1996 Review: Outstanding High-tech Deals

January

• Nice Systems raises $20 million on Wall Street in return for a 27% share. The company is active in the computer telephony field, and manufactures NiceLog, a digital voice logging system that provides continuous, unattended high-quality digital recordings of telephone and radio receiver conversations, supporting thousands of channels. The company also develops and manufactures military intelligence communications systems. Nice posted stable growth margins which reflected a 72% yield on the issue at the end of 1996. The company is owned by Discount Investments, PEC, employees and public investors.

• US company Madge completes its merger with Lannet, after acquiring the company from the RAD-Bynet group in November 1995 for $300 million. Lannet becomes Madge (Israel), and productivity improves 70%.

February

• Bidding closes on the second and third international communications provider contract. Six companies, comprised of Israel and multinational partners, bid for tender. This is the second major step made in liberalizing Israel’s communications market, after Cellcom began activity a little over a year earlier. Then-Minister of Communications Shulamit Aloni states: "The winners will set the price and level of service." Ten months later, the Ministry of Communications publishes the results. The winners: the Barak group and Golden Lines who will compete for the long-distance phone call consumer market against Bezeq.

• Vocaltec raises $47.5 million on Wall Street, after releasing a software suite enabling users to conduct audio telephone calls over the Internet and at Internet prices. The announcement causes a worldwide stir, and is considered a breakthrough product. A day after the Vocaltec IPO, IBM announces its own software with similar applications, causing the new Vocaltec share to drop. The erosion continues throughout 1996, and investors lose almost 71%.

March

• Tadiran Telecommunications goes public on Wall Street, raising $75 million. The IPO is executed after a prolonged reorganization within Tadiran, which takes most of 1995. Upon its completion, Tadiran Telecommunications becomes a separate division, taking some of Tadiran’s defense communications activity, and focusing on the civilian communications markets such as wireless telephone systems, ISDN products and more.

• Digital printing innovator Indigo tries to recover from disastrous 1995 financial results. General manger Giora Yaron leaves and in a surprising move the company raises $128 million from founder Benny Landa, George Soros, Claridge and other investors. 1997 still sees the company’s future in question.

April

• DSPC, owned by Davidi Gilo, raises $104 million on Wall Street.

• Davidi Gilo offers to buy Scitex in order to save the company from collapse. Along with expressing surprise, many wonder whether Scitex is still the flagship company of Israel’s high-tech scene or perhaps its Titanic. Scitex management rejects the offer outright and announces efficiency measures including reorganization and lay-offs. Over the next eight months, Scitex financials plummet and many senior managers resign. By the end of the year, the situation is grim with losses of over $100 million. Chances for recovery are one of the big questions for 1997.

May

• Israeli communications satellite Amos, is launched. After three weeks in space, during which time orbit is established and systems are tested, Amos is revealed to be in perfect working order and the $250 million investment brings Israel into the space age. Amos was developed at Israel Aircraft Industries’ Mabat plant, and satellite services are marketed by SpaceCom. Immediately after the launch, the cable television companies enter into conflict with the Ministry of Communications, in order to prevent SpaceCom from selling competing television services.

• The cornerstone is laid for Intel’s Kiryat Gat semiconductor manufacturing plant, a $1.6 billion investment. The government of Israel gives Intel a $608 million grant for a ten-year period and the company commits itself to additional investment in Israel, in the form of procurement and technology development, investment in Israeli enterprises and technological education, at a volume of $500 million.

June

• Check Point Software raises $67.6 million on Wall Street at $350 million company value. By the end of the year, it becomes clear the share was sold not merely on dreams, as investors gain 54.4% on their investment. Check Point's flagship product, the FireWall-1, is used in enterprise-wide network security. In contrast to its competitors, Check Point is considered a profitable company, with an estimated 40% of the network security market.

July

• Limor Livnat, the new Minister of Communications meets with members of the press, and declares her support of the Wachs-Brodet Commission report, the third cellular operator license and the abolishment of Bezeq’s monopoly - without taking a stance on the Bezeq privatization issue.

August

• M-Systems raises $15.3 million on Wall Street. The company develops, manufactures and markets hardware and software products for digital information storage on Flash disk, based on data management proprietary program True FFS. The technology is accepted as a de-factor standard, due to strategic agreements with Intel, Samsung, Systemsoft and others. However, the company enters into competition with Sandisk, which is also setting up a group in order to set the sector’s standards.

September

• Orckit, which operates in the high-speed line communications sector, raises $52.8 million on Wall Street. The company’s products utilize ADSL technology to enable telephone companies to convert their old infrastructure of copper wires into a pipeline capable of digitally transmitting large quantities of data, in order to offer video broadcasts on demand, connection to on-line information and high-speed Internet access. Orckit is currently conducting a experimental cooperative venture with France Telecom, to integrate ADSL and the more expensive ATM technology.

October

• Software house Memco raises $58 million on Nasdaq, having identified a technology marketing niche considered to have high growth potential in the coming year: protecting UNIX systems handling organization-wide critical applications. The Gartner group published a report on Memco in 1996, saying "the product is of great value to organizations where UNIX systems are of strategic importance."

November

• US company Applied Materials acquires Opal and Orbot Instruments for $285 million. Via the acquisition, the Applied Materials, a $4.1 billion manufacturer of semiconductor fabrication equipment enters the field of quality inspection and metrology. Applied Materials president Dan Maydan announces Opal and Orbot Instruments’ annual sales turnover will reach $600 million by the year 2000. To this end, Applied will invest $100 million per year in research and development.

December

• Bezeq’s privatization process is still incomplete. At the end of 1995, an international 25% public share offer was planned, but to a conflict with Cable and Wireless, which owns 10% of Bezeq, the issue was postponed until an amendment to the Bezeq Law could be passed. The amendment would grant the government control of the telecommunications company after privatization. At the end of 1996, a possible agreement was reached between the State of Israel and C&W, but no new date has been set for share issue.

• The Wachs-Brodet-Leon Commission, nominated in January 1996, publishes its report, concluding that Israel’s telecommunications market should be opened to full competition as of 1998. In mid-December, two of the sector’s central figures announce their intentions to resign; Ministry of Communications director-general Shlomo Wachs, who will leave his post in several months, and his main enemy-ally, Bezeq general manger Yitzhak Kaul.