage gainers on the Nasdaq; Silver Standard Resources Inc. is rising 18%. See (Nasdaq:SSRI).   
• Exterran Partners is up 18% on light volume as energy-related stocks are on the rise today. See (Nasdaq:EXLP).  
• Deltek up 15% today following SC&H Group's announcement earlier this week of a business partnership with the small cap. See (Nasdaq:PROJ).
• China Sky One Medical is up 7% on light volume following news this week that the small cap obtained production rights for nine new drugs. See (Nasdaq:CSKI). 

Small Cap Losers:

• Buckeye shares fall 26% after BGH terminates tender offer. See (NYSE:BGH).  
• Shares of Media General are down another 26% today following news Thursday that Harbinger Capital sold stock in the newspaper publisher. See (NYSE:MEG).
• Collective Brands Inc. is off 25% as the holding company for Payless Shoes and Stride Rite plunged to fresh 52-week lows See (NYSE:PSS).  
• Red Robin Gourmet Burgers Inc. is down 23% as the casual dining restaurant chain also made new move lows. See (Nasdaq:RRGB).  

During midday trading, the Russell 2000 is one of few indices in the green, up 0.77%, however trading remains volatile, with the market popping back off a 3% mid-morning slide fairly quickly. Today’s small-cap gainers are Encore Acquisiton (NYSE:EAC), Targanta Therapeutics (Nasdaq:TARG) and China TechFaith (Nasdaq:CNTF). Other Market Watch highlights today included:

• The industrial production report released this morning pegged output down 2.8%; the forecast was for -0.8%.
• The best performing areas today are coal, education services, agriculture products, footwear companies, food retail firms, airlines, gas utilities and steel stocks. 
• On the downside, life health insurers, gold, paper products, auto manufacturers, asset mngt. firms, and Internet retail stocks were all taking a hit. 
• Crude oil extends slide after inventory data, dips below $70.
• The credit crisis is forcing many European firms valued at >$1.5B to end their publicly traded status, Bloomberg reports.
• The CBOE Volatility Index (a good indicator of the level of fear in the markets) hits a record high.
• The market continues to slide after the Philly Fed diffusion index fell to -37.5 in Oct. from +3.8 in Sept., its largest 1-month decline ever. 

Small Cap Gainers:

• Targanta Therapeutics Corp. (Nasdaq:TARG) is up 49% on light volume, bouncing off a test of move lows.
• Encore Acquisition (NYSE:EAC) jumps 24% on Q3 operating results and authorization for the repurchase of an additional $40 million in stock.
• Molecular Insight Pharmaceuticals Inc. (Nasdaq:MIPI) is up 21%, basically trying to recover losses from Wednesday’s big decline.
• Deltek Inc. (Nasdaq:PROJ) announced preliminary results. Shares . . .

Small-cap stocks pushed higher on the opening, powered by a decent corrective bounce in the wake of Wednesday’s epic collapse. Bargain hunters were back nibbling in stocks after this morning’s initial batch of non-manufacturing economic indicators came in relatively mild and didn’t serve up any stunners like Wednesday’s huge drop in retail sales. In addition to the tame economic data, Libor inter-bank lending rates slipped in European trading, which bolsters confidence that frozen credit lines and lending mistrust is thawing as governments around the world push liquidity into the system and guarantee loans. At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was up 11.18, or 2.23%, at 513.28.

After wholesale prices (PPI) came in near the forecast Wednesday, consumer prices (CPI) were slightly better than projected, but it’s really no surprise that inflation fears have receded — after all, crude oil prices are at 13-month lows and commodities in general are at the lowest level in three years. More importantly, the weekly unemployment claims release was better than feared, with 461,000 people filing for unemployment insurance in the latest week, down from the forecast of 470,000. Still, 461,000 is a very big number historically and the four-week moving average on claims is still at a seven-year peak. Analytically, there is a case to be made that jobs data will continue to look awful for some time, but will be a lagging element on the recovery story. That argument will gain favor from investors looking for last week’s lows to be a major turning point for the stock market.

However, stock index futures started to trim away gains after a horrendous industrial production report came out just ahead of the opening at 9:15 a.m. ET. Output tumbled 2.8%, much worse than the forecast for a decline of 0.8% and the slide represented the biggest decline in nearly 34 years. Hurricane Gustav and a strike at aircraft maker Boeing exaggerated the decline in output. Industrial production data seldom sparks a big move in the market nowadays, and clearly investors were looking at other factors this morning if they were able to shrug off this weak report in favor of the relatively painless inflation and jobs reports earlier this morning. The Dow and S&P 500 slipped back into the red briefly after the Philly Fed survey came out well below the forecast, mirroring sobering news on the manufacturing front that we’ve . . .

ICO Inc. (Nasdaq:ICOC), Alloy Inc. (Nasdaq:ALOY) and Animal Health International Inc. (Nasdaq:AHII) are among the most actively traded companies in Thursday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Deltek Inc. (Nasdaq:PROJ), Trico Marine Services Inc. (Nasdaq:TRMA), Bronco Drilling Co Inc. (Nasdaq:BRNC), First Financial Northwest Inc. (Nasdaq:FFNW), Smart Balance Inc. (Nasdaq:SMBL) and Canadian Solar Inc. (Nasdaq:CSIQ).

Here are the most actively traded companies among small caps:

Small-cap stocks broke out of the gate this week like a rocket as investors cheerfully greeted news of a government takeover of mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was up 12.92, or 1.80%, at 731.77.

The U.S. government had already inked plans to open credit windows to government-sponsored enterprises like FNM and FRE, but on Sunday the Treasury Department decided more drastic measures were needed, and stepped in to takeover the firms, which investors saw as a big relief to financial shares.

The clear immediate beneficiaries of the news were banks, insurance firms and brokerage firms. Even though preferred stock holdings in FNM and FRE might not be worth much now, the housing loans secured through GSEs should be on better footing for now. Shortly after the open, American International Group Inc. (NYSE:AIG) was up 5%, while Citigroup Inc. (NYSE:C) was up 7% and Bank of America Corp. (NYSE:BAC) was up 8%. The Financial Select Sector SPDR Fund was up 8%, while the PHLX KBW Banking Index was up 7%.

Stock markets around the world embraced the GSE takeover news, with Japan up 3.3%, Hong Kong up 4.2%, Taiwan up 5.5%, Australia up 3.9%, Singapore up 4.4%, South Korea up 5.2% and India up 3.1%, which also helped set the stage for a stunning morning climb in U.S. equities.

Looking beyond the news, it will be interesting to see how the market trades throughout the session from this morning’s immediate bullish reaction. The opening gap left by the overnight rally in stocks was huge — history suggests that an opening gap that is not filled within the first hour of trading often marks an important turning point for markets. Probably the most important trading time frames today will . . .

Chemgenex Pharm (Nasdaq:CXSP), LSB Corp (Nasdaq: LBSX) and Zumiez Inc (Nasdaq:ZUMZ) are among the biggest percentage gainers in Friday's trading among companies with market capitalizations under $1 billion.     

Also included among the results: Cato Corp (Nasdaq:CTR), Deltek Inc (Nasdaq:PROJ), RXi Pharmaceuticals Corp (Nasdaq:RXII), Princeton National Bancorp Inc (Nasdaq:PNBC), Micromet Inc (Nasdaq:MITI) and Torch Energy Royalty Trust (Nasdaq:TRU).   

Here are the biggest percentage gainers among small caps:    

Delta Apparel Inc. (Nasdaq:DLA), Champion Enterprises Inc. (Nasdaq:CHB) and Staar Surgical Co. (Nasdaq:STAA) are among the biggest percentage gainers in Friday's trading among companies with market capitalizations under $1 billion.    

Also included among the results: Lithia Motors Inc. (Nasdaq:LAD), QCR Holdings Inc. (Nasdaq:QCRH), Tween Brands Inc. (Nasdaq:TWB), Deltek Inc. (Nasdaq:PROJ), Oplink Communications Inc. (Nasdaq:OPLK) and Ricks Cabaret International Inc. (Nasdaq:RICK).        

Here are the biggest percentage gainers among small caps:     

Small-cap stocks pushed higher in morning trade, carried on the wings of a renewed rally in the U.S. dollar and a slide in global commodities — particularly crude oil. At 9:59 a.m. ET, the Russell 2000 (NYSE:IWM) was up 5.24, or 0.69%, at 759.62; the morning peak in the Russell marked the highest intraday price since Jan. 2.

Small-cap stocks are on the verge of posting the highest weekly close of 2008, a remarkable achievement considering the Dow and S&P 500 are still suffering losses in the 11% range so far this year. Any close today above 747.38 would do the trick. If the Russell were to really catch fire today and push above 766.03, then small caps would actually be in positive territory for the year. The reason it takes a big leap from current yearly high weekly closing levels to positive territory is because the market got hammered the very first trading day of the year and also fell hard when staking the June peak.

Back to the big news today — the U.S. dollar stormed to fresh move highs overnight against both the euro and the Japanese yen, climbing about 0.6% versus both currency markets. The strong upside push in the greenback clearly had a bearish impact on commodities, most notably the crude oil market. Crude oil tumbled some $2 dollars a barrel back below $113 and was hovering just above three-month lows early this morning. The story in commodities wasn’t just an energy tale, however; palladium was down 5% this morning, cocoa was off 2.5%, sugar was down 2.2%, copper tumbled 2.7% in London trading and aluminum prices hit a six-month low. The recent collapse in commodities markets (the Commodity Research Bureau Index has tumbled 17% from the July high) has provided some relief on the inflation front and bolstered investor psychology that consumer spending won’t be crushed by higher gasoline and food prices.

In addition to the dollar/commodities theme, the market also got some bright news this morning on the manufacturing front. The NY Manufacturing Survey came out at plus 2.77, which was much stronger than the forecast for minus 4.4, and marked the first positive reading since April. This survey is for August and marks one of the earliest manufacturing reports of the month, setting a positive tone going forward. When the NY report came out ahead of the opening, stock index futures and the . . .

Protherics (Nasdaq:PTIL), Heelys Inc. (Nasdaq:HLYS) and Cheviot Financial Corp. (Nasdaq:CHEV) are among the biggest percentage gainers in Thursday's trading among companies with market capitalizations under $1 billion.   

Also included among the results: Deltek Inc. (Nasdaq:PROJ), Beazer Homes USA Inc. (Nasdaq:BZH), Noble International (Nasdaq:NOBL), Orexigen Therapeutics Inc. (Nasdaq:OREX), Pzena Investment Management Inc. (Nasdaq:PZN) and Ceco Environmental Corp. (Nasdaq:CECE). 

Here are the biggest percentage gainers among small caps:    

Radyne Corp (Nasdaq:RADN), Gencor Industries Inc (Nasdaq:GENC) and RAM Energy Resources Inc (Nasdaq:RAME) are among the most actively traded companies in Monday's trading among companies with market capitalizations under $750 million.

Ricks Cabaret International Inc (Nasdaq:RICK), Deltek Inc (Nasdaq:PROJ) and IMAX CORPORATION (Nasdaq:IMAX) are also among the most actively traded companies.

Here are the most actively traded companies among small caps:

Small-cap stocks closed out the week with a meager advance Friday, bucking the red ink seen in the Dow and S&P 500, which is a supportive sign for stocks in general as small caps tend to lead the way for equities — especially in recent years on the way up. The Russell 2000 (NYSE:IWM) rose 0.50, or 0.07%, to 720.05. For the week, small-cap shares were down 0.78%, which seems pretty tame in the face of renewed fretting about the credit crunch crisis and the highest crude oil prices in the history of the planet.

Crude oil futures shot above $126 dollars a barrel Friday, and have now soared about 11% since the beginning of May amid supply jitters out of Africa, geopolitical tension in the Middle East and tightening stocks of distillates. Not to mention a feeding frenzy from the bulls and a panic scramble by the shorts. With national pump prices already north of $3.50 a gallon, this week’s surge in crude oil prices will be a bitter pill for many Americans, already squeezed by rising food costs and sinking home equity. The ballyhooed economic stimulus package may lose some impact as the funds simply go to pay off consumer debt and fill the gas tank, not to “fuel” economic growth. Some airline carriers have announced fuel surcharges in recent days, and Northwest Airlines (NYSE:NWA) and Air Canada joined that chorus today.

The market came into Friday’s session on the defensive amid renewed concern about the credit crisis after American International Group (NYSE:AIG) reported larger-than-expected quarterly losses. AIG tumbled about 8% for the day, and was . . .

Deltek Inc. (Nasdaq:PROJ), 3D Systems Corp. (Nasdaq:TDSC) and Cheniere Energy Inc. (Nasdaq:LNG) are among the new 52-week lows in Friday's trading among companies with market capitalizations under $750 million.

Primedia Inc. (Nasdaq:PRM), Community Bancorp (Nasdaq:CBON) and Orexigen Therapeutics Inc. (Nasdaq:OREX) are also among the new 52-week lows.

Here are the new 52-week lows among small caps:

After opening sharply lower, the Russell 2000 (NYSE:IWM), along with other major indices, remains besieged midday Friday after the credit crisis continued to ravage Wall Street.

At 1:45 p.m. ET, the Russell 2000 was down 1.91, or 0.27%, at 717.64, while the Dow sunk 136.54, or 1.06%, to 12,730.24

Credit concerns were reignited after insurance juggernaut AIG (NYSE:AIG) reported a record loss after Thursday’s close, signaling that outside of Wall Street credit conditions have tightened further and the credit tempest isn’t showing signs of letting up.

“[AIG’s earnings] underscore that the credit crunch is ongoing,” said Andy Busch, foreign exchange strategist for BMO Capital Markets, in an interview. “I think we had gone through a period in which the earnings didn’t seem so bad and [now] we are getting earnings that are much larger as far as write downs go. People get nervous … when you have an earnings shock to any company.”

Compounding concerns, oil continued its skyward climb, hitting $126 a barrel midmorning on concerns that Venezuela could cut oil exports. Since then, oil has pulled back slightly to roughly $125 a barrel midday. Over the course of the . . .

Deltek Inc. (Nasdaq:PROJ), 3D Systems Corp. (Nasdaq:TDSC) and GeoEye Inc. (Nasdaq:GEOY) are among the biggest percentage losers in Friday's trading among companies with market capitalizations under $750 million.

Omega Protein Corp. (Nasdaq:OME), PowerSecure International Inc. (Nasdaq:POWR) and Knot Inc. (Nasdaq:KNOT) are also among the biggest percentage losers.

Here are the biggest percentage losers among small caps:

Shares of Deltek, Inc. (Nasdaq:PROJ) are getting pummeled this morning after the provider of enterprise applications software for project-focused businesses reported first-quarter results after Thursday’s close that fell below the consensus on Wall Street.

The Herndon, Virginia-based firm attributed results to purchasing delays and elongated sales cycles with its A&E and professional services customers as the U.S. macroeconomic environment weakened. The company said it also experienced execution challenges that adversely impacted licensing revenue.

Shares skidded 28%, or $4.18, to $9.94 at 10:10 a.m. For detailed price information and recent news stories about Deltek, click PROJ. 

Small-cap stocks opened sharply lower, pressured by a renewal of the credit crisis fears and reeling from a dramatic surge in crude oil that could crimp consumer spending habits and weigh on sentiment. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was down 4.43, or 0.62%, at 715.12.

Financial shares sparked a wave of overnight selling after American International Group (NYSE:AIG) released earnings that disappointed investors and renewed concerns about debt write-downs among financial institutions. AIG tumbled 5% on the regular opening (which was better than the overnight showing), and the largest bank Citigroup (NYSE:C) was basically flat — also not as bad as overnight action — as the CEO spoke at an investor meeting.

There also was talk of asset allocation plays being back in vogue this morning, with investors shifting money away from equities and into treasury products. The old stock market adage “sell in May and go away” appeared to have a life this first full week of May trading.

In a Goldman Sachs research report released overnight, analysts say that the underlying shock of mortgage credit defaults is large and “still has a ways to go.” Although they say that some of the markets that have been beaten down will normalize and create positive spillover on sentiment in the broader economy, they said that excess housing supply, acceleration of home price declines and over leverage in the U.S. housing market will not go away anytime soon.
 
“We believe that such losses (from over leverage) imply further adverse surprises for balance sheets in parts of the financial sector, with correspondingly adverse effects on lending and economic activity. The focus of the pain is likely to shift away from subprime mortgages, where the markets are already discounting very large losses, to other residential mortgage debt, including prime mortgages. This is one reason why we are expecting a renewed slowdown in economic activity after the stimulus-fueled bounce in mid- to late 2008. In turn, it makes us fairly confident that . . .

012 Smile.Communications LTD
www.012.net
NASDAQ: SMLC
Scheduled for Oct. 29
$375.7 million post-money valuation

Is it 1999 all over again? No matter how mature the Internet seems, investors want stock in it. Hence, Internet Gold - Golden Lines Ltd. (Nasdaq: IGLD), an Israeli telecommunications and Internet company, is spinning off its 012 Smile.Communications subsidiary, which operates a broadband Internet service, VoIP-based telephone and business services, and a network of Wi-Fi Internet access spots throughout Israel. After the deal closes, Internet Gold will own 73.3% of the 012 Smile.Communications business and all of its Smile.Media business, which provides online content, advertising, commerce and search services.

Internet Gold hopes to net about $91.3 million from the offering of 6,675,000 shares at a price between $14 and $16 per share. (All numbers are in U.S. dollars on U.S. GAAP.) Of the proceeds from the offering, $41.0 million will go to pay off debt, debentures, and a contingent payment stemming from its December 2006 acquisition of 012 Golden Lines, an Internet service provider (ISP) that was rolled into Smile.Communications. The rest of the funds will go to general corporate purposes, possibly including acquisitions. Acquisitions aside, the big source of growth will be telephone services. Israel is a tiny country. Its citizens come from all over the world, and its businesses (including Internet Gold) rely on customers and partners all over the place. Hence, it’s easy for people to run up big long-distance bills, and that makes alternatives attractive. Already, the company captures 34% of incoming and outgoing international call minutes within Israel.

Although 012 Smile.Communications is the second largest ISP in Israel with about a third of the market, it generated just $244.4 million in revenue from one million residential and business customers in 2006 on a pro-forma basis. To put that in perspective, Comcast Corporation (Nasdaq: CMCSA), which is the second largest ISP in the United States with about 12% of the market, brought in over $24.9 billion in total revenue last year, although the company did not break down how much of those sales came from its 11 million Internet subscribers and how much came from customers using television and telephone services.