More than any other Israeli company, Telrad's pavilion at the CeBIT exhibition this year reflects the enormous change undergone by the company during the past year. From last year's stand in the Export Institute's pavilion, Telrad has this year presented the largest, most attractive, and well-designed Israeli pavilion in the exhibition, decorated with illustrations by the Israeli artist Baruch Na'e, who designed Telrad Networks' new image.
Six separate companies have presentations in the Telrad Networks pavilion - the parent company and five start-ups founded in recent months by general manager Reuven Avi-Tal, who entered his position a year and a half ago.
One of the cornerstones of Avi-Tal's new strategy is to turn Telrad activities into separate business units in company form and take them out of Telrad. At the Geneva Telecom exhibition they spoke of this and showed one activity, Be Connected. Telrad rented a relatively large pavilion at CeBIT, the entire second floor of which is dedicated to the company's start-ups, which, with the exception of Be Connected, will be revealed here for the first time. In addition, Telrad is presenting its older subsidiaries, such as the NSC voice identification company and the Gad Line cable modem company, in a corner pavilion.
When Avi-Tal moved into the general manager's office at Telrad, there were many eyebrows raised by people, who didn't understand why a man considered a success story (president of cable TV company Matav) was entering a sickbed. Avi-Tal's optimism and declarations concerning the challenge involved seemed out of touch with reality. Eighteen months later, however, Telrad is presenting a completely different company at CeBIT, with the new start-ups at the front constituting the company's new face.
"The method is to take technologically advanced topics and give them a flexible work environment suitable to the modern world", says Avi-Tal. "Results follow quickly. We did it with Be Connected. That was just a Telrad division, which I thought was being incorrectly managed. We set up an external company, cut its manpower by over 50% and signed the rest on personal contracts. We gave them options and put them outside Telrad".
"Globes": There has been talk for a long time of finding investors for the company. I know of negotiations with Israeli groups, but an agreement is finally about to be signed in the coming days with international companies at a company value in the tens of millions of dollars.
Reuven Avi-Tal: "All I can say about that is the negotiations have reached a very advanced stage. We want to copy the Be Connected model".
How many times do you want to copy it?
"As of now, four times. We have set up four more start-ups".
Why should they succeed, when the same activities in Telrad failed to take off?
"The change is in the work environment and the motivation to work. When you work in a start-up atmosphere, with personal contracts and options, it works differently than in an environment with group work agreements".
What is left of the old Telrad?
"Telrad still has 2,000 employees, 200 of whom are in the new start-ups".
And the other 1,800?
"They are divided between four divisions: development and manufacturing for Nortel, public networks, business systems, and maintenance".
Didn't you want to sell off the business systems?
"We succeeded in streamlining the division. Now it's profitable, and we aren't selling. We only get rid of what doesn't earn money".
You announced that you would sell the manufacturing activity. Where does that stand?
"We're taking care of it. Nothing has stopped. Everything's moving along. We are examining all the options".
Are negotiations for sale really taking place?
"We are examining all the possibilities for reducing costs. One is selling, another is subcontracting, and a third is internal rationalization".
What about an issue?
"First of all, let us stabilize, then we'll talk about an issue".
Is there a timetable?
"I prefer to discuss that in two to three months. We'll be wiser then".
Telrad Networks has converted four more of its internal activities into external start-ups, which will be completely separate from the company, in addition to the first start-up, Be Connected, which was founded a few months ago. The start-ups are being presented for the first time in the new format in the company's CeBIT exhibition pavilion.
The first start-up was set up from the beginning as a US company, named firebit.net. It is managed by Eldad Gefen, who was brought in from the RAD-Bynet group. The company is developing an Internet bounce and control system. Both Gefen and Avi-Tal were unwilling to discuss the future product, for fear of volunteering information to competitors.
The product is in the initial stages, and a prototype is expected in another nine months. The company has 30 employees and is still located in Telrad's building in Lod, but is in the process of renting separate offices. As in Be Connected and the other start-ups, the employees were signed to personal contracts and given options in the event of the company being issued.
The second start-up is COM-MATCH, which is developing a system for communication between previous generation TDM networks and next generation IP networks. The product already exists and is being marketed on a small scale. The company is being managed by Menahem Honik, who managed its activity in Telrad. Demand for the product is expected to rise with the increasing deployment of IP networks, which will create a need for a system to bridge between the two networks.
The third start-up, GalaxTel, is working on a system to enable communications operators to provided additional services, such as 1-800 calls, voice operation, etc. The system is designed to be simple and inexpensive. This start-up is still in the founding stage (the activity is still in Telrad), and a general manager has not yet been chosen.
The fourth start-up is NetEye. It includes the HawkEye system, which is a software package that assists operators in areas such as service quality, combating fraud, and connections with various billing programs. The system enables a manager to observe what is happening in the system and make the most informed decisions possible.
Published by Israel's Business Arena on February 29, 2000