reflections ahead of 5761 - ishitech.co.il · 2 the hebrew language has acquired a new jargon which...

A MONTHLY REPORT COVERING NEWS AND INVESTMENT OPPORTUNITIES JOSEPH MORGENSTERN, PUBLISHER

October 2000 Vol. XVI Issue No.10 You are invited to visit us at our website : http://ishitech.co.il

Copyright 2000: Israel High-Tech & Investment Report Subscription, Bulk copy and reprint information available on requestEditorial Offices: P.O.Box 33633, Tel Aviv 61336, Israel Tel: 972-3-5235279 Fax: 972-3-5227799 E-mail: [email protected]

In this Issue

Reflections Ahead of 5761!Given ImagingÕs Breakthrough TechnologyScientific Protection from Jellyfish StingsECI Telecom Announces Spinoff PlansThe Digital DivideThe Arrow Hits the TargetTalking with Danny Fishman ahead of the 4th Annual GrowthConferenceTelemedicine Company is ExpandingHow the Global Investor Can Capitalize on IsraelÕsHigh-Tech BoomIHTIR Model Portfolio New DevelopmentsPoint of Sale Acquires US CompanyBackWeb Provides Push Infrastructure for Siemens ICNÕs IntranePrecise Software Boosted by Merrill LynchGilat to Dominate Satellite High-Speed Internet MarketBioTechnology IPO NewsFriendly RoboticsIsrael High-Tech Model Portfolio:Selected Israeli Growth CompaniesAfter Eight Months Intel Becomes IsraelÕsBiggest Private Sector ExporterHewlett Pakard Invests $100 million in IndigoGeneral Electric Medical AcquiresElgems

With the coming of the Jewish New Year, 5761,according to tradition, the time is ripe for somereflections. On the political front there are arguablysome positive developments.

Israelis and Palestinians have finally bared theirsouls to each other and tabled a central issue, name-ly Jerusalem. This could be a positive step becauseit underlies what really matters in the hearts of everyIsraeli and Jew throughout the world. It is unlikelythat any Israeli politician can strike an acceptablelong-term agreement with the Arab world withouttaking into account the issue of Jerusalem.

The essential preservation of the sanctity ofJerusalem for all who hold it dear, cannot be turnedover to outside parties. It is an “insiders” problem,one which is understood with difficulty by “out-siders”.

The issues of Peace for Israel and Peace for the Mid-dle East will be debated, argued and undoubtedly, ifrequired, fought for. Peace is as elementary toIsrael’s very being as the Bill of Rights is for theAmericans and the right of free speech to the British.So with the New Year, we hope for a further movetowards Peace for Israel and the Middle East,Region.

In their 52 year old history Israelis have never beenmore convinced tof their ability to create dollarwealth based on technological creativity.

We chronicle frequently multi-million and morerecently multi-billion dollar deals.

Electronic engineers and software programmers arein greater demand than ever. The ranks of regulararmy electronic engineers are being decimated, asthe private sector combs the Israeli Defense Forcesfor qualified, but less highly paid personnel. The yeshivot, the halls of learning for the ultra-reli-gious are becoming the battleground for computertrainees.

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Reflections Ahead of 5761

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The Hebrew language has acquired a new jargonwhich is a transliteration of Initial Public Offer-ings, options, mergers and strategic partnershipsand investments. These are the buzzwords for apopulation that not long ago concentrated onfelafel, drip irrigation and the miracle of exporting$150 million worth of oranges a year.

The articles in the newspapers and popular jour-nals concentrate on how long it would take to"make it big". Some delve into the long-term psy-chological effects on children and wives, left athome while the men toil around the clock to movethe startup to a new level of achievement and ahigher valuation.

So what are the problems as we face 5761? It allcomes down to Israel’s role in the globalization ofcountries, economies and the individual. It is notjust a question of big payoffs and high salaries buta the forging of a new way of life.

It is the adjustment of a temporary two-track econ-omy which punishes participants in Old Economypursuits and rewards those that partake in the NewEconomy which embraces Information Technolo-gy. It is also the necessity of dealing with the newmobility for Israeli entrepreneurs. That includesoverseas registration of startups, researching andproduct development. There are worries of loss oftax revenues, personnel or even worse a possible"brain drain".

As we end the old year indeed, the blessings heldout by globalization are great and beckon to thosewho will partake in them in 5761.

ISRAEL HIGH-TECH & INVESTMENT REPORT October 2000

Insight into unseen recesses of the human body onlypreviously partially accessed by endoscopic surgery orradiation has been made possible with Given Imag-ing’s patented technology. The patented M2A ImagingCapsule holds great promise in the diagnosis and heal-ing of gastro intestinal disorders. GIVEN IMAGING(GIVEN is an acronym for GastroIntestinal VideoEndoscopy), founded in January 1998 has audaciouslypursued and achieved the goal of miniaturizing a videocamera and encapsulating it so that it could be swal-lowed, traverse smoothly through the digestive tractand then be naturally excreted. Currently, the broadlyused method for gastrointestinal diagnostic isendoscopy, which uses flexible scopes insertedthrough the mouth or rectum. Typically the length of

a gastroscope exceeds 2.5 meter. Most patients whosephysicians suspect ulcerations, lesions, tumors,Crohn’s disease, inflammatory bowel disease (IBD)and irritable bowel syndrome (IBD) undergo endo-scopic procedures, which most individuals find stress-ful due to patient discomfort and the need for sedation.Dr. Paul C. Swain of the London Royal College Hos-pital, who participated in the development of the M2AImaging Capsule describes it as an "added and notreplacement" technology. "It is non-invasive, notexpensive, eliminates anxiety and allows the individ-ual to continue a daily routine while being examined."Most of the diseases affecting the small intestine relateto infarcts, hemorrhages and ulcerations in areas of the

GIVEN IMAGINGÕSBREAKTHROUGHTECHNOLOGY

Insight into unseen recesses of the humanbody only previously partially accessed byendoscopic surgery or radiation has beenmade possible with Given ImagingÕs patented technology.

To all of our Jewish friends aHappy New Year

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small intestine and are not observable byendoscopy or radiology. "Radiology does not pickup polyps of less than 5 millimeter in size but M2Ahas no difficulty delivering resolutions at 0.1 mil-limeters," Dr. Gavriel Meron, the company’s chair-man and CEO points out. The advantages of a video camera capturing pic-tures with small bowl disease are of invaluableassistance to the GI physician.

The response by the medical community has beenboth positive and enthusiastic. At the annual meet-ing of GI specialists the capsule was viewed, inclosed sessions, by nearly 1,000 specialists.

How does it work?The procedure is simple. The patient swallows thecapsule. A wireless recorder equipped with sensorarrays worn on a belt around the waist receives sig-nals transmitted by the capsule. The use of the beltallows users to continue their daily activities as theyundergo the "GI" examination". Any conventionalPC equipped with Given’s proprietary RAPID(Reporting and Processing of Images and Data)software produces a short video clip of the smallintestine. The workstation allows the viewing, edit-ing and archiving of the video and the saving ofindividual images and short video clips. These inturn may be e-mailed for further diagnostic evalua-tion. The proprietary software is very sophisticatedand provides features such as the ease of intensiveviewing of the digital video clip, which has a back-

ward and forward feature. Still pictures can ofcourse be studied. The video clip is downloadedinto a conventional computer. The GI specialistwho receives the video can review it for easy exam-ination.

IHTIR visited the brand new and enlarged Israeliheadquarters of Given Imaging in Yokneam's high-tech center in the Carmel Mountain range andlearned the background of the M2A Imaging Cap-sule. Dr. Arkady Glukhovsky, immigrated to Israelfrom Moscow in 1970, the same year that Dr.Meron moved to Israel from South Africa. TheRussian was employed by Raphael DevelopmentCorporation, a company established in partnershipwith Discount Investment and Elron Electronic. Thecompany was formed to commercialize the highlyvaunted technology developed by Rafael, Israel’sArmament Development Authority. Dr. Meronreviewed Dr. Glukhovsky’s work and decided that itmerited further development, applying for patentprotection and positioning the project in its com-mercial direction. All this was done during the past32 months.

The biggest market for Given Imaging’s M2AImaging Capsule is the US, where between 60 to 70million people are affected by gastrointestinal dis-eases. Moreover, more than 10 million endoscopicprocedures are performed yearly and according tothe National Institutes of Health the annual cost ofthe gastrointestinal disease is more than $100 bil-lion. The US Food and Drug Administration’sapproval last August has led the company to initiateclinical testing.

“Our time to market goal is Q1 2001,” estimatesCEO Meron.Should Given Imaging initially market 100,000diagnostic procedures it could easily reach sales of$30 million.

With positive comments being received from gas-trointestinal specialists the miracle of "seeing theunseen" holds out the promise for a major revolu-tion in how we perceive our bodies.

ISRAEL HIGH-TECH & INVESTMENT REPORTOctober 2000

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The Nuclear ReactorIn what has been describedas an indication of Israel’snew openness as to itsDimona based NuclearReactor an Israeli mass cir-culation newspaper pub-lished this satellite view of

the reactor. The source of the picture is the Federa-tion of American Scientists web site.Since it became known, more than 30 years ago,that Israel operates the nuclear reactor the Govern-ment has maintained a policy of intentional ambi-guity. However, outside of Israel sources have spec-ulated that Israel possesses an arsenal of 200-300nuclear weapons. If thi is accurate it would makeIsrael the sixth largest nuclear nation.Furthermore the publication of the pictures hassparked off a discussion as to whether Israel shouldchange its policy and take its nuclear capabilityfrom "basement" status to an openly stated policy.The openness to be employed as a deterrent againstthe launching of missile attacks by those nationsthat have openly stated that they possess a missilecapability of striking any target in Israel.Federation of American Scientists site:http://sun00781.dn.net/index.html

Scientific Protection from JellyfishStingsMimicking the secretion of Clown fish, an Israelihusband and wife scientists team have developed asubstance which offers protection against the stingof the jellyfish. The Clown Fish secretes a sub-stances which prevents it from being stung by thesea anemone jelly fish.

Israelis bathing in the Mediterranean Sea haveoften passed up on going to the beach during peri-ods of jelly fish infestation. Stings can inflict lac-erating welts and burning blotches on its victims.The creatures’ greatest concentrations are in Flori-da, the Caribbean, the Far East and the Mediter-ranean where millions of the sea creatures canswarm in a normal summer.

A cream developed by marine biologist Amit Lotanand his molecular scientist wife Tamar has qualitiessimilar to the Clown Fish "This is really a break-through. They claim that while "most creams giverelief after someone is stung, this is the first thatactually prevents the effect of a sting in the firstplace".

Building on their ten years of experimentationLotan founded a commercial company to produceand market the patented invention. Nidaria Technology is a biotechnology company,dedicated to making the ocean and marine envi-ronment a safer place for beach goers, swimmers,surfers, divers and fishermen. Earlier this year theproduct was initially marketed under the SafeSeatradename.The company is now negotiating with sunscreenmanufacturers around the world including Copper-tone and Hawaiian Tropic in the United States andBoots chemists in England to manufacture theirproducts jointly in a one application beach cream.

ECI Telecom Announces Spinoff Plans ECI Telecom said it would spin off and eventuallytake public its five fastest-growing businesses:transport networks (cross-connect), optical net-working, access (broadband), next generation tele-phony (Internet protocol) and InnoWave.The aim is to at least double its current $3 billionvaluation. Wall Street analysts suggest that higher


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expenses will hurt profits and weigh on ECI’s shareprice until the process is complete.

ECI's Deutsche Telekom AG agreement is a mas-sive one and is valued at $250 million. The agree-ment is to supply broadband solutions to more thanone million subscriber lines through the end of2002 at some $250 per line. ECI has received twoprevious contracts from Deutsche Telekom for sim-ilar equipment which is expected to take at leasttwo years to deliver.

The Digital DivideThe per-capita gross domestic product of Egypt,Jordan and Syria is between $1,100 and $1,400,according to Economic Models Ltd., a Tel Avivconsulting firm, while Israel's is $16,100. Thisdivide will widen dramatically if Israeli economicgrowth accelerates, as is expected, over the nextfew years.Moreover, there exist clear inequalities withinIsrael itself, where the explosion of wealth amongentrepreneurs, engineers, technologists and pro-grammers that they employ, has only begun totrickle down into the economy. Israeli businessmenand social commentators are already expressingconcern at the widening of Israel's digital divide--the gap between the wealth and opportunity ofthose plugged into the technology economy andthose left behind. Many entrepreneurs have mademultimillion-dollar hits from selling their compa-nies to overseas buyers. Even rookie engineersstraight out from the universities can command$80,000 or more per year, nearly five times thecountry's per-capita gross domestic product. Butwhile Israeli technology companies are strugglingto find and retain engineers--even offering to paythe government $50,000 for each visa for foreignengineers it approves--unemployment in the econ-omy at large is lingering at about 9%. The situation is delicate and is being recognizedas a potentially explosive social issue as mirroredin the increased attention paid to the problem in

the country’s press.However, it will require more than some old fash-ioned early State of Israel socialist thinking to cor-rect the digital divide, as the Government’s think-ing today, appears to be reflecting a laissez fairecapitalist approach. The question is how quicklycan Israel’s high-tech sector close the gap inIsrael’s economy. However, as near that may be,the gap between Israel and its neighbors is less like-ly to decrease in spite of the efforts of ShimonPeres whose Peres Peace Center aims at establish-ing economic cooperation throughout the MiddleEast .

The Arrow Hits its TargetIsrael successfully tested the Arrow 2 anti-ballisticmissile September 14, 2000, with the warheaddestroying a live incoming missile fired at theIsraeli coast. It was the first time the Arrow 2 hadbeen tested against a live rocket. The missile,named the Black Sparrow, was dropped from anIAF F-15 fighter jet.According to the Israeli Defense Ministry all com-ponents of the weapon system — the radar track-ing, the fire control center and the Arrow 2 inter-ceptor — worked as planned. The test wasobserved by a delegation from the United StatesBallistic Missile Defense Organization, whichoversees the program.The project dates to 1988,three years before Iraq pounded Israel with 39 Scudmissiles during the Gulf War. It is expected to costmore than $2 billion, with more than half the fund-ing coming from the United States. In the test, asimulator missile similar to a Scud was fired froma plane toward the Israeli coast. "The Arrow wasfired toward the target in a stable, exact fashionuntil it hit and destroyed the target, "said DanielPeretz, head of the Arrow program at Israeli Air-craft Industries. Peretz said the Arrow was opera-tional. The Arrow contains a static radar station, batteries,and control center. Its radar, developed by Elta, isdesigned to track incoming missiles from as far as300 kilometers away. The battle management cen-


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ter, built by Tadiran, will guide the launches of theinterceptormissile which was developed by IsraelAircraft Industries' MLM Division.The first battery of Arrow missiles is deployed inthe center of the country. Originally, Israel plannedto deploy just two batteries, but the United Statesapproved $81.6 million toward the purchase of athird battery, whose total cost is estimated at $170million, but could be less if the system is sold toother countries that have expressed interest.Upgrades to enable the Arrow to tackle moreadvanced missiles, such as the Shihab-3 and Shi-hab-4 being developed by Iran, are being planned.The Arrow is designed to strike and destroy a war-head, be it nuclear or other, well before it is sup-posed to explode, on or near the target.

Tamir Fishman & Co., (TF) founded slightlymore than three and a half years ago, has growninto a full service investment bank. At its Roth-schild Boulevard, Tel-Aviv headquarters itemploys 80. Its rapid growth parallels the dynam-ic expansion of Israel’s high-tech sector. TheTamir-Fishman group focuses nearly exclusive-lyits investment attention on the technology andemerging growth industries sectors.

A propitious representation agreement, early in2000, with the American Dain Rauscher Wessels,links the American’s services and reputation as aglobal investment bank with TF’s understandingand experience in the turbulent local technologymarket, where three new startups are thought tobe born each day.

Corporate finance activity involvement totals$3.2 billion, over the past three and a half years.In a wide ranging discussion with Danny Fish-man, Co-President and CEO of TF he stressedthat the “deal flow is nothing short of fantastic".Over a period of a few months, TF has been theobject of 500 approaches by technology firms toprovide financing. "They reach us by e-mail, theysend in their business plans, they arrange fortheir names to be brought to our attention bymutual friends and others make contact by wayinvestment banks. I expect the surging deal flowto continue, but perhaps the rate of growth mayslow,” commented Danny Fishman.

The 40 plus year old executive is most comfort-able in describing cross border banking activities.He spent four years in the Government’s privati-zation effort to privatize the 250 companiesowned by the Government of Israel. Prior to thathe earned his MBA at the Hebrew University ofJerusalem. The University’s economics depart-ment is famous for turning out many graduateswho have climbed to the pinnacle in the businessworld as well as in academia. "I served in the Israel Defense Force’s intelli-gence 8200 unit. This is the unit from which halfthe country’s high-techies have graduated," statesFishman, with a broad grin on his face.

TF manages two venture capital funds. One is the$ 120 million Tamir Fishman Ventures 2, and theother is the $ 55 million Eucalyptus Fund. Thelatter has experienced three exits including RAD-Ware, a highly well received IPO, Chromatis, a$4.5 billion buyout by Lucent and the mostrecently in September, ViryaNet Ltd. The com-pany offered 4 million shares at $8 each in itsIPO, raising $32 million through the deal. In addition TF manages NIS 200 million ($50million) in mutual funds and its asset manage-ment activities account for NIS 1.5 billion or$375 million. These moneys are entrusted to TF


Listening to Danny Fishman ahead of the

4th Annual Growth Conference

Conference

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by high net worth individuals, many of themflush with large sums derived from M&A activ-ities and sale of founders’ shares. Options man-agement of $3.5 billion covers 25% of Israel'shigh-tech employees. The offering of a service tohigh-tech option holders has only became popu-lar in the past few years as nearly every high-tech employee receives options as part of theremuneration package.

In an environment of many mergers and IPOs,cashing in on options requires knowledge of taxand stock exchange law and practices as well asa ready access to market brokerage facilities. TFoffers this service and the owner of the options"receives Israeli shekels in his account. We evenarrange for the payment of taxes due," explainsDanny Fishman. Corporate finance activities arein excess of $3.2 billion and with nine IPOs in thepipeline are likely to exceed $4.0 billion.

ÔThe M & A Tax Law is a really bad one..ÕA Jerusalem based research tank expressed theopinion “that any CEO who insists on registering a local start up in Israel should be canned”. This comment was widely reported in the media."It is an advantage to register as a US company.But the real and compelling reason is the Merger& Acquisition law in Israel. It is a really bad one.I think it should be a top priority of the Govern-ment which is losing billions of dollars in corpo-rate and individual taxes, to make the smallchanges which will make all the difference.When Israeli sell companies they do not get paidin cash but in stock. The tax is due on the merg-er (sales price) but the shares received in pay-ment are not saleable immediately and may onlybe saleable months or a year later. There is noguarantee that counter value of the sale will suf-fice to pay the tax. “I was involved in an M&A transaction betweenand Israeli and American company. The Israelicompany was to be sold for $150 million in stock

and the tax liability would be $75 million. Thedeal did not go through. In the US you pay taxwhen you have a real exit. The tax level shouldbe the same as in the US with the Israelis payingthe same tax as all the world is paying,” animat-edly pointed out Danny Fishman, in an uncharac-teristic outburst by an otherwise self-controlledinvestment banker.Nearly every recent high-tech event has drawnunprecedented attendance. But the 4th AnnualGrowth Conference, with a record 125 compa-nies presenting themselves, and an overall atten-dance of more than 2,000 is likely to be a’ stand-ing room only’ event.

IHTIR will be there to cover the Conference

Telemedicine Company is ExpandingCard-Guard, which develops telemedicine sys-

tems, announced that it has acquired the Ameri-can Instromedix for $30 million in cash. Found-ed in 1969 Instromedix produces video cardio-vascular and pacemaker monitoring systems. In the past two years, Instromedix has operated asthe equipment division of the medical systemsproducer Alaris, a public company.Instromedix joins US company Life Watch,which Card-Guard acquired in January 2000 for$11 million, In the first half of this year, Card-Guard had sales of $19.7 million and reported aprofit of $3.8 million, compared to sales of $4.07million and a $300,000 loss in the correspondingperiod in 1999. Card-Guard shares are traded in Zurich at a com-pany value of $517 million. Since its shares wereregistered for trading at the end of 1999 theirvalue has appreciated by more than 300 per cent.Implementation of the deal and the joining of

Instromedix's staff will increase Card-Guard'sstaff by 20% to 300. Card-Guard is expected toannounce shortly a new round of financing aimedat raising $200 million.


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How the Global Individual Investor Can Capitalize on IsraelÕs High-Tech

Boom

TASE Publicly Traded Venture CapitalCompanies

Results for the individual companiesSadot + 8.0%*

Teuza + 30.1%*

Marathon + 2.5 %*

Mofet + 121.0%*

Inventech + 54.2 %*

Tamir Cap + 17.1 %*

* Yields Year to Date and as of September 21, 2000

A balanced portfolio of the above TASE Publicly Traded Venture Capital Companies since thebeginning of 2000 reflects a nominal paper profit of 38.8%. This is nearly three times as great ascompared with the General Share Index of TASE traded companies, which since the outset of thisyear has gained13.4 per cent.

In an interview with Danny Fishman, Co-President and CEO of Tamir Fishman & Co., the execu-tive pointed out that in the Tamir Fishman Ventures II Fund,four investments have been completed. At current price levels,not far from its launch price, the shares are still reflecting themoney value, without taking into account the prospectiveadded value from the vc investments.

Mofet, has one of the more promising mixes of investmentsin its portfolio. The recent resumption of IPOs along with acontinuous trend of Mergers and Acquisitions should favorthis sector. Mofet saw an exit for its investment in PreciseSoftware which debuted some time back and is trading com-fortably above its issue price.

UPDATE

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IHTIR Model PortfolioDevelopments

Point of Sale Acquires US CompanyPoint of Sale Limited (Nasdaq: POSI) announcedthat it is acquiring privately held RCS Technolo-gies, Inc. of Warrendale, Pennsylvania. RCS Tech-nologies (``RCS'') designs, develops and installs awide range of advanced corporate and store-levelsoftware solutions for the mid-and small-indepen-dent supermarket sectors. The deal is valued at atotal of $8.5 million in cash and stock. RCS, whichemploys 92 people in Pennsylvania, Ohio, Ten-nessee and Washington, has been at the forefront inproviding affordable, integrated store and host-level software solutions for the past 25 years. Thecompany's flagship RCS ScanMaster SolutionSeries is a flexible and robust retail checkout soft-ware system built on an open, scalable foundationof Windows NT and client server technology. TheScanMaster product has historically been distrib-uted through NCR Corporation. This exclusivearrangement with NCR will continue post-acquisi-tion. RCS will continue with its current operations,including the release of several new product lines.The RCS deal brings on board a total of 2,200 storeinstallations, bringing the total U.S. installed basefor Point of Sale to approximately 7,000 grocerystores.The company expects to strengthen its support of

both NCR and ICL's dealer programs that marketthe ScanMaster and ISS45 products, respectively.The deal is expected to contribute significantly tothe market penetration by Point of Sales' innova-tive ASP offering. “As we have continued to investand develop our Internet-based products for super-markets, we have realized the importance of astrong installed base and distribution channels. Thecombination of the RCS products and market posi-tion with our other U.S. operations moves us clos-er to our goal of creating a large community ofusers,'' said Barry Shaked, CEO and Chairman of

Point of Sale Limited. ``In addition to its installedbase, RCS enjoys a strong relationship with NCRCorporation and a number of dealer/distributorsthat we will continue to support and enhance in thecoming years.'' Robert Allnock Sr., President ofRCS Technologies, commented, ``We are excitedabout our new relationship with Point of Sale Lim-ited. We believe that we are beginning to enter awatershed period of change in the supermarketindustry and that the strategic direction that Pointof Sale has embarked on is the right one. Our cus-tomers, employees and strategic partners will allenjoy the benefits of this new alliance.'

BackWeb Provides Push Infrastructurefor Siemens ICN's IntranetSiemens AG recently announced that it has select-ed BackWeb® Technologies (Nasdaq: BWEB), aleading supplier of push technology for e-businesssolutions, to provide the Polite(TM) push infra-structure for Siemens' ICN (Information and Com-munication Networks) division, one of the threeinformation and corporate technology divisions atSiemens AG.With BackWeb's patented Polite(TM) push tech-nology, the ICN Intranet proactively distributescustomized content directly to users' desktops.

Siemens selected BackWeb after a two-year evalu-ation. Using BackWeb Foundation, Heidelbergfirm Expert Center Rodo Media developed VD-Infochannel, an all-inclusive communicationsapplication deployed in spring 1999. With theSiemens ICN Intranet growing steadily, 7,500 ofSiemens' 60,000 Intranet users already receiveproactive deliveries of critical information.

Supported by BackWeb's push technology,Siemens managers can supply its distribution staffwith the latest information, including distributionreleases, product information and price lists. Thisinformation is generated in the VD-Infochannelheadquarters in Munich and is delivered directly


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to users' desktops with the help of BackWeb'sPolite Agent(TM) and Flash features. Theseunique capabilities ensure that Siemens only usesavailable network bandwidth for deliveries, thusminimizing the impact that content deliverieshave on system and network performance. Back-Web's Flash feature also allows Siemens toemploy multimedia alerts that instantly informusers about the arrival of important or time-sen-sitive information.

The push-enabled VD-Infochannel provides easyaccess to Siemens Intranet's most importantsources of information, thus reducing the time ittakes to research topics and locate materials.With BackWeb, the Siemens network also auto-matically updates important files and materials,and distributes information culled from some 25Web channels, including SAP information ornews, share prices and news articles.

With BackWeb's patented Polite push technolo-gy, Global 2000 companies can deliver multime-dia-rich digital packages of any size or format,including audio, video, graphics and html. Back-Web's Polite Agent avoids disrupting the con-sumer by using only available bandwidth andpolitely delivering the information in the back-ground.We note that the recent Nasdaq decline in theprices of technology shares, BackWeb has fallento levels of around $12, a price not seen since itsIPO in June 1998.

Precise Software Boosted by MerrillLynch Merrill Lynch analyst Mark Fernandes raised hisintermediate-term rating on Precise SoftwareSolutions Ltd. (Nasdaq:PRSE) “to buy” from“accumulate”. The report predicted a key productrelease, important customer wins and broaderdistribution reach.

Gilat to Dominate Satellite High-SpeedInternet MarketGilat Satellite Networks (Nasdaq:GILTF) shouldcontinue its march toward dominance of thesatellite powered high-speed Internet marketdespite weak second-quarter earnings, analystssaid recently. Gilat has already captured at least51% of the global VSAT (very small aperture ter-minal) market and should enjoy its position as thefirst direct provider of two-way, high-speedInternet access for at least three years, they said.The company’s net earnings, as recently reported,of $9.1 mln. in the second quarter of 2000, rep-resent a 24.5% drop from $12.1 mln. in Q2 1999.

BioTechnology IPO News Two companies launched recently, CompugenLtd and Keryx Biopharmaceuticals, are two goodexamples of Israel’s fledgling biotechnology sec-tor. Compugen hardware accelerates genesequencing, while its algorithms were developedto analyse genetic information.

Keryx technology is used in protein-based drugdiscovery. Both were priced at $10 a share intheir respective initial public offerings this year.Compugen has since seen its share nearly doubleto about $18, while Keryx advanced to over $13.

Friendly Robotics Friendly Robotics, which develops robots forhome use, has announced the signing of a five-year contract with Stiga, which is controlled bySwiss investment bank UBS. It is estimated thatFriendly Robotics will supply 60,000 units for$50 million. In May, Friendly Robotics signedan agreement with US company Toro for supply-ing several hundred lawn-mowing robots for atleast $500,000 each and a total of $100 million.Under the agreement, Toro will market the lawnmowers in the US under its own brand name.


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ISRAEL HIGH-TECH MODEL PORTFOLIOSelected Israeli Growth Companies

IHTIR Model Portfolio Investment Summary

Original Assumed Investment at the Start of 1999 was $ 246,850

Total Current Value $ 893,963

Gain $ 647,113 +262.4 %*valued as of September 21, 2000Note: The Precise Software shares were added to the portfolio on July 5 at $20.50

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After Eight Months Intel BecomesIsraelÕs Biggest Private Sector ExporterIntel, the world's biggest semiconductor manufac-

turer, has become Israel's biggest private sectorexporter, after increasing exports to $1.2 bn in thefirst eight months of this year compared with$810m in 1999. The announcement by Intel Israelappeared to be strategically timed to remind theIsraeli government of the company's growingimportance, while it considers a request to providegovernment grants for a proposed $3 bln. Intelinvestment project. Alex Kornhauser, co-chiefexecutive of Intel Israel, said he expected a gov-ernment decision on the grants "within weeks".The grants are likely to be decisive in Intel's deci-sion on the project. Intel's proposal is theoreticallyeligible for a 20 per cent government investmentgrant, valued at $600m. But trade ministry officialsconducting a feasibility study are caught betweenthe economic dividends of such a large investmentand the controversial high cost of wooing Intel tocontinue to expand in Israel. Managers of Intel Israel, which includes a researchand development centre and two Fabs, or semicon-ductor plants, said rapid growth this year was dri-ven by the launch of Fab 18, its new facility in thesouthern town of Kiryat Gat. Fab 18 has exported$796m of chips this year and $1 bn-worth since itcame online a year ago. Intel secured its leadingposition in Israel's high-tech export market by sur-passing ECI Telecom, the telecommunicationsequipment manufacturer, which exported $550m-worth in the first six months of 2000. By year'send, it may exceed the export level of Israel Air-craft Industries [IAI], the state-owned aerospacecompany which had $1.5 bn in exports last year, asthe country's single biggest exporter. Productivityof Intel's 4,100-strong Israeli workforce amountsto about $400,000 per head, compared to sales of$140,000 per employee at IAI.

According to the Israel Export Institute, totalIsraeli exports rose 27 per cent in the first sevenmonths of this year to $9.67 bn.

Hewlett Packard Invests $100 million inIndigoThe two companies will jointly develop high-endprinting systems aimed at the commercial market.The Palo Alto, Calif., company also will manufac-ture Indigo's products under the Hewlett-Packardname.

The deal provides a helping hand to Indigo, whichhas suffered repeated losses, reorganizations andmanagement shakeups in recent years.

In the second quarter the company reported a netloss of $16.2 million on revenues of $40.2 million.Indigo, over the years has exhibited substantialresearch and development abilities but has not man-aged to convert itself to a major industrial concern.

General Electric Medical Acquires Controlof Elgems American GE Medical Systems Inc., paid $30 mil-lion to buy out its Israeli partner. By virtue of thepurchase it gained total control over the nuclear-medicine imaging products distributed under itsbrand name.

The deal covers research, development, engineeringand manufacturing of GE Medical nuclear-imagingproducts. GE Medical agreed to purchase the 50%stake in Elgems Ltd. owned by Elscint Ltd.

Elgems was established in July 1997 as a joint ven-ture between GE Medical of Milwaukee and ElscintLtd. of Israel. GE Medical and Elgems jointlydeveloped the Hawkeye, the world's first imagingsystem to combine nuclear medicine and X-raytomography. GE Medical purchased Elscint's mag-netic resonance imaging and nuclear medicine divi-sions in 1998 for $100 million. Elscint will remainthe main supplier of medical components to Elgems,according to the agreement. Elscint will report a $20 million capital gain fromthe deal

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