Against the backdrop of the possible acquisition of Provigent Ltd., a fabless semiconductor company that provides best-of-breed system-on a-chip (SoC) solutions to vendors of broadband wireless equipment, it is worth taking into account the words of the Israeli start-up's CEO Dan Charash.
He said, when collecting the "Globes" award last summer for the most promising Israel start-up of 2010, "Lately funds have been rushing to invest in Internet companies. It's great that there is still an opportunity for start ups in the chip sector to succeed."
From a financial point of view, Provigent is yet to succeed. Even though the company appears to be on the threshold of a most respectable exit, the funds that invested in Provigent know that there is still further to go than it seems. Reading between the lines of Charash's "Globes" award acceptance speech in front of the country's most important investors, was no small amount of frustration.
It is not possible to compare the decade of hard work that Provigent has gone through with the funds that are flowing today into the Internet companies. In that sector investors open their wallets much more easily.
However, the chip market has entered 2011 in a much better situation than it was two years ago. Some of the notable acquisitions in the final months of 2010 demonstrate this and show that Provigent is not alone.
Israel's Percello was acquired by Broadcom and another Israeli company Wintegra was bought by PMC-Sierra on the eve of its planned $300 million Nasdaq IPO. There have also been similar major international acquisitions.
Israel's competitive advantage has always been in complex solutions and there is no shortage of local managers who like Charash feel frustrated. Chasing after investments from leading funds is not only a matter of proving success but also educating the market. In other words: to prove that chips companies can "still do it."
Maybe that's not what Charash meant but Provigent could turn out being a very successful example. A six-fold return or more on its investment will do the trick. Now all that the company needs to do is to complete the deal.
Published by Globes, Israel business news - www.globes-online.com - on March 1, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011