It’s not an error. Teletron was founded in 1954 as a family business working in secret. Nevertheless the company can be called a start-up. Today, after 45 years, the company is shaking off the long-settling dust, disposing of a few product lines, putting aside its main market, and diving into the communications market.
”This company is like a Phoenix,” says David Solomon, head of investment bank D.S. Solomon Holdings. Solomon raised found an investor for Teletron and put the company on what everyone hopes will be the right path. He also orchestrates company matters, although he bears no official title. “It’s a start-up in every sense: innovation, new niche, different life style, penetration of new markets and capital raising,” he says. “So what if we didn’t change the name.”
Founded: 1954 (!)
Product: Smart call retrieval system
Market: Current – intelligence sector. Future – switch manufacturers
Competition: Comverse, Nice, Dictafone, Ericsson, Racal, Spectronix (of Denmark), and PK (of Britain).
Ownership: The Avni family (75%), private investors (25%).
Until Solomon arrived on the scene, the company was content with a few millions of dollars and operating strictly undercover. Secrecy was a way of life: no advertising for staff, no public relations, no Internet site, and even no sign on the door. There was a reason. The company’s product basket could easily have starred in a James Bond film. Its customers are secret services in many countries, and every deal was subject to SIBAT (Ministry of Defense Foreign Defense Assistance and Export) approval.
Teletron developed voice monitoring, and with it, wiretapping products and all sorts of sexy gadgets. It actually re-invented the wheel on some products, from its viewpoint, as it could not enter into strategic partnerships, for security reasons.
However, voice monitoring was and will be its major product line. The sophisticated system enables the monitoring, management and smart retrieval of recorded calls. There are two Israeli companies in this sector: Comverse-Efrat and Nice. Solomon says Comverse provides an off-the-shelf product solution in the military-security field, and controls 50% of the market. Nice produces recording systems that hook up to PBX corporate exchanges, addressing the lower end of the civilian market (bank trading floors, brokers), but sells a little to the military market as well.
According to Solomon, Teletron manufactures the only system in the world capable of connecting up to any network for recording all types of communication – cellular, fax, telephone, and in the future, IP (Internet Protocol) networks. The system enables the recording, retrieval and analysis of communications. Analysis? Solomon says, “For example, you can define the hierarchy of a neo-Nazi organization on the basis of a mathematical model derived from a collection of conversations between two people. ”
”Globes”: Your equipment is used to wiretap neo-Nazi groups?
Solomon: “It was an example. Whether it really happens or not is for you to decide.”
To date, Teletron’s problem had been that it needed to adapt each system to the customer’s requirements. Before its face-lift, this meant that Teletron was a workshop, a sophisticated one, but nevertheless a workshop.
Solomon now wants to turn the family workshop with customized, off-the-shelf products into a start-up with a “message for the telecom world”. The old business will remain for the time being as a sub-division, or perhaps spun-off into a separate company.
This time, Teletron’s target market will not be intelligence organizations, but telephony companies, cellular operators, and and IP based communication services providers. These companies are committed to providing recording infrastructures to the competent authorities. The technological significance is that an interfacing unit needs to be created between the various communications protocols and the recording and monitoring equipment.
This will be the end user group. Teletron’s satisfied customers will be communications equipment manufacturers like Cisco and Lucent, seeking to add this solution to their communications equipment package, at the request of customers.
Teletron will still continue to supply a marginal product for the communications sector. But the product will be designed, in the future, for the showy communications market, with an emphasis on IP communications, which is where the market is headed. Solomon says Teletron provided a solution for the communications market giants’ vital need. “They were racking their brains over something that was not part of their core business,” he says, “and we came along and solved their problem.”
The new product is expected to be released on the market in less than a year. Solomon says that an average sale will amount to $100,000 for an exchange that can provide a solution for 100 recording channels. As an illustration, 50 exchanges are needed to cover a company like Bezeq, totaling $5 million. Solomon anticipates revenues of tens of millions of dollars within three years.
Solomon initially raised $1 million from “angels”, among them Daniel Goldman, an investor in BATM. Company valuation in this round was $4 million after money. He is currently organizing $2 million from strategic partners, Israeli and non-Israeli, whose names he refuses to disclose. The third round will be in the form of an IPO, and is expected to take place within 12-18 months. Solomon, of course, does not rule out an exit through acquisition. Avni appears to have become used to the change in status. “Business was not bad at all. However, a new situation was created, a new point of view, and we decided to make a change,” he says.
Published by Israel's Business Arena on 30 August, 1999