Written by: Aaron Katsman | September 5, 2008
With global capital markets in the middle of a meltdown, it would be expected that the Israeli hi-tech startup industry would be in shambles. With most investors hunkered down waiting for the storm to pass, they wouldn’t seem to be in the mood to fund new companies. Well that may be what you would expect, in reality it’s not the case. According to a report in Globes the number of startups that have closed their doors this year is actually much less than in the previous 2 years. “According to IVC Online, 35 start-ups have closed down since January: 24 companies in the first quarter, six in the second quarter, and five in July-August. For the sake of comparison, 228 companies closed down in 2007 as a whole and the number that closed in 2006 was about the same.”
That hardly sounds the panic whistle. It’s hard to understand why this is occurring but one reason may be that companies have cut out the frivolous expenses of years passed, and are doing a much better job of making whatever money they raise, last.
That’s the good thing about lousy capital markets. It sends a dose of reality to the startup world, that they better shape up and watch their spending or their sole option will be bankruptcy. I guess you can find some good in any situation.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | April 17, 2008
Aaron Katsman
www.IsraelNewsletter.com
Just in time for the State of Israel’s 60 birthday, IBM (IBM) continues to only buy blue and white (the colors of the Israeli flag). It looks like IBM is set to acquire Israeli storage solutions developer Diligent Technologies Corp. for $200 million. This will be the third purchase of an Israeli start-up by IBM since the beginning of ‘08.
Back in Jan. IBM purchase storage technology company XIV for around $300-350 million, and last week it bought data recovery company FilesX Ltd. for about $70-90 million. That makes about $600 million in purchases, not bad. It reminds me of the Richard Pryor classic, “Brewster’s Millions” where, as per the Wikipedia definition “Brewster is an aging minor league baseball pitcher, with the (fictional) Hackensack Bulls. He suddenly finds that he is an inheritor of an eccentric millionaire who wanted to discourage him from spending excessively. To do so, Brewster must spend the entirety of $30 million within a strict time limit in order to inherit $300 million. There are some conditions attached: the money cannot simply be destroyed nor can he buy expensive goods and destroy them.”
As we have posted previously, IBM has stated that they plan to spend freely to buy technology companies. To date they have stuck to Israeli storage companies. IOI has speculated that a move into the security space may make sense for IBM, and if so, Checkpoint (CHKP) may become a target. That speculation has been met with a “when pigs fly” type of response from certain investors. All can say is who would have thought that we would live to see IBM as a real life Brewster!
Disclosure: Author’s fund has a position in CHKP, fund has no position in any other stock mentioned as of 4/17/08.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
