Device enabling telephone conversations while surfing the Internet.

It all started with an idea Eyal Manor formed while visiting friends in Rome. Being the computer kid that he is, he naturally clocked in hours on the PC, but unlike the situation at home, his friends' family kept urging him to quit surfing so that they could use the telephone. At that historical moment, Manor asked himself why the line rings engaged, if he is surfing the Internet? And, if there's a waiting call, why does it disconnect him from the 'Net?

His next stop was Los Angeles, where he encountered exactly the same situation. He sat down and examined his idea from the technical aspect, and started to build a prototype of combined hardware and software. "It took ten seconds to find the solution, but implementation took longer - almost a year," says Manor, a graduate of the Israel Air Force research unit, who eventually founded MerlyNet and serves as the company's general manager.

While developing his product, Manor discovered several attempts had been made in the market to find a solution, such as, for example, by Delta 3, a former Israeli company acquired by Cisco. Manor says an expensive installation was needed, costing the user thousands of dollars. "When a computer costs $1,000, and an additional line in the US costs $80, it wasn't a viable option." At the time, Manor did not know that VocalTec was launching a similar solution on the market - a fact he learned about last week. But he still doe not know what it consists of.

Manor raised $67,000 from private investors and built the prototype. In April this year, he raised another $420,000, also from private investors. The seven staff company is now in the final stages of developing the product that solves the problem of incoming calls, Manor says. But the solution is incomplete from the family's viewpoint, since the incoming call can be received on the computer, but not on the regular handset.

On the other hand, the product has very efficient additions, such as the ability to receive faxes on the computer, helpful for people who hook the telephone line up to a fax machine. It also has voice mail with the ability to transfer messages to cellular telephones and e-mail as well. In fact, the product is a sort of unified mail solution built by the talented MerlyNet team almost incidentally, whereas other companies with a similar development are likely to use it as their raison d'etre.

The beta version of the product is already in use at NetVision, and is scheduled to go on the US market on July 4, America's Independence Day, a national holiday. Manor, however, insists on the date. Two major marketing channels are planned for the product: one is aimed at ISPs (Internet Services Providers) and the other, in a different form, at telephony companies.

The first product is aimed at ISPs, a market much more receptive to innovative technology and more naturally interfacing with it from a technical aspect. The product's next version will reach the market after revenues start coming in, Manor says. It will enable conference calls to be conducted on the computer with several users, at the same quality as an additional line would offer. What do all these features have in common? Mainly sophisticated algorithms for compression, effectuating more efficient use of an ordinary telephone line. Incidentally, the company has already registered patents for its technology.

"Globes": There must be other applications for voice compression technology.

Manor: "There are many, including in the cellular field, but we don't wish to enter them at the moment."

Other options for the technology will do the company no harm when the solution becomes superfluous, after the cable companies start with Internet traffic. Manor admits that the telephone line will, at that point, be made available again anyway.

Next year's sales forecast stands at $5-6 million, at a "pessimistic estimate" according to Arik Nissim, general manager of Advent, which is providing consultation and fundraising services for the project.. Manor says there are no substantial support problems attached to the system, which functions as a Bezeq switch, that is totally independently.

Beside the announcement by VocalTec, there have been other attempts at solving the problem. With much fanfare, Ericsson announced it had found a solution, only to be soundly defeated. Lucent is working on a similar solution through start-up company Efasom, in which it has a minority holding, but Manor says the product is not expected to get to market until next year. Comverse is also working on a similar product, but Manor says its final form has not been set. The company is currently raising funds.

Published by Israel's Business Arena June 28, 1999