High-tech flourishes despite Gaza conflict

high tech

The volume of capital raised accelerated during Operation Protective Edge.

The high-tech sector made a significant contribution to Operation Protective Edge. 75% of high-tech companies report that some or all of their employees had been called up for reserve duty, while 25% of companies stated that none of their employees had been called up. These figures appear in a survey conducted over the past few days by the People and Computers research division. The survey covered 100 companies: 30% large companies (more than 200 employees), 23% medium-sized companies (50-200 employees), and 47% small companies (fewer than 50 employees).

Asked whether the operation in Gaza would affect their 2014 business results, 80% of the surveyed companies said it was too early to tell. In answer to a question whether they would change plans and forecasts following the operation, 20% said they would cut back their activity. Most of the companies in the sector are not part of the defense industry. 23% of the surveyed companies make most of their sales overseas, and 65% of them reported slower orders. 30% of the export oriented companies reported delays in overseas business. Several people scheduled to visit Israel, investors, partners, etc., postponed their trips. 25% of the anticipated visitors canceled their plans.

Operation Protective Edge had practically no effect on employee recruitment plans. Before the operation, almost 30% of companies had planned to recruit employees, and only a third of them said that now, following the operation, they would not recruit employees. People and Computers group CEO Peli Hanamer Peled said, "The downtrend in the survey is not necessarily directly connected to Operation Protective Edge. A slowdown in the high-tech sector has been evident for some time. Strong global companies have already announced large-scale layoffs in recent months globally, and some also in Israel.

"Furthermore, beyond the layoffs, the slowdown in high-tech began before Operation Protective Edge, and will continue after it, because in general, the high-tech industry is more affected by global trends and events and what is happening in the sector worldwide, not events in Israel. At the same time, there is no doubt that the operation constitutes an additional influential factor. It is important to note that the sector continued functioning throughout the operation, despite the difficulty, and companies continued to produce and export, and there will probably be no effect on capital raising and investment in Israel. This is not the first difficult period in Israel, and these companies have proven each time that they can overcome the situation and continue to function. Judging by my many years of familiarity with the industry, the companies are strong and determined, and I want to be optimistic and think that we'll overcome this crisis, too."

Another entity that assessed the high-tech industry at the request of "Globes" is Ethosia Human Resources, a high-tech and bio-tech employee placement company. Ethosia CEO Eyal Solomon says, "In wartime, the high-tech industry is uncorrelated with the rest of the economy. While the economy as a whole is suffering from a slowdown, high-tech is flourishing more than before Operation Protective Edge. The main measures in which this lack of correlation is expressed are the number of jobs for growth purposes (the rise in the number of employees), the number of startups raising capital, and the number of salary offers received by those seeking jobs in software."

While most of the economy is suffering a loss of revenue - the most prominent sectors affected being tourism, restaurants, and media - the high-tech employment market is surprisingly now a jobseekers' market.

"Many of the high-tech companies operating in Israel are international companies located overseas that have their development centers in Israel. The products of this industry are also designated for overseas markets, which are mostly unaffected by this war. The global economy is improving, and the high-tech market is therefore not suffering; it is on an uptrend," Solomon remarks.

Several key indicators describe the situation well. One is the number of new jobs, reflecting company growth (not those created by laying off employees and hiring better ones in their places). "The number is unprecedented, and there is more to come," Solomon says. "Established companies and startups have begun an aggressive recruiting program since Operation Protective Edge began. The number of jobs opened in the market has gone up 12% since the operation began, compared with average growth of 3-4% a month,"

An example of this can be found in the situation of a software engineer trainee in the web and mobile fields. Such a trainee looking for job these days gets 3-8 offers from different companies. Before the beginning of the operation, such an employee received only three offers or less. "In view of the strong demand for personnel, we're seeing clients demonstrate great creativity in employee recruitment: companies are offering signing bonuses of 2-3 months' salary and additional options packages amounting to 30% more than what is usual at normal times. Another characteristic of a jobseekers' market is evident - the number of those leaving their jobs voluntarily is skyrocketing."

Another aspect is capital raising by startups. The number of startups that raised money in July continued the impressive trend in the second quarter of 2014. Instead of the expected downturn in the volume of capital raising caused by the security situation, it accelerated during Operation Protective Edge.

Prominent financing rounds included the $890 million New York Stock Exchange (NYSE) IPO of Mobileye(NYSE: MBLY), which develops, manufactures, and markets systems warning drivers of potential traffic accidents, at an eye-popping company value of $5.3 billion. Tango, which is developing an application for free video calls on mobile telephones, raised $42 million in July, shortly after its previous $28 million financing round from Chinese online trading giant Ali Baba.

Atox Bio, which is developing a drug for treating virulent bacterial infections, recently announced that it had raised $23 million. Zooz, which provides a cellular payment platform for applications, raised $12 million in July. Intigua, which is developing a software platform for virtualization of infrastructure management systems, completed a $10 million financing round, its second, in recent weeks. GetTaxi, announced yesterday that it had raised $150 million.

This lively activity is without doubt a surprise in a month during which a large military operation was conducted. July benefited from the momentum of an excellent second quarter, which saw a leap in demand for employees, especially in the fashionable areas. "The second quarter of 2014 was the most successful in several years. Nevertheless, the fact that the high-tech industry prospered in July and early August concurrent with a military operation lasting almost a month is as impressive as it is unexpected," Solomon said.

Published by Globes [online], Israel business news - www.globes-online.com - on August 14, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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