Eli Barkat says he isn't a "hit and run" investor, and so the decline in the Check Point share doesn't worry him. Barkat, together with his brother Nir and partner Yuval Rakabi, invested and hit. The $300,000 they put in at the initial capital raising stage has already yielded $200 million from shares that have been realised, and left them with another parcel of shares worth some $150 million before the fall. How does an investor who loses tens of millions of dollars on paper in a couple of days feel?
"I'm not just an investor in Check Point," Barkat replies from his San Francisco residence. "My involvement goes beyond financial investment. In any case, as someone who lives with the daily challenges of running a company (Barkat heads BackWeb, a world leader in push technology. M.S.), I have learned that, in the end, the dynamics between company and investors boil down to the question whether the investors believe in the company's management team. We have complete faith. The management is doing a wonderful job. I'm not worried at all.
"The stock exchange is not a market where you make profits every day, and you don't have to be Check Point to take a hit. You just have to look at Intel, or Cisco. Oracle took a dive not long ago. The high-tech market isn't an insurance company. Anyone who wants an insurance company should invest in a mutual fund. Nearly everyone who invested in Check Point made a great deal of money. Most of its investors are in for the long-term. They don't get excited over a small drop here and there. As for the "hit and run" investors, maybe its good that Check Point got rid of them on this occasion. Anyone who fled - will be sorry."
"Globes": Can any conclusions be drawn from the "Ballmer incident"?
"The world is divided into those who understand the field and those who don't. Microsoft has such massive shareholders' funds that if it were to say it was going into cars tomorrow, General Motors would feel it. In other words, when a company of that size makes declarations, it doesn't matter what it actually does, the first reaction of those who don't understand is: "That's not good." Those who understand the field a little better immediately saw it wasn't serious. In my humble opinion, I reckon Microsoft isn't really going into this field.
"Microsoft isn't the first gorilla to beat its chest. Six months ago, there was Cisco's declaration that it was entering this area. The fist reaction was that the news was bad, and Check Point's share was hit, until the financial results came along and everyone saw it was all nonsense. This isn't a market of words. It's a market of deeds, and Check Point doesn't just do its stuff in the first and second act. It concentrates for the entire performance. I think the same thing will happen as happened with Cisco. A quarter or two will go by, and everyone will see that the dogs bark but the caravan carries on, and that will be the end of the matter."
In retrospect, it was a mistake to respond to what Ballmer said with "no comment".
I wouldn't like to analyse Check Point's response because I don't know what information the management had at that moment. It could be that Check Point was taken aback by the whole business and wanted to give an intelligent response. Ideally, of course, you know exactly what the situation is and you can give a reaction on the spot. But when there is no response - it's better to keep quiet. If there's one unforgivable thing in the world of investors, it's talking nonsense."
What reactions have you encountered in the Silicon Valley and in Israel?
"In Israel of course they made a bigger story out of the affair. There aren't many more Check Points to talk about in Israel. In the US there are more. Here in the US, they've already forgotten. In the next quarter, everyone will forget."
Do you attribute the fall to Ballmer alone, and not to the results? Some analysts have tried to explain what wasn't good about the results.
"I meet a lot of people, and Check Point isn't a model company just in Israel. It grew at an astonishing rate from quarter to quarter. It's a super healthy company with impeccable results. When you think the situation's good, find analysts who'll say everything's fine. When you think it isn't good, you'll find those who'll tell you what you wanted to hear. There were "well-wishers" six months ago too. As the saying goes, "A stopped clock is right twice a day." So just at this point, they found all the stopped clocks."
Published by Israel's Business Arena on May 18, 1998