Elron Electronic Industries (Nasdaq:ELRNF) today reported net income for the year ended December 31, 2000 of $30.4 million, or $1.43 per share, and a loss of $9.8 million, or $0.46 per share, for the fourth quarter.
In the 12 months ended December 31, 1999 net income amounted to $43.4 million, or $2.05 per share, and $21.3 million, or $1.01 per share, for the fourth quarter.
In the fourth quarter of 2000 Elron had a gain of approximately $6.3 million from the sale of Servicesoft (3.3% held by Elron) to Broadbase Software (Nasdaq:BBSW) and a gain of approximately $3.1 million from the sale of Zoran shares. The value of Broadbase shares, which were received in consideration of Servicesoft shares, is subject to stock price fluctuations.
Factors contributing to the losses of the fourth quarter included:
Elron Software Inc. and Elron Telesoft Inc. -- Operating losses amounted to approximately $7 million, compared to losses of approximately $2.3 million in the fourth quarter of 1999. The increase in operating losses resulted mainly from the demerger of Elron Software in April 2000 into two companies, Elron Software Inc. and Elron Telesoft Inc., and the subsequent reorganization of Elron Telesoft into a more strictly product-oriented company. In addition, both companies had higher sales and marketing and product development expenses.
Elbit Ltd. - Elron's share in Elbit Ltd. losses amounted to approximately $3.9 million. No exits were recorded in Elbit in the fourth quarter.
NetVision - Elron's share in the losses of NetVision amounted to approximately $5.1 million. NetVision is undergoing a restructuring program in order to achieve positive cash flow from operations in the second half of 2001. In the year 2000 NetVision revenues increased by 37% to $48.5 million. At the end of the year NetVision had 304,000 customers, an increase of 82% compared to last year.
Factors contributing to the income of the twelve months included:
In the twelve months of 2000, Elron had a gain of approximately $34.3 million in respect of Zoran shares, $19.1 million gain from changes in holdings in Elbit Systems as a result of its merger with El-Op and a $17.4 million share in the gain of Elbit Ltd., which had a very good year with a twelve-month net income of $40.4 million.
These gains were partially offset by the operating losses of Elron Software and Elron Telesoft which amounted to approximately $19.5 million, over the twelve-month period of 2000, compared to an operating gain of approximately $0.6 million in 1999.
In addition, Elron's share in NetVision's losses for the year amounted to approximately $12.8 million as compared to approximately $1.3 million in 1999.
Liquidity and shareholders equity
As of December 31, 2000, Elron had a strong balance sheet with cash and other liquid instruments of approximately $118.3 million (excluding bank loans in subsidiaries of $59.3 million). Shareholders equity amounted to $280 million representing 76% of the total balance sheet.
Dividend
Elron paid its shareholders $45 million in dividends ($2.12 per share) for the year 2000, due to the successful realization of holdings over the year.
Operational highlights
In the year 2000 Elron invested $45 million and together with entrepreneurs established seven new companies in Elron and the DEP group. Investments and corporate activity during the year were aimed at managing the business according to Elron's long-term sector strategy, which is focused in four core technology areas:
- In the defense sector, the merger between Elbit Systems
(Nasdaq:ELBT), a world leader in large scale defense projects and
upgrade programs for airborne, naval and ground-based military
platforms, and El Op, a global leader in advanced electro-optical
products for both military and civilian uses was completed,
creating the largest non-governmental defense company in Israel
with revenues in 2000 of $591 million and a backlog of $1.4
billion.
- In the software sector the demerger of Elron Software Inc. into
Elron Software Inc. and Elron Telesoft Inc., will enable the
companies to better focus on their specific areas of operational
expertise. Elron Software will continue to specialize in Internet
Policy Management (IPM) solutions with its unique technology to
perform web-access monitoring and content filtering of
information, Elron Telesoft will focus more directly on telecom
software products, including integrated IP service platform for
Internet access management (Intertools) and a call performance
manager (CPM) that analyses network traffic and Quality of Service
on Public Switched Telephony Networks and performs billing
verification.
- In Elron's new area of wireless broadband access, Elron
established Wavion, together with Wavion's founding entrepreneurs.
Wavion specializes in the development of intelligent antenna
networks for wireless broadband access.
- In the area of Internet content, Elron established K.I.T. e
Learning in conjunction with Kidum and the University of Liverpool
(UK) to offer on-line academic Master programs to IT professionals
worldwide.
Commenting on the results, Ami Erel, Chairman and CEO, said, "It was a challenging fourth quarter for the industry in general. Elron is dependent on successful exits to realize its investments. The market situation is such that the opportunity for worthwhile exits has become more difficult, valuations are lower, and the timing between such opportunities tends to be further apart. Nevertheless, Elron was very successful in executing profitable exit strategies in 2000. This allowed us to distribute dividends totalling $45 million ($2.12 per share) for the year 2000 and to maintain a cash reserve of $118 million (excluding debt in subsidiaries), which will enable the company to operate more effectively in a volatile market in 2001. While we believe that conditions in the technology sector will remain difficult during the first half of 2001, our cash should allow us not only to support our portfolio companies, but also to aggressively pursue new attractive investment opportunities."
Published by Israel's Business Arena on March 7, 2001.