In Discount Investments and PEC’s basket of technology-orientated investments (Gilat, Elron, Liraz, Cellcom), a place of honor is reserved for RDC Rafael, which engages in the conversion of technologies developed by Rafael, Israel’s Armament Development Authority, to civilian applications. However, RDC (51% of which is owned in equal shares by Discount Investments, Elron, and PEC, and the remaining 49% by Rafael), is, for the time being, an open wound, from which NIS 100 million has bled over the past three years.
By contrast with software and communications, in which fields graduates of various signals and intelligence units have made millions out of converting technologies, RDC has yet to score a significant success in the hardware field, which constitutes its main business, or in its other fields of activity.
RDC’s operating strategy dictates finding and developing civilian applications for the technologies developed by Rafael, and commercializing these applications through its subsidiaries. The main companies owned by RDC (there are currently seven altogether) are involved in medical diagnostic systems, multimedia and robotics, automation, and metals analysis.
One of RDC’s main holdings is Galil Medical, which develops and markets medical systems for surgical procedures for the removal of growths by means of deep freezing. The company, of which RDC owns 49%, uses Rafael missile technology. Since the most advanced missiles are heat-seeking, they have to cool themselves, and to that end, Rafael developed a special cooling system. Up to now, the attempt to adapt it to use in the medical field has not met with success, even though, according to RDC general manager Reuven Krupik, this system is the only one to have started showing sales recently.
Another important holding is Medi-Card, which develops aids for heart surgery and cardiology, based on pulsate technology, and in which RDC has a 44.5% shareholding. Three months ago, venture capital fund Gemini (another outfit in which the Recanati family is involved) invested $2.5 million in acquiring 15.3% of the shares.
Other interesting companies are VSOFT and Vitcom. The first provides software services, particularly systems integration and applications development for digital video, real time information systems, and database management. The second develops digital communications systems that give high broadcast output and sensitive reception for communications systems for digital data transmission.
Krupik says all the subsidiary companies have external strategic partners, Thermo-Electron, for example, which is a partner in Givun Imaging, which develops capsules containing video cameras, for transmitting real time pictures of the small intestine.
Over the past three years, the company has made an operating loss of NIS 100 million, and a net loss of NIS 80 million. Most of RDC’s losses (NIS 60 million before tax in 1997) stemmed from allowances for the fall in value of its shares in Geotek, a US company founded by RDC, whose business is the deployment of a digital wireless communications network.
Geotek, managed by Yaron Eitan, was successful in raising money from the US public, but collapsed after losing $370 million in its six year existence. Even the fact that famous financial magnate George Soros was one of Geotek’s shareholders failed to help it.
Published by Israel's Business Arena on December 20, 1998