Mention the word "robotics" to an Israeli institutional investor and watch for a look of fear in their eyes. The name Robomatix comes to mind, a company which went public on Wall Street and crashed immediately. Or Pegard of Belgium, which for years weighed heavily on Oshap’s balance sheet.
There’s also Eshed Robotec which, if everything had gone according to its business plan, would have been reaping significant revenues for several years now on its industrial robot developed together with a large Japanese company. As the previous sentence indicates, this did not happen.
The law of inertia has it that unfulfilled dreams become collapsed shares. Eshed’s share needs a seven-fold rise in order to return its peak price of 1993. Recently however, there have been signs that Eshed has succeeded in reviving the dream of industrial robotics.
In November, the company announced it would establish a joint company, together with Japanese company Yaskawa Electric, to develop and manufacture robot controllers, drivers and other motion control products. Yaskawa has committed itself to acquiring $25 million in equipment from the new company, by the year 2000.
Eshed Robotec and Yaskawa will each invest $925,000 in the joint venture, called Yaskawa Eshed Technology (YET), which will devote 1997 to developing two products, defined by the Japanese partner. The first is planned for market release in early 1998 and the second in mid-1998. The marketing rights for the two products have been granted exclusively to the Japanese partner.
A year and a half ago, Eshed Robotec general manager Rafael Aravot was very reticent to express himself concerning the venture. "The Japanese partner is very optimistic concerning the robot. I am very careful." he said. "We are very dependent on the Japanese market, and if the product does not succeed there, it will never succeed anywhere."
Today, Aravot is singing quite a different tune. "1997 will be devoted to development, but in our estimation, there is no technological uncertainty. We proved we could execute anything they asked of us, now we have to deliver the goods. This is the year we must prove ourselves, but we don’t foresee technological problems, only a lot a hard work."
The jointly developed product is a motion controller for motors operating machinery. There is no shortage of such products on the world market. The motor of every automatic machine, Aravot explains, has a controller. The industrial motion control market is a multi-billion-dollar one, and Yaskawa is a leader in the field, as one of the three largest robotics manufacturers in the world.
"In our specific field, Yaskawa’s volume of sales is $800 million per year, so the obligation to sell $25 million is relatively small, for them," says Aravot.
The agreement between the two companies assumes the product will sell $2-3 million in 1998, while sales are expected to increase to $14-15 million by the year 2000.
As sales will be handled by the joint company, Eshed Robotec itself will recognize only one-half the venture’s revenues and profits. Nonetheless, sales volume is expected to be significant. Eshed is expected to end 1996 on $18 million in revenues.
Despite this, the company’s share reacted sluggishly to the announcement, at a time when the TASE is exhibiting renewed interest in Karam Index shares. Apparently, the reason is rooted in the fact that Yaskawa Eshed Technology is a long-term story.
The joint venture will not yield revenues in 1997, and the bulk of activity will be devoted to research and development. Therefore, YET will record losses during the year. Eshed will recognize half the loss which will be a drag on its already mediocre financial results. Even if the joint venture does well, most of the fruits will be reaped in 1999 and onwards. As is well-known, Tel Aviv does not like long-term investment.