Time (not) to forgive

Yaniv Pagot

Alvarion represents the flip side of our vaunted technology industry, that we don't like to face.

The collapse of Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR) once again demonstrates that successes by publicly-traded Israeli technology companies are rare, and that the failures at this stage of their life cycle are actually frequent. This is in contrast to the picture portrayed by Israel's high-tech public relations machine, which presents the industry as an ongoing global success story.

Alvarion was not a marginal company in the Israeli technology scene, but a company that was included on the Tel Aviv 25 Index in the first half of the 2000s, and merged with another Israeli technology company. Therefore, most of us, knowingly or not, invested in this company.

Many of us fell in love with Israel's description as a "high-tech nation", and became confused about our position in the global high-tech premier league. But, as mentioned, reality is completely different.

It is enough to look at the list of Israeli companies listed on Nasdaq to see that this list, which in the early 2000s was glorious and full of promise, has turned into a list with many stock market carcasses, tiny technology companies seeking a way to survive, alongside a few legitimate, successful, and global high-tech companies.

The public is indulgent towards failures of Israeli high tech, and no systematic and sufficient effort has been made to draw the necessary conclusions about the industry's thunderous failures. Most of the money lost in failed investments in public Israeli technology companies originated in equity issues, not debt issues, and it seems that this is the reason for the much more lenient attitude toward the failed companies.

The fact that a substantial part of the money raised by Israeli companies came from foreign investors also generates an overly forgiving attitude. After all, there is here cheap money from "goyim", which provides a good living for blue-eyed Zionists of Israeli high tech.

In the strange Israeli reality which has been created, it is legitimate to fail in investments in technology companies, but not legitimate to fail in investing in land in Las Vegas or in a local mobile carrier.

Over the years, the Israeli public and its representatives have looked on with forgiveness and some helplessness at the long line of executives, the clique of investment bankers, and well-paid consultants who navigated Alvarion and many similar technology companies to oblivion, while winning fantastical compensation. The executives, directors, and investment bankers who have failed in these companies over the years as though made of Teflon are walking amongst us, and no blemish has stuck to their reputations.

The resources should be found to produce a comprehensive professional, surgical report that will show what and who are responsible for a cash-rich company like Alvarion falling from a promising technology company into bankruptcy: whether it was managed for years as "a pharmacy of corporate governance", or whether its corporate governance was unsatisfactory.

Such a detailed report would teach us well about the standards by which some local technology companies operate, from which we can draw the proper conclusions for the future.

The main problem is that few of the relevant parties want to spend the costly time and resources for carrying out investigations into an obsolete company, and many of them prefer to move on and find the next attractive investment opportunity, rather than reopen painful wounds.

The writer is the chief strategist of the Ayalon Group

Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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