Check Point Software Technologies Ltd. (Nasdaq: CHKP) founder and CEO Gil Shwed has accused the US government of thwarting the Israeli cybersecurity company's acquisition attempts.
"It can't be that we are unable to expand in the US through acquisitions. The State of Israel must come and say to the Americans - we are not threatening you," Shwed told a Ministry of Finance seminar today regarding the difficulties raised by the US administration over acquisitions of American companies by foreign companies.
Shwed spoke about the challenges faced by Israeli companies and whether high-tech can remain the engine of the country's economy. "The government doesn't have to intervene too much in the high-tech industry, except in things that it has influence over such as education, higher education, taxation and international relations. In the past the tax on high-tech companies was lower. Today they are very similar to the US. It's not that tech companies did not need to pay more tax, and there has been a healthy process of raising taxes.
Shwed continued, "But worldwide there was the opposite and competitive process led by the European countries. And then Trump provided a knockout with tax policies in the US. In a stroke of genius, he brought the taxes back to the US within a year. We in Israel are no less sophisticated than the Americans and we can also implement measures like that. I'm biased of course but it is very clear to me that if tax rates won't be attractive, there will still be companies here but the revenue and profits will all be abroad, to an extreme degree. It's not complicated to do it, especially in high-tech, where it's difficult to determine where the IP is found."
Regarding the opening of development centers abroad by Israeli companies, Shwed stressed that that is something that Check Point has never done, and that the development centers it does have are the result of acquisitions. He says that there are countries where the cost of employees is 80-90% lower than in Israel. He cites the example of Minsk in Belarus where a tech employee earns $5,000 a year compared with $50,000-$60,000 or more in Israel.
He said, "We are working to train people in Israel and in order to integrate people from all population sectors but that doesn't mean that it is necessarily economically viable and that the employees are available. For example, in Arab society, our challenge is to form a network of certain types of people, who will begin to bring along others to work with us. The challenge is for them to want to advance and go back to their villages in the north."
Shwed was asked if there is room for government intervention to prevent multinationals operating in Israel's tech sector from being harmed. "It really is a genuine problem," he said. "In the US university graduates want $200,000 to join a company and in Israel it costs companies only $120,000. We Israelis don't want to miss out and so if we come to another country, we won't pay an illogical salary for that country. But Americans come here and think that $120,000 is significantly low. They don't need to take all the employees from a particular team - it's enough that Google and Amazon take two employees, and the rest of the staff are frustrated. Google hired an economist that worked for us, accepted him on the basis of an Internet exam and tripled his salary."
Asked why Check Point stays in Israel despite all the difficulties, he said, "First of all I have a personal bias in everything. I see my friends that have moved to the US talk about how wonderful it is there and why it is worth employing people in the US. I very much want to be here and promote an agenda of Israelis being in Israel. We are also not based on relocation. I argue against people who want to leave Israel, it's a matter of a world outlook and ideology. I also have reasons as to why it's good from a business point of view. I think that this is a good place to be and there are any good people here. I compare Israel with Silicon Valley and although we are further from the action, there are also advantages. For example, there is less loyalty to your place of employment over there."
Published by Globes, Israel business news - en.globes.co.il - on November 5, 2019
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