When it comes to media attention, brothers Yehuda and Zohar Zisapel want it focused on the RAD Group. Bynet, the other group controlled by the brothers, receives much less exposure. Dror Goldschmidt, general manager of Bynet Data Communications, parent company of the two groups, has never been interviewed by the press before. Perhaps this is because, in contrast to the RAD Group, which issues companies at lightening speed (and usually on Nasdaq), none of the Bynet group's nine companies has gone public. The Zisapel brothers (mainly Yehuda) control these private companies, together with private entrepreneurs and investment companies.
In any event, the regime of the Zisapel brothers includes complex reciprocal relations between the two groups. The covert competition between them can be gleaned from the words chosen by Goldschmidt to open the interview: "We prefer to use the name Bynet-RAD, not RAD-Bynet."
The two groups employ 2,600 workers in Israel and overseas, 300 of whom work in Bynet Data Communications. Sales volume to suppliers reached approximately $500 million in 1999. A quarter of these sales were by the Bynet group, and the rest by RAD. According to Dun and Bradstreet, Bynet Data Communications accounts for $74 million in sales. According to Bynet Data Communications marketing manager Ezra Yosef, sales to private users add dozens of percentage points to the total.
Bynet Data Communications, which was founded 25 years ago, is the company from which all the other companies were spun off, including RAD, which became an independent group. It was rated 87th in 1999 among trade and services companies by Dun and Bradstreet, compared with a 1998 rating of 107th place.
From Goldschmidt's words, its hard to tell exactly where Bynet Data Communications ends and RAD begins. One gets the feeling of one big extended family. When "Globes" published a stinging column on recent share sales by the Zisapel brothers, Bynet Data Communications took it personally as well.
Goldschmidt therefore took great pleasure in announcing in his first-ever interview two new start-ups founded by the group: SANRAD, which will deal in data storage networks, and Module, which will deal with IP tools.
"Globes": How exactly does the group work?
Dror Goldschmidt: "Each company is managed separately. Young companies receive assistance in their activity from other companies in the group. The companies benefit from close cooperation."
Why has no company in the group been issued up until now?
"No one told us not to issue. I know some people who would like it very much. Yehuda Zisapel once said, however, that a share issue is not the answer to everything. Bynet Data Communications and the group in general post annual growth rates of 30-40% at the moment. We have private financing sources, and there are no special problems that an IPO could solve. On the other hand, we do not rule out that option."
Bynet Data Communications is the marketing arm for RAD-Bynet companies in Israel. It specializes in comprehensive solutions, integration, and project applications. The company also represents Novell, Compaq, Alcatel, Lucent, 3Com, Picture Tel, Marconi, and Microsoft in Israel. The list of its customers includes banks, insurance companies, trade and manufacturing companies, government ministries, education and academic offices, health funds, hospitals, airlines, and hotels. Goldschmidt: "Israel Air Force, the IDF's MAMRAM Computerized Data Processing Center, Israel Aircraft Industries, and IDF intelligence units are important customers. Pele-Phone, ECI, Cellcom, and Bezeq buy millions of dollars of products from us. Foreign banks planning to open branches here soon have chosen us. They have no time, since they want to start operating as soon as possible, and they have a high work standard."
The proportion of start-ups among company customers in 1999 was one sixth of the company's volume of activity. 30% of the group's activity volume was in Israel. Other company sales are made through dozens of overseas branches.
Bynet Data Communications, like everyone else, is preparing for the opening of the local communications market to competition. Last week the company had to change its plans. Bynet Data Communications had planned to bid in the internal tender of Ofek of the Eurocom group, which announced it would compete for the Ministry of Communications' franchise for local telephone calls. Cisco, Siemens, Novell, and Alcatel are expected to compete for the project, which is estimated at $200 million. Bynet Data Communications has already signed an equipment supply agreement with Lucent. For its part, this week Lucent announced a possible withdrawal from the tender. It was reported that Lucent decided it might not bid for tender after having determined that the requested IP network technology lacked sufficient reliability and quality.
Lucent tripped you up.
"It is true we have a signed contract with Lucent to jointly enter the Eurocom project. We are supposed to be the integrator. We were in the same package with Lucent, but with their consent I can say that we will be glad to work with another company on the project. There are only a few companies worldwide that manufacture this sort of equipment. Hundreds of millions of dollars will be invested in the Eurocom project. It looks as if Cellcom will choose to compete with Bezeq and Eurocom for the franchise. We believe that this project will truly revolutionize the Israeli communications market, and we intend to be involved. We have already identified the field, and have signed a distribution agreement with Cisco."
Not everyone may be aware of it, but Bynet Data Communications was among the winners in Bezeq's ADSL tender, where it jointly represents Alcatel together with Orckit.
Bynet Data Communications behaves like an octopus. In addition to the two excellent projects mentioned above, Goldschmidt this week revealed for the first time that the company is now turning to the SDH field. "We have installed and are maintaining Cellcom's SDH network. They have invested in optical networks. The equipment will come from Alcatel, and Bynet Data Communications will implement the project." According to various reports, Cellcom is considering the possibility of using an SDH/SONET network between its switches around Israel. This network will eliminate the need for Cellcom to use Bezeq transmission to compete for the local telephony franchise.
In exactly the same field, Bynet Data Communications has been hired by Israel Railways to maintain its Lucent-equipped SDH network. Goldschmidt is aware that Israel Railways knows that it will not be easy for it to penetrate the communications market (Israel Electric Corporation also wants a franchise, so a real battle is heating up). On the other hand, Goldschmidt sees no problem in Bynet Data Communications working with both Cellcom and Israel Railways, which may join forces in the future: "We are professionals. Besides, any competition is indirect."
What particularly inspires Goldschmidt's enthusiasm, however, is something completely different. Bynet Data Communications is jointly involved in two huge projects with Motorola International and Comverse.
"For several years, we were like an incubator. Divisions that managed to grow were spun off as separate companies. The goal was to build a group capable of being a one-stop shop."
Weren't these octopus-like capabilities maintained at the expense of Bynet Data Communications' specific fields of expertise?
"Our concept is integration of the Bynet and RAD groups with companies represented by us, in order to offer our customers a complete integrated solution. I can confidently state that there is no other company like us in Israel. It's not a matter of arrogance, it's a matter of statistics."
And who are your competitors?
"We have many competitors. I can't point to one single company that challenges us in every field. In data communications, we compete with Motorola and Netcom. In telecommunications, we're up against Eurocom and Telrad, and in video we confront Tadiran's TNN. We have competitors in all fields, and we frequently find ourselves working with them or for them. The concept of competition has changed."
As proof, Goldschmidt pulls a rabbit out of his hat. Bynet Data Communications was also involved in solving the Pele-Phone phone line cloning crisis.
You, too!?
"It was a giant project of several million dollars, which had to be done in a short time. Bynet Data Communications managed the project and was responsible for the solution in the area of communications hardware. It is true that other companies were involved in this project."
The Pele-Phone example proves the RAD-Bynet family's big advantage. "The link between companies in the group provides us with direct access to development personnel. For example, at the moment Bynet Data Communications is serving as a beta site for a product being developed by RADWARE. No company in Israel can compete with me in replacing or altering features of large, complex projects."
Published by Israel's Business Arena on June 22, 2000