Once, Telrad’s sales was based on sales of switching equipment to Bezeq and Nortel. The Bezeq era ended in a major breakdown, which led to Reuven Avi-Tal’s appointment as CEO two and half years ago. Avi-Tal also bet on a two-headed strategy: Nortel was one and two start-ups were the other.
Telrad is now in crisis again. Nortel’s profit warning demonstrated how insecure that anchor really was. At the same time, Telrad’s lifeline to the start-up world has yet to bear fruit. These days, the word ‘start-up’ is no longer synonymous with ‘success’.
“Globes”: Was your announcement of additional lay-offs the same day Nortel published its profit warning evidence of prior knowledge?
Avi-Tal: “On Thursday, I announced that I planned to lay off 300-350 employees, of which 270 were from the operational and manufacturing division. That will not change, because Nortel made its announcement Thursday evening, while mine was made that morning. Nortel’s announcement relied on its events of recent months, and so was mine. I possess certain forecasts, on the basis of which I predict a certain level of operations until the end of the year. In order for operations to be economical, it will be necessary to lay off 270 employees in manufacturing, plus an additional 80 from other sections.”
You signed an agreement with the workers last year, and now you are announcing additional lay-offs.
“Look, Nortel can fire 10,000 employees without any problem. I have an issue with the workers committee in order to lay off 270 employees in manufacturing. I have to explain to them that either 270 employees are let go, or Telrad ceases operations altogether.”
What were Telrad’s sales to Nortel in 2000?
“Telrad’s sales in 2000 totaled $410 million, two-thirds of which were to Nortel.”
How many employees does Telrad have in manufacturing?
“About 500.”
In the end, will you eliminate in-house manufacturing altogether and subcontract everything to SCI?
“If I can keep manufacturing operations profitable, I will do it.”
Given the bleak forecasts being published daily, that seems doubtful.
“Laying off 270 employees is not easy, but it’s easier than laying off 500.”
What’s the forecast for 2001?
“Sales will fall 25-30%, including to Nortel.”
How will this affect the company?
“I built a strategy based on two foundations, one of which depended on Nortel. I am pleased that it proved itself.”
What will happen to the part that does not depend on Nortel, the start-up part? There are problems there too. Last week, you closed Aptonix.
“You know what happened to Be Connected – Cisco entered for $15 million. We are in advanced negotiations with strategic partners for Com-Match, NetEye and Galaxtel Solutions.
You are at a critical moment here as well. After all, there won’t be many sell-offs here in the coming years.
“I didn’t say that the start-ups would be sold quickly. I am in very advanced negotiations, and I think that I will have investors in at least two of the companies within a few months. Where there are investors, there is money. The critical moment is therefore not so critical. Whatever is unprofitable for Telrad will be closed down.”
Including the start-ups?
“I was not ashamed to close down Aptonix’s ‘Whizard’ project when it had no chances of sales. Any company that fails to attract investors will be sold.”
What will the lay-offs cost Telrad?
“Each laid-off employee will cost Telrad NIS 600,000. These are de luxe severance terms. I am also doing everything possible to help people acclimatize outside, including retraining courses, CV-writing courses and courses for their leisure time.”
Published by Israel's Business Arena on 19 February 2001