These days, Elron is reviewing dozens of young companies operating in the information technology fields, in order to select those lucky few who will join the veteran and reputable high tech firm. "By the end of next year we hope to expand our activity and reach significant holdings in 10 or 12 new companies," says Dr. Kobi Ben Zvi, Senior VP of Business Development at Elron, and in charge of the current "search and absorb" mission.
Those same companies will be integrated into elroNet, which is Elron’s new division for information technology. Up to this point, five companies have joined the division, three of them veterans in the field, and two new ones which joined during the past six months.
Elron’s volume of activity is $1.2 billion, annually, and the concern has a wide international scope. But despite this impressive volume, the spirit on the fifth floor of Elron headquarters is of new beginnings. In terms of actions and investments, Elron’s priority for the past two years has been information technology, and this vision is now beginning to translate into numbers. The new companies are coalescing into a single group, with strategy and execution overseen by Ben Zvi.
Ben Zvi defines his search as a pure marketing activity. "Our entry into start-up companies is not merely an acquisition but a sale as well. We create market awareness and interest, receive offers, sort through them and enter into negotiation."
Until recently, Elron had three information technology companies: NetVision which provides Internet service, Elementrix which develops and markets information security, and ServiceSoft, whose customer service and support tools are used in developing diagnostic applications. Over the past year, NetVision has absorbed a number of elroNet activities, elroNet itself being an Internet service provider established as part of the Elron holding company itself.
According to the new strategy, Elron will focus on three primary information technology areas: Internet and Intra-Net, communications network management and software applications and development tools.
Ben Zvi and his staff have begun an intensive search of the Israeli market, with an emphasis on young companies with advanced propriety technologies, good market potential and good people. Up to now, five companies have joined the division, three veteran companies and two new ones.
The absorption process of the new companies is not simple. After reviewing dozens of companies over the past half year, only two were chosen: Ornetix which develops CD ROM server and management software for computer networks, and Arel Communications and Software, a developer of wide area network systems technology. Ornetix has joined elroNet. Elron and Arel have created ArelNet, a joint venture whose product line and technology will be used for transmission of faxes and other messages over the Internet and other communications networks.
Since joining the Elron group, Ornetix has won a number of prestigious contracts, including supplying CD ROM management systems to the US Pentagon library and Fiat. Ornetix has also signed marketing agreements with 12 major CD-ROM hardware vendors, such PLEXTOR, TODD, NSM, Excel, Boffin, CD-International, Optical Access International, Sigma, and Kintronics. A strategic agreement signed with the PLEXTOR, allows the Japanese company to market a jointly developed product, a CD ROM Tower which supports seven disc drives, and a PC using Ornetix software.
ArelNet merges Arel's "ARCOM" wide area network systems technology with Elron's i-FAX product line and technology for transmission of faxes and other messages over the Internet and other communications networks.
Shortly after its establishment, ArelNet signed a cooperative agreement with US firm Dialogic to develop and market hardware and software products for Internet, Intra Net and Internet-fax servers. These products will enable fax documents to be transmitted in real time over communications networks such as the Internet, X.25, Frame Relay and others.
Everyone predicts a bright future for Arel’s joint venture with Dialogic. "There are some 70 million fax machines around the world, paying the telephone
company high international rates for telephone calls, at a total annual cost of $45 billion," says Ben Zvi. "The Internet fax offers massive savings by sending international faxes via the Internet and other networks at low local rates."
Additional activity in the Internet and communications field is centered around Elementrix, which was established in the beginning of 1994. Elementrix has developed an information security technology for public and private networks, such as the Internet. This new technology enables very strong but transparent encryption at a very high speed, installed on the server level and with a variety of applications. Up until now, Elementrix has had two products, an electronic mail encryption technology and a second for FTP files. Ben Zvi says there is a great deal of interest in the company, and new products will soon be announced.
NetVision is Israel’s largest Internet server, which supplies a range of services, such as personal website construction and Inter-Beeper paging services. The company operates from a number of locations within Israel, which enables Internet service for the price of a local phone call.
ServiceSoft recently began development of software applications
and development tools for customer service and support via the Internet. This is an area with high growth potential, due to the introduction of Intra-Net systems into the workplace. "The Internet integrates software technologies, communications, and applications development, which are also suitable for other information and communications systems," says Ben Zvi.
Elron itself specializes in high technology industries, and manages its business via subsidiary and affiliated companies operating in specified markets. The holding company’s two flagship companies are Elbit and Elscint, which specialize primarily in defense and medical applications. Despite the focus on these two areas, Elron has always taken care to encourage and develop new companies, investing in new enterprises and outside activities, none of which have, thus far, brought Elron fair return on its investment.
Elron Electronic Industries portfolio includes Zoran (23%), Chip Express (43%), Oren Semiconductor (15%), Orbotech (18%), and Opal (15%). Internet-related companies include ArelNet (20%), Elementrix (48%) and NetVision (50%). Elron recently liquidated the majority of its holdings in NetManage and today holds only a 2.4% share.
Elron’s partners in encouraging entrepreneurship include the Gemini fund, Athena Venture Partners and the Eltam Technology Incubator, located at the Haifa science industries park. Together with Discount Investments, Elron is partners with Rafael in the company RDC (Rafael Development Corp). Elron's holding is 33%.