News

Scitex Corporation – The New Strategy

A network of companies, the strategy for growth and leadership

Herzlia, Israel, May 11, 2000 –
Scitex Corporation Ltd. (NASDAQ: SCIX) today announces its new corporate strategy following the transaction with Creo Products Inc. on April 4, 2000. Scitex will dedicate itself to building a network of leading and innovative companies that are focused on combining digital imaging technologies with the power of the Internet.

Scitex Corporation’s strategy is based on the following business objectives:

• Enhance and highlight the value of its existing activities and investment portfolio;
• Invest in specialized technology companies that are revolutionizing their industries;
• Leverage the complementary strengths of the existing network of companies that Scitex Corporation either owns or has an interest in; and
• Add managerial depth and market knowledge to this network of companies.

Scitex is uniquely positioned to implement this strategy with its knowledge of the graphic arts and digital imaging industries and an established brand name. Using its vast intellectual property and experienced management team, Scitex is working to maximize the synergetic opportunities created within its network of companies, in order to generate value and growth from the convergence of digital imaging technologies with the Internet.

Yoav Z. Chelouche, President and Chief Executive Officer of Scitex said: “Through our leadership in print and publishing technology we are committed to continuously innovate and advance in these industries. Scitex is building a network of leading, innovative companies focused on combining digital imaging technologies with the power of the Internet to create a world of visually rich business communications. From its position as a world leader in digital imaging solutions, Scitex is continuously advancing technology in order to capitalize on the market’s expanding potential.”

The DRUPA trade exhibition (May 18 – 31) in Dusseldorf, Germany is a timely opportunity to present the company’s new strategy and focus, and to display at the Scitex booth the broad array of industrial inkjet solutions from Scitex Digital Printing, Scitex Wide Format Printing and Aprion Digital. Vio Worldwide Limited and Karat Digital Press will have their own stands. It will also be the first showing of the combined CreoScitex preprint business.

Chelouche concluded: “We are excited to be able to participate on a wider front of technologies and opportunities as our industry transforms.”

Further information on Scitex Corporation Ltd.

Scitex’s network of companies presently consist of the following:

Scitex’s main businesses now operate within three main markets:

Digital Preprint

• Creo Products Inc. With the closing of the Scitex and Creo Products transaction, Scitex received 13.25 million shares in exchange for the assets of Scitex’s digital preprint business. In so doing, Scitex became the major shareholder in Creo with approximately 27% of shares outstanding, and going forward, Scitex’s participation in the digital preprint business will be driven by its equity investment in Creo. Creo Products Inc. is a world leader in digital preprint and on-press imaging technologies.

Digital Printing

• Scitex Digital Printing, Inc. (SDP) is a world leader in high speed variable inkjet printing. The company, which is 100% owned by Scitex, recorded revenues of over $140 million for 1999. The company provides the most advanced, competitive, and low-cost solutions for high-speed variable data printing for applications such as telecom billing, direct mail, and one-to-one marketing solutions. SDP’s growth strategy is based on sales of its new ultra high-speed, high resolution Scitex VersaMark� products. The company recently announced the launch of the VersaMark Business Color Press� which prints 100% variable data in process color at the highest speed and lowest page cost available in the world.
• Scitex Wide Format Printing Ltd. This fast growing, 100% owned subsidiary, is a world leader in digital inkjet printing systems and consumables for use in wide and super-wide format printing applications. The company recorded revenues of approximately $43 million in 1999, an over 50% increase over 1998. During the quarter Scitex Wide Format Printing signed an exclusive worldwide cooperation agreement with 3M.
• Karat Digital Press. This 50/50 joint venture with Koenig & Bauer A.G. develops and manufactures the highly innovative 74 Karat� digital offset press. The company has placed ten beta units worldwide and expects to commence commercial shipments soon.
• Aprion Digital Ltd. Scitex obtained venture capital financing for this exciting technology in mid-1999 and now holds approximately 17% with the option to increase its holdings to approximately 47%. The company develops state of the art drop-on-demand inkjet technologies, creating flexible, value generating printing solutions to be brought to market by a network of strategic partners.

Internet

• Vio Worldwide Limited, our 50/50 joint venture with British Telecommunications plc, is pioneering Internet and telecommunications services for the printing industry. Vio operates as an ASP (Applications Service Provider) for the graphic arts industry. The company is enjoying a rapidly growing user base, including wide band and Internet users.
• RTimage Ltd. Scitex holds a 13% stake in this leading provider of professional Internet-based imaging products and services for the graphic arts and medical communities. RTimage’s breakthrough technology provides online remote proofing applications, and remote diagnostics for the medical community.
• SciDel Technologies Ltd. Scitex holds 30% of the company, which specializes in real time advertising insertion to TV and Webcasting. The SciDel technologies offered as a service are experiencing expanded deman.

Creo releases Information Circular for March 30 shareholders’ meeting

PR Newswire – February 28, 2000 16:54

Hart-Scott-Rodino Act waiting period expires

VANCOUVER, Feb. 28 /CNW-PRN/ – Creo Products Inc. (NASDAQ: CREO) (TSE: CRE) is pleased to announce that a Management Information Circular has been distributed to shareholders today in preparation for the upcoming Annual and Special Meeting, scheduled for March 30, 2000 in Vancouver.

As previously announced, on January 17, 2000 Creo and Scitex Corporation Ltd. (“Scitex”) entered into an Asset Purchase Agreement providing for the acquisition by Creo of the digital prepress and print-on-demand businesses of Scitex (the “Scitex Business”). At the March 30 meeting, shareholders will consider – among other things – the issuance of 13,250,000 common shares to Scitex as consideration for the Scitex Business. On closing of the acquisition, Scitex will hold approximately 26.1% of Creo’s outstanding common shares on a fully diluted basis.

The Management Information Circular includes a description of the Scitex Business and the combined businesses, as well as audited financial statements of the Scitex Business for the three years ended December 31, 1999, and unaudited pro forma consolidated financial statements of Creo reflecting the acquisition of the Scitex Business.

Net income of the Scitex Business in the year ended December 31, 1999 was US$32.6 million, compared to losses of US$1.1 million in fiscal 1998 and US$8.6 million in fiscal 1997. Total revenue for the year ended December 31, 1999 was approximately US$491.5 million, compared to US$454.1 million in the previous year and US$473.6 million in the year ended December 31, 1997. Product sales and service revenues in fiscal 1999 were US$336.9 million and US$104.8 million, respectively (compared to US$303.3 million and US$103.7 million, respectively, in fiscal 1998, and US$322.2 and US$103.2 million, respectively, in fiscal 1997). Revenues from the sale of supplies were approximately US$49.8 million in fiscal 1999 (compared to approximately US$47.1 million in fiscal 1998 and approximately US$48.2 million in fiscal 1997).

On a pro forma basis, assuming that the acquisition had been completed as of the end of Creo’s most recent financial year (September 30, 1999), the consolidated balance sheet of Creo and the Scitex Business reflects total assets of US$883.2 million, and net equity of US$686.9 million. In addition, on a pro forma basis as if the acquisition had occurred at the beginning of Creo’s 1999 fiscal year, the combined entity discloses total revenues of US$669.8 million, gross profit of US$291.3 million, and operating income of US$45.4 million. As disclosed in Creo’s financial statements for the year ended September 30, 1999 previously mailed to shareholders, Creo’s total revenues on a stand-alone basis were US$178.3 million, with gross profit of US$83.8 million and operating income of US$29.5 million.

Creo expects that significant synergies, including cost and capital savings, will result from the combination of its business and the Scitex Business, creating a broader platform for Creo’s further growth. Management also expects that customers will benefit from the combination of product and service offerings, the expansion of these offerings into new markets, and improved efficiencies, and that the business prospects for printCafe – Creo’s recently announced e-commerce initiative with, among others, Prograph, Inc. – will be significantly improved.

Completion of the acquisition is subject to a number of conditions. Among these are the approval by the Creo shareholders of the issuance of the 13.25 million common shares to Scitex, and approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 of the United States (“HSR Act”) and the antitrust or comparable laws of several other countries, including certain countries in Europe and Latin America. The applicable waiting period under the HSR Act has expired, and application for the other approvals has been made or will be made shortly.

Upon completion of the acquisition, the new graphic arts group – tentatively named Creo/Scitex – will operate as a division of Creo Products Inc., which will continue to trade under the name Creo (NASDAQ: CREO; TSE: CRE).

Sun-Thu at 18:00 (GMT+2)
High Tech Features

If It Ain’t Broke Don’t Fix It

By Aviva Rosen

Start-ups acquired by international concerns often wake up to a new reality in which Mama tries to straighten out and clean up her messy new baby.

Eliezer Lev, general manager of Infineon Israel, Siemen’s semiconductor division, which also serves as the company’s development center in Israel, replaced IC Com’s founders, after it was purchased four months ago by the multi-national concern. Lev says the company underwent a period of uncertainty, during which part of the senior management team left, and some of the functions no longer required disappeared, along with a few of the less successful projects.

Why leave a company that is turning into the development center of such a leading and respected company in the sector? “Some left apparently because their dream was gone. Dreams are part and parcel of a start-up,” Lev says, “and one of the dreams is to have options and shares.”

Lev talks of a period of adjustment which Infineon Israel appears to be embarking on. Lev, who in the past was deputy general manager for development at Scitex and a company division manager, was brought to Infineon to “sort out” the start-up’s structure, which is far less organized than that of the multi-national concern.

“There’s something about large organizations which deters people looking for the feeling of a unified elite unit, while many others are attracted to order and good organization,” he says.

“These people know they now have the opportunity to work with the most advanced technologies, and even move from project to project throughout the world, within the company.”

“Globes”: How do employees relate to the fact that they are working for a company with German roots?

Lev: “The subject has never arisen, as far as I know. I think people nowadays put much more emphasis on the fact that they work for a large and successful company, and they can feel part of that success.”

What’s happening vis-a-vis Israeli and German styles of management?

“It’s true that, compared with the Israeli management style of improvisation, the German style of management is much more structured, but I believe that bringing order and sprucing things up in development matters of an Israeli start-up is not a bad thing. Even if there appears to be a conflict between German and Israeli mentalities, the conflict doesn’t necessarily need to be destructive.”

In contrast to Infineon, Convergys Israel, formerly Wiztec Solutions, which belonged for several years to Digital International, and later to Formula Israel, is already very well experienced in transitions, including the sort that takes place between a development center of a multi-national company and the local company, and vice versa.

In Convergys case, which is contrary to Infineon’s, the acquisition did not take place as a one-time purchase, but was carried out in stages, with the final purchase in March 1999. By that time, Wiztec and Convergys had developed a close relationship of joint work in various fields. It is perhaps an exception to the rule for the mergers and acquisitions we hear about, that are rushed through and fall apart not long afterwards.

Moreover, according to the Israeli company’s new general manager Riki Alon, “The company was always in the international market, so that even if it was based in Israel, the transition to a multi-national company did not deeply jolt it.”

What about company structure? Apart from development, are there other functions which wither and die?

Alon: “Beyond our small marketing group, the company has not changed, and neither have people’s responsibilities. Various functions remained, such as management of finances, which normally disappears, but in our case remained. In the meantime, we’re continuing to function in a relatively independent manner.”

Alon explains that from the management processes aspect, some things have changed, for example management of human resources, employee evaluations and salaries. The changes are instituted gradually, not forced.

Alon says Convergys is trying to act gently and wisely in incorporating the Israeli company so as to avoid harming it, and to get the most out of it. “Nobody looks at the calendar and says: we’re now turning over a completely new leaf. They understand that something that works well does not need to be mended.”

What about the relations between the US company and the Israeli one?

“We receive certain things from them, and they receive certain things from us. They can learn from us, for example, why it’s sometimes worthwhile ’rounding corners’ and becoming more creative about solutions when the regulations interfere.”

Published by Israel’s Business Arena on 16 February, 2000

“The Number of Shares We’ll Receive from Creo Hasn’t Changed”By Avishai Ovadia

Congratulations to Scitex. After seven years of crisis, the company’s fortunes are improving, at least as far as investors are concerned. We would like to remind you that it all started with a profit warning that triggered a 27% fall in the price of Scitex shares, which plummeted to $28. The share is currently traded at $15.

Scitex is picking itself up largely thanks to Amos Michelson, Creo’s general manager. It was his idea to merge Scitex’s preprint division with Creo.

Following the merger, Scitex became a kind of holding company investing in preprint, digital printing, wide format, and Internet ventures. In return for its preprint division, Scitex received 27% of Canadian company Creo, which is traded on NASDAQ. Creo is considered a world leader in manufacturing and marketing CTP (computer-to-plate) systems for the preprint industry. The company also sells other preprint products, such as scanners, and cooperates with the world’s biggest printing manufacturer, Heidelberg.

After close of trading on Wall Street yesterday, Scitex published its financial statements for Q4 1999, posting record sales and a significant increase in profits. Yet it appears that the decisive factor for Scitex at present is the fall in Creo’s shares, which plummeted 40% since its deal with Scitex. (Could it be possible that the market didn’t like the deal?) The fall shrank the value of the deal by $610 million to about $390 million.

“Globes”: Will Scitex demand a larger number of Creo shares, now that their price has fallen?

Yoav Chelouche:“The number of shares we’ll receive is still the same: 13.25 million. The deal was based on a price similar to the present one. Following reports on the deal, the share rose, and now it’s falling – apparently because six months have gone by since Creo first issued its shares. The blocking period is over, and some people want to sell off their shares. This is a natural development. When we signed the deal we discussed roughly today’s sums. We’re not really disappointed over the fall in price.”

You haven’t succeeded in recovering and regaining your technological supremacy since that notorious profit warning seven years ago. The sale of the preprint division to Creo is tantamount to an admission that you failed to position yourself at the cutting edge of preprint technology.

“I’m stunned by your question,” said Scitex’s CFO Eyal Desheh, who was present at the interview. “Nobody has the benefit of hindsight at the time things happen. We believe that no one who saw Scitex’s Q4 results, with profit going up 70%, and the strategic sale deal, would use the word ‘disappointment’. We’ve just announced our greatest quarterly results ever, the highest operating profits in five years, and record sales.”

And the share is still treading water?

“The share almost doubled relative to its trading price last summer. It’s impossible to draw parallels between this and our peak of several years ago. We had a company in need of a serious overhaul and that’s what we did. From the investors’ point of view, the results are very strong in terms of growth and profitability.”

The preprint division grew and sales reached a record $135 million. But what about the division’s profitability?

“We never present profits by division. We can say that profit levels improved greatly. This division was part of Scitex’s problem, and management took on a massive commitment in order to fix it. A good part of Scitex’s improvement stemmed from this division, which makes up two-thirds of the company.”

Is it possible to say that a major portion of this quarter’s profits came from this division?

“The division, overall, represents two-thirds of Scitex.”

What about other divisions? Sales for the digital printing division dropped, as compared with the previous quarter, to $39 million.

“This year was one of great technological changes in the digital printing field. There was no growth. We presented and based our products on a new technology, VersaMark. This system has attracted a lot of attention in the market, and already represents 40% of sales. We have a good feeling about this field; today we announced a $10 million contract to provide British Telecommunications with eight VersaMark high speed laser printers for their telephone bill printing centers.”

And what do you foresee for this division in 2000?

“We don’t forecast numbers. But we can say that we considering expanding our markets and applications.”

In 1998, Scitex entered wide format printing, now considered one of the most rapidly expanding divisions in your company. What do you intend to do in this field?

“The wide format printing division, which is based in Israel, increased quarterly sales to $17.8 million. The company has over 250 installations, each one of which yields $350,000- 450,000. This is a growth field and we’re in a good position.”

In the past, there were rumors that Scitex was in negotiations with Nur Macroprinters.

“We are not in contact with Nur or anyone else. But we think, in general, that in such rapidly changing fields it’s very important to be open. We’re open to dialogues about mergers. But, as I said, there are no negotiations of this sort right now.”

Is there any news regarding your new Karat printers?

There’s a lot going on in the Karat field. This technology is starting to enter the field – although this is still the beta-site stage. Six of these systems were released in the fourth quarter, five in Europe and one in the US. I assume that when beta site testing is over, around mid-year, the final product will be released on the market.”

What about Scitex’s other activities?

“VIO, our joint venture with British Telecom, contributed a great deal in the fourth quarter. We set up a website intended to allow users to familiarize themselves with VIO’s service and technology.”

“The service enables print-quality graphics to be transferred rapidly and inexpensively. For example, UK concern Reed already uses the VIO network to transfer half its graphics from its system to print. It’s a sort of e-mail for pictures and graphics; information that requires a great deal of bandwidth and memory.”

Published by Israel’s Business Arena on February 3, 2000.