Venrock Associates venture partner Ohad Finkelstein, who manages the venture capital fund’s Israeli activities, is also the only Israeli board member at Qpass Inc. He has been an independent director at Qpass for the past three years, and brokered the company’s connection with Amdocs Ltd. (NYSE: DOX), basically pushing for the acquisition.
Finkelstein says, “Lucent Technologies (NYSE:LU) once made an offer for Qpass. I thought Amdocs was a much more suitable buyer for Qpass than Lucent, which was why I set up the connection between the two companies. It was convenient, because I’m Israeli.”
Finkelstein says there were two reasons why he though Amdocs was a better buyer. “First of all, Amdocs’s financial situation is much more stable. Lucent’s very existence is under threat. Furthermore, Amdocs’s business is closer to Qpass’s middleware activities. Qpass has middleware software for downloading ringtones to handsets. Since both Qpass and Amdocs have many large customers in North America, I think that the compatibily between the companies fits like a glove.”
Finkelstein says Qpass will post $50 million revenue in 2006, reflecting the size of the market. “Remember that Qpass gets a percentage from every rigntone download, which means that $50 million revenue represents a much larger market, and demonstrates the direction the industry is headed.”
“Globes”: Does the $275 million Amdocs paid for Qpass correctly reflect the company’s condition?
Finkelstein: “That’s the market price, and that’s the fact. I can say that there were previous offers at higher prices, but they didn’t reach the examination stage, so I don’t know how serious they were. In any case, Amdocs’s offer was the most suitable in my opinion, and I used all my influence on Qpass’s board for them to accept it.”
In your opinion, can, or should, other Israeli companies acquire foreign companies on the scale of the Qpass acquisition?
“I very much hope so. Israeli companies have a problem. Israel is very good at creating companies that become number one in their field, and sometimes invent a new market. The problem is staying in first place, and we’ve seen examples throughout history, such as Scitex Corp. (Nasdaq: SCIX; TASE: SCIX) and ECI Telecom Ltd. (Nasdaq: ECIL). There’s a kind of bell curve: Israeli companies are ahead of everyone, they’re the industry trailblazer, but can’t hold onto their position. I ask myself why this is so, and I don’t have a good explanation. It could be that the reason is an in-built fear at Israeli companies against making acquisitions. Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) is an exception. It isn’t afraid to acquire companies, and it’s number one in its field in the world. In my opinion, large Israeli companies ought to be told that they can go out and buy. There’s a lot of respect in the world for the technology of Israeli companies, and there’s no reason for this fear.”
Published by Globes [online], Israel business news - www.globes.co.il - on April 20, 2006
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