Buy Them Before They Buy You -Arazi’ Imedia is being sold

Tuesday , Jul 27, 1999 Sun-Thu at 18:00 (GMT+2)
High Tech FeaturesBuy Them Before They Buy YouBy Mary Sagi-Maydan

How does it feel to “buy” Efi Arazi, one of Israeli high tech’s founding fathers? I ask Terayon’s founder Shlomo Rakib the day following the announcement that Terayon bought Arazi’s Imedia for $100 million. Rakib, whose rags-to-riches story has been told innumerable times, replies that Imedia is a wonderful company with remarkable staff and technology. But what does it mean to you emotionally speaking? I insist. Rakib is not a man to display his emotions. His answers are always correct, dignified, respectable. “Clearly it’s a great honor,” he finally pronounces. “After all, Arazi is indeed the grandfather of Israeli high tech.”

Brothers Shlomo and Zaki Rakib are believed to be worth more than $100 million each. Their modest beginnings have been much reported. They graduated from high school at age 16 and went on to university. Shlomo studied electric engineering, and Zaki did a PhD in mechanical engineering and post-doctorate studies in applies mathematics. He taught for a while at Tel Aviv University’s computer science faculty, and then joined Helios. After Helios was sold to US company Cadence, Zaki moved to the US, and urged his brother to join him and set up a company. This is how Terayon, a maker of modems for high-speed Internet communications over cable, came into being. Terayon held an IPO in August 1998, and its market value has already crossed the $1 billion mark. When I ask Shlomo where he would like to be in five years’ time, he replies that he’d like to become a 3Com.

“In all respects, except for the share price,” he adds. “I’d like to be as solidly based and as decentralized as 3Com, and I’d like recognition. I’d love to be a blue-chip company.”

Such aspirations contrast with the prevailing trend in Israel, dubbed “the gold rush” by BackWeb founder Eli Barkat. Entrepreneurs can’t wait to sell and “run off” with the money. Do you find this trend disquieting? I ask. “I see a negative side to it,” he replies. “But I also see the positive side. I believe that entrepreneurs who sell off at an early stage will invest the money in something new. Israel’s objective is, naturally, the establishment of longer-surviving companies, but it’s perfectly all right to sell at an early stage. Some venture capital funds specialize in early selling. It takes a long time to build up a company. Sometimes the economy is stronger when there are a lot of small companies. Diversity is a hedge against risk.

“I, for one, am in favor of judging each case on its own merits. Mirabilis, for instance, had an option to sell. They could have refused to sell and, perhaps, later face competition from AOL, which bought them. The Lord created Mirabilis, and the Lord will create others. I don’t know Yossi Vardi personally, but I tend to trust his judgment. Another example is Libit, which was sold to Texas Instruments. Libit considered all the alternatives and assessed the competition, and reached the conclusion that joining a big company would help it cope in the market place.”

“Globes”: What do you think of the idea of imposing restrictions on the sale of companies in which the Chief Scientist’s Office has invested?

Shlomo Rakib:I’m not familiar with the details, but, above all, I believe in a free economy. That’s the right way to do things. When the government invests, it should set commercial terms, such as receiving shares, so that if the company is sold, the government will also get some profit. By the same token, you can’t force people to stay in Israel. And anyway, I don’t see it as a brain drain, but as an excellent way for Israelis to learn how to do things. If engineers or entrepreneurs want to leave, you can’t keep them. The world’s free. If someone leaves, the State should offer him enough attractive reasons to come back.”

Do you believe Israel will produce a Nokia?

“Israel has ECI. Elbit is a large company. I believe one day Israel will produce a really big company. Not of Cisco’s size, but big. It takes maturity to run a company so that it gets really big. I believe it’ll come with time.”

Of the tendency to sell companies at an early stage, Zaki says: “The Israeli high tech industry used to have the reputation of an industry prone to premature, and sometimes disappointing, IPOs . In the last few years, there has grown a better understanding in Israel of what a public company means. Some entrepreneurs who opt for selling recognize the fact that it’s very difficult for an Israel-based general manager to bring a company to a situation in which it’s visible enough. In Israel it’s difficult to get high valuations. A wonderful company such as ECI is traded at a market value of $2.5 billion, whereas a company such as RedBack, whose sales turnover is only $5 million, already has a market value of $3 billion.

“This combines with various personal considerations. The liquidity of a listed company is limited. You can’t make a fast couple of million, because if you sell too many shares, you’ll drive the share value down. A merger, on the other hand, gives you a lot of money right away. And as far as the company is concerned, there’s the advantage of obtaining marketing and sales infrastructure.

“Life in a public company is very difficult. I live in the Valley, not in Israel, and I still have to spend seven months a year away from home (the interview with Zaki was held on the telephone, with Zaki calling from Japan -MSM). I have to spend at least three months a year with investors, which is necessary if you want a higher market value that will enable the company to make investments and progress. I opted for expanding the company, because it suits me. I’ve always dreamt about it. To make a change. To bow out of business leaving something that will be remembered. I don’t underestimate the remarkable capacity of some people to sell off their company, but I find it hard to believe that the name of Libit will mean anything to anyone five years from now. I want Terayon to be remembered. We’re competing with giants like AT&T, and it’s important to me that people will say that David overcame Goliath.”

When you first came to the US, did you dream of success on this scale?

Zaki Rakib:“I refuse to call it a success. Thank you for the complement, but I’m paranoid. It’s very premature to call it a success. As for my aspirations, I have believed we would succeed since I was very young. My father was an electrical engineer in Egypt, and he had a contracting company. From early childhood, Shlomo and I were interested in the technical side of things. We used to take things apart and put them together again. I remember that, when I was seven, I told Shlomo we would build a company together. I said, ‘I’ll be the general manager, and you’ll report to me.’ And it all came true.”

It was the urge to strike it big that prompted Zaki to try his luck in the US. “I left because at that time the atmosphere in Israel didn’t make it possible for young people to make a breakthrough. That’s why I take of my hat to all the Israeli high tech industry,” Zaki says. “It’s difficult enough to set up a company and make it a success in the US, but it’s even more difficult in Israel, because you’re far from the sources, far from the market. There’s a smartness surplus in Israel. I’m not saying it in any negative sense. It’s simply a fact. Everybody’s smart. Everybody thinks: ‘Who are you to be general manager?’”

Like his brother, Shlomo has profound respect for Israel’s top high tech people. “The brothers Zisappel, for instance, have left their mark everywhere, cultivating start-up companies. I also have deep respect for Uzia Galil, for Shimon Peres, who set up Tadiran and other electronic companies, for the BIRD fund, Dan Tolkowski, and Ed Mlavsky. DSSP’s Davidi Gilo has set up some very successful companies.”

“Is money still a driving force for you?” I ask. “Money,” replies Zaki, “gives a sense of power. But what’s more important, money is a gauge. Your quality of life will be the same at $10 million and at $100 million, but money becomes a measure of your success. A good general manager must have criteria against which he can measure himself all the time. Comparison is also important. The industry has its heroes, and you look to them as role models. It’s important to be jealous. If you’re not jealous of another company or don’t envy another manager, it detracts from your urge to succeed.

“One of the important things for institutional investors is to know that the general manager has an insatiable hunger to build up shareholder’s equity. If he’s not hungry, why should they be hungry to invest in him? As a shareholder in Terayon, it’s very important to me that the company’s value keeps growing.

“My office overlooks the parking lot, which is full of sparkling brand-new cars. Many of our staff, including my sister, have bought houses and cars (Susan Fishel works in Terayon as a systems engineer. She joined late and doesn’t have holdings like her brothers; only options like the rest of the staff). It’s fantastic to know that I’ve touched the lives of so many people, and will continue to do so. Right after we bought Imedia, I told the staff: We bought Imedia for $100 million, and we’ll turn it into a billion-dollar company.”

Published by Israel’s Business Arena July 26, 1999
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Scitex Giant Wakes

High Tech Features

Scitex Giant Wakes

By Ronny Lifschitz

 

yoavsScitex at long last got its act together again. Last week it proudly announced the establishment of a new subsidiary that would employ a unique digital printing technology developed in Israel. Scitex President Yoav Chelouche, who has been the butt of many barbs by a captious press, was in a position to declare that the digital giant was back, standing tall.

“Globes”: Yoav Chelouche, what is APP’s business plan?

Yoav Chelouche:“We’ve developed an inkjet print-head technology that’s very fast and very reliable. It enables the use of a broad spectrum of ink and various liquids. The technology is good for massive and industrial printing, such as wallpaper, packaging, and disks. The major advantage of the business plan is to get into several markets at the same time. Our strategy will be to make this entry together with partners in each of the chosen markets. Two or three cooperation programs, which are still not to be elaborated upon, already exist with regard to entry into unique markets.

“We’ve developed the technology over the last four years, and now we’re going to use it to create very high-speed printers for wholly new applications. It’s uniqueness is the ability to print on special materials at very low costs: wallpaper printing, for instance, which is going to be one of the first applications. People will be able to order customized wallpaper. For instance, something personal, such as photos from their latest journey, etc. In this way, the stock plants and businesses must keep will go down. They’ll print only what’s ordered by the customer. In this way, we’re in fact going to create a totally new market of printing customers.”

What’s the “thousand start-up companies” theory?

“I’ve never heard this expression, but I’m prepared to adopt it. In the last three years, Scitex invested very large sums in in-house entrepreneurship, including technology entrepreneurship and procedural and administrative innovation. In digital printing, we have a joint venture with German company KBA to build a digital printing press. It will be an automatic printing press with automatic plate loading and digital exposure. Through this project, we’ll turn the printing press into something simple and easy.

“Our venture with British Telecom continues to move ahead. It’s based on communications and Internet software developed in Israel within Scitex. We realized that bringing them to market would require cooperation with a communications provider. That’s why we set up a joint venture called VIO with British Telecom, and we’re already selling in the US, Europe, Singapore, and Australia. It’s a joint company based in London and owned 50%:50%. We already have more than 100 customers, including some of the largest printing and graphics companies in the world. At the moment our major task is to increase the number, in order to create a sufficiently large user community.

“The company supplies software for linking up with a broadband network, with British Telecom filling the role of communications provider. The software enables high-speed and high-reliability image file transmission, and creates a virtual community of graphic artists and print specialists linked to each other through the network. We’re now building an infrastructure that enables high-speed communications provision for the completion of tasks such as proofing and approving print jobs. In the future, it will enable operations such as printing orders.”

Just a minute. Are you getting into e-commerce?

“It’s still too soon to say that. We’re now building the software and the community, and later on we’ll present them with e-commerce tools.”

In what other areas are you introducing innovations?

We’re applying business innovation to old products. We recently entered a partnership with Israeli company RTimage. It enables access to image bases via the Internet. It’s possible, for instance, to get through the Internet into the data base of a certain printing house, and to approve – or not – the proofing for a printing project. It helps the printing sector to get into the Internet era. And that’s not the only example.

“The digital printing division, for instance, has developed a system for printing the first editions of books through inkjet rather than offset. It appears that half the cost of any first edition comes from storage of unsold copies. By using inkjet printing, it’s possible to supply very short runs that free publishers from the need to maintain large warehouses. The first machine is currently being installed in Dayton, Ohio.”

What is the Internet’s impact on Scitex?

Scitex is being affected on several levels. One of them is cutting down production time thanks to high-speed communications. We’re electronically linked to our suppliers. We recently did some outsourcing operations, involving, for instance, all our logistic system.

This year we switched to e-commerce. We entrusted an international shipment company with maintaining our logistic system. In order to accelerate the shipment of spare parts and goods, this company keeps for us a stock of spare parts, materials, and finished products. In so doing, we’ve succeeded in cutting down 6,000 sq. m. storage space, as well as in improving customer service.

Under which terms will Scitex consider bringing in additional investors into the parent company?

“This question should be addressed to Scitex shareholders. What we’ve said is that management activities will focus on tracking down partners for our subsidiary divisions.”

Isn’t the digital printing market disappointing? It doesn’t quite seem to meet the expectations pinned on it.

“We’ve no cause to talk about disappointment. The market is developing, but it develops through niches, and our strategy was based on niches. Today there are half a million printing press throughout the world, and they’re not going to go digital overnight. Expectations have been premature.”

Your quarterly report reflect a growth rate of about one percentage point. Does the problem lie in sales, profitability, or the entire digital printing industry?

“Our challenge is to bring about growth in profitability. The bulk of activity today focuses on the introduction of a larger number of new products, such as work management systems, or plate-borne exposure systems, which yields bigger gross profit. When we look at the sales percentage of new products compared with the overall sales figure, we definitely see a significant rise in the ratio of new products. The company has a great technological depth, and we’re improving our ability to exhaust it.”

The Internet changes everything.

Scitex, too, is beginning to feel the sweeping impact of the Internet – at least to judge by reactions to the RenderView system Scitex is marketing together with RTimage. RTimage’s management is headquartered in California, but it development center is based here in Israel. Where else could it be based?

Development of the system, which was brought to market only this year, started in 1996. RenderView offers printing specialists and graphic artists – including advertisers, photographers, and anyone involved in high-quality printing jobs – full-resolution soft proofs, down to the smallest details. And it is all available via the Internet, by using only a PC and a modem.

RTimage has developed a technology that enables the use of servers working with the Internet to transmit graphic images down to the level of a single pixel. Called Pixels-On-Demand, the technology transmits only the specific data requested by the proof reader. For instance, it may transmit the entire image or only parts of it at the required blow-up degree. At the same time, the proof reader may mark points on the image that require special handling, or open windows for specific requests. One demonstration shows how the proof-reader identifies a human hair on the image of a skate roller due to imperfect scanning, and requests its removal through digital retouching.

This is how, at long last, Scitex has entered present mainstream technologies. No mean feat. It gets the company the right headlines, and gives it a special advantage in a market that’s becoming more competitive every day. The user of this technology is able to maintain a personal connection with customers. He is no longer the mere a supplier of machines or materials, but an indispensable ingredient in his customers’ routine activities.

Having badly burnt its fingers in its attempt to get into digital video, Scitex has got it right this time around. “The Internet Changes Everything”, is what RTimage has inscribed on its banner. The Internet certainly appears to be changing the printing world.

As Yoav Chelouche puts it, “Now we’re building the software and the community. Later on, we’ll present them with e-commerce tools.”

Published by Israel’s Business Arena July 18, 1999

http://www.globes.co.il/cgi-bin/Serve_Archive_Arena/pages/English/1.3.1.1.3/19990719/1

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Efi has done it again

His third company Imedia of San Francisco, CA is being sold for $100M to Terayon Communication Systems.
Terayon Announces Acquisition of Efi Arazi’s Imedia Corporation

Acquisition Adds Video Expertise to Terayon’s Broadband Access Portfolio

Santa Clara, California. (July 13, 1999) – Terayon Communication Systems, Inc. (Nasdaq: TERN) today announced a definitive agreement to acquire Imedia Corporationhttp://www.imedia.com. Terayon, a leading supplier of broadband cable modem systems, plans to acquire Imedia, a privately held company that produces routing and re-multiplexing systems for digital video. Imedia’s innovative, patented products enable cable operators to select and customize their program lineup for viewer preferences, while maximizing video capacity and quality over standards-based set-top boxes. The acquisition will expedite Terayon’s ability to offer a complete broadband system portfolio to support high-speed delivery of data, voice and video over cable.

The Imedia acquisition will be accounted for as a purchase. Terayon’s acquisition of Imedia, which is valued at $100 million in stock plus transaction costs, is expected to be effective late third quarter.

Efi Arazi   earazi@imedia.com
Chairman of the Board
A recognized industry leader who has brought multimillion dollar ventures to new markets, Efi Arazi founded and pioneered Scitex and Electronics for Imaging (EFI), today worth a combined $3.5 Billion in market capitalization. Mr. Arazi was invited by the founders of Imedia Corporation to join as partner and chief executive officer in 1995. He was named Chairman of the Board in 1998.

Terayon and Imedia have strong, complementary customer bases that include the world’s leading cable operators. Imedia has a customer base that includes major cable operators, such as Adelphia, Cox Communications, and Time Warner, as well as partners, such as General Instrument. Terayon’s cable modem systems are deployed by leading North American cable operators, Cablevision Systems, Rogers Cablesystems, Shaw Communications and TCA Cable TV, as well as by major international cable operators including United Pan-Europe Communications (UPC) in Europe, Jupiter Telecommunications in Japan, and operators in Latin America.

Terayon Communication Systems provides cable operators with reliable, high-capacity cable modem systems that support a full range of broadband services. The Company, based in Santa Clara, California, USA, has sales and support offices worldwide, and is traded on the Nasdaq National Market under the symbol TERN. Terayon can be found on the web at www.terayon.com.

Privately held Imedia Corporation, based in San Francisco, develops and markets the industry’s most powerful tools for cable, satellite, and terrestrial television operators to manage compressed digital video. Their patented products are currently used to deliver standards-based video (MPEG) to operators on three continents.

For more see http://www.imedia.com/news/index.html
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Panorama Software Systems is holding a new financing round.

 

Business intelligence
Eight years after its first financing round, selling its technology to Microsoft for $20 million, Panorama Software Systems is holding a new financing round.
Gilad Nass   13 Apr 03   16:32
After talking with Panorama Software Systems executive chairperson and founder Rony Ross, her interviewer realizes it’s hard to keep up. Ross talks faster than other people, walks faster than them, and is apparently more convincing. She has done only one thing more slowly than others – raising money. On paper, almost eight years passed between Panorama Software’s seed and first financing rounds.Ross was the first Israeli to sell a company – to be accurate, most of a company – to Microsoft (Nasdaq:MSFT). At entrepreneur conferences, which are not exactly bastions of feminism, she and Ornet cofounder Dr. Orna Berry (now chairperson of Lambda Crossing) are always cited as proof that “you don’t have to be a man to succeed in high-tech.”

After working for years in various positions in Israeli companies, Ross went to the US in the 1980s to complete a Ph.D. in computer sciences. She founded a company to market voice mail systems, which failed. After joining CAD/CAM (Computer Aided Design / Computer Aided Manufacturing) company MetalSoft, she returned to Israel, after convincing its owners to set up a development center in Israel. Ross later sought alternatives after it became apparent that global demand for CAD/CAM solutions was stagnant, and founded a new company to develop Microsoft Windows applications.

The company’s activities in Israel exposed Ross and her team to market needs, and she decided to switch to OLAP (online analytical processing) business intelligence software, which provide executives with graphic depictions of market conditions, instead of having to wade through mountains of data. In contrast to companies that still based their programs on DOS interface, Ross gambled on Windows.

Ross financed her company from her own pocket, after local venture capital funds declined financing. She did not want a grant from the Office of the Chief Scientist. She founded Panorama Software in 1993, and began amassing Israeli customers within two years. She still needed money, and in July 1995, Ross convinced Ariel Landau, a former executive at Elbit Systems (Nasdaq: ESLT; TASE:ESLT) and Elscint (NYSE: ELT ) and now manager of Pamot Rehovot Advisors, and another partner to invest $200,000 – less than half the amount she had asked of the venture capital funds.

Picture-taking in front of Microsoft

The rest is history. A stubborn pursuit of OLAP expert Nigel Pense led to a meeting in an English pub. Pense was so impressed that he promised to help the tiny company, and shortly afterwards published a report praising Ross’s technology.

At this point, Ross decided the time had come to expand outside of Israel. In 1996, she began meeting with international software companies, including forming personal connections with Microsoft staff in Seattle. “I even traveled to Microsoft to be photographed in front of the company’s sign to tell them I had been there. I couldn’t think about anything else,” she relates.

Panorama Software’s staff presented their software to Microsoft’s team, after which they were asked to stay for another meeting. Three hours later, Microsoft offered to buy the company. Ross owned 87% of Panorama Software at the time.

“We had 60 customers in Israel at the time, including major companies like IDI Israel Direct Insurance, Sahar Israel Insurance Co., the Israel Prison Service, Cellcom, and Elite (TASE:ELEI1),” says Ross. “Microsoft didn’t plan to acquire our product and sell it as is. They wanted the development plans in order to integrate them into their work environment.

“How would that have affected our existing customers in Israel? Who would support them? I therefore proposed they buy the technology, rather than the company. They also realized the logic of having a partner in at least one place who could sell existing customers the product developments derived from the technology that they would later try to market. They did not reduce their offer, but actually raised it a little, because the Israeli customers were a kind of liability, and they would have had to invest more resources in continuing to handle them, were they to take over the entire company.”

“Globes”: It was widely rumored that the deal was worth $20 million. You’ve always declined to comment about the amount, despite attempts to reveal such information.

Ross: “It was in the area of the amount you mentioned. I’m so used to being careful not to reveal the price that I don’t even talk about it to myself.”

Multi-exits

The deal was completed in October 1996, and Panorama Software’s original development team moved to Microsoft’s offices. “The fact that Microsoft bought the technology and not the company kept me alive,” admits Ross. “If I had sold the company, I’d have been left without a framework to exploit opportunities that came up a few months later, when Microsoft decided to stay in the field and provide the technology on the server side. In effect, Microsoft enabled us to reenter the field by offering client-side products. As in similar agreements, we signed commitments not to work in the side for five years afterwards. Since they stayed in the server field, they didn’t care that we sold supplementary products to the other side.”

Because the Microsoft deal caused Panorama Software’s original development team to move to the US, the company hired a new team, headed by Kobi Averbuch, who,four years later, is still R&D director . The old team trained the new team for a few months to support the company’s existing customers. Once Ross realized that Microsoft was leaving the client field open, the new team began working on new developments.

The five-year non-competition clause in the agreement ended in 2001. Coincidentally or not, Microsoft then acquired Israeli start-up Maximal, which became the basis for Microsoft’s Data Analyzer. This is a wholly client side product that, for $150, displays the user’s Excel data graphically .

Ross was not satisfied with just one exit. In 1999, she signed an agreement with Canadian business intelligence company, Cognos Incorporated (Nasdaq:COGN; TSX:CSN). The agreement stipulates that Cognos will have exclusive worldwide marketing rights (outside Israel) to Panorama Software’s second-generation product. Ross says that after waiting for Cognos to act, she realized they had no intention of marketing the product, and she cancelled the agreement in 2001.

The contract stipulated that Cognos would pay several million dollars in advance on future royalties, with no right to demand a refund if sales failed to materialize. “There’s never any harm in earning money, especially for a small company,” said Ross, with a mischievous smile.

“I add every function the customer wants to the product.”

Ross has said in the past, and reiterates now, that she preferred not to get a grant from the Chief Scientist, in order to avoid future obstacles, in the event that she wanted to sell the company to a foreign buyer.

Did you always plan to found a company for sale?

“It was a very hard decision to take. I had received a grant from the Chief Scientist for my first company, so I knew exactly how the procedure works. I nevertheless decided to fund Panorama Systems myself. When I met with Microsoft, they asked me if there was any reason that deal might not go through, and I could tell honestly them, no.

“It’s not that I had planned from day one to found a company for sale, but it was obvious that if I wanted to reach international markets, I had to plan in advance to collaborate with international companies. There aren’t any clever tricks – in order to break into the international market, and grow over time, you have to enter into these partnerships.”

The decision not to seek the assistance of the Chief Scientist was just one facet of Ross’s three-step plan. The second stage was a mad rush to win Israeli customers, in contrast to most Israeli high-tech companies that view the Israeli market as a secondary market at best. “I believed that if I could approach a large partner with a large customer list, I would be more credible. When I told Microsoft that I had 60 customers in Israel, some of them major companies, it proved I was serious.”

Panorama Software’s third facet is its technology, and Ross claims it is the secret of the company’s current success. “I add every function the customer wants to the product. That’s a heavy burden on my development team. At one point, I had 20 versions of the product. Since all the customers were only a half-hour drive away, it was a lot easier to visit them and meet their demands. An international company can’t do that.

“Sometimes, the weirdest customer demands have become our most popular products. In Business Intelligence, you almost always find to an enterprise that already a particular kind of system, and they know exactly what they want the next product to do. It’s therefore crucial to listen to each customer’s specific demands. I worked with Cognos’s staff, and it was another world. Their development guys never saw or spoke with a customer in their lives.”

Leaving the driver’s seat

The interview with Ross was conducted moments after she had lectured at a joint Panorama Software-Microsoft conference. The companies maintain close cooperation. It took place two weeks after it was clear that the company had completed a multimillion dollar financing round, its first since 1995, from US venture capital funds Ross declined to name them.

Panorama Software moved its development center, which has 35 employees, to Toronto, after the company’s Canadian investors proposed that city as the base from which to conquer the North American market. The fact that besides, New York, Toronto is the only North American city with direct flights from Tel Aviv was also a consideration, says Ross. In a related measure, Janice P. Anderson, a former director of customer relations at Lucent technologies (Nasdaq:LU), was appointed CEO. Ross kept her position as executive chairperson.

Ross naturally decline to expand on the company’s revenue, noting, “Part of business intelligence includes keeping secrets from competitors. She claims revenue in 2002 was 40% higher than in 2001. Ross believes it is now easier to explain to companies why they need business intelligence solutions. “Despite the cuts in IT investment, companies need to know why and where they’re losing customers more than during the period of euphoria. We provide the tools to help them figure it out,” she says.

On stage before 300 conference participants, Ross looks like someone to whom it is important to clarify that a financing round is not a sign of financial distress. “Following the announcement about the round, people began asking me what had happened. We managed for so long without external capital, and suddenly we were raising money. The financing round is intended to invest more in growth, including paying an American CEO and opening a regional office. The fact that we now have more partners in decision-making processes improves our position,” she says.

I envision a different scenario: Panorama Software has acquisition offers, possibly from Microsoft, and you want to raise the value of the company. You’ll use the money in the coming months to win new customers in precisely those regions that are important to the potential buyer.

“This investment is intended to raise the company’s value, but we have no acquisition offers at the moment, not from Microsoft or anyone else. At least, no offers that are relevant to us. We believe that the IPO market will recover in three of four years, and we’re definitely considering that option. But Microsoft has already surprised me once, and they might do so again.

“I think that until now I’ve done the best I can for me and my partners, but the time has come to begin something different. After driving for many years, it’s amazing to sit in the passenger seat and watch the awesome ride.”
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Members’ reactions to the Millenium Email

Sample of reactions to the Millennium E-Mail to ExScite members (of Nov 20, 2001).

click here to see a Sample of reactions to the Millennium E-Mail to ExScite members (of Nov 20, 2001)Scitex_logo_Succari

 

* (from Boston MA) This site is great and we all love it. Definitely think there should be a major get together in December in the Bedford MA area.

 

* (from Israel) Thanks for your Email. I really appreciate your project and I never had the chance to say it. Not too many people do things for others and it so encouraging to see that still a few do.

 

* (from Boston MA) Thanks for giving me a heads up regarding the newsletter. It’s a lot of fun. My years at Scitex between 1980 to 1987 were some of the best of my business life. I am going to update my profile. I’m not happy now that they are taking away the Scitex name.

 

* (from Israel) How are you these days? The Israeli newspaper Haaretz this morning had an article about Creo eliminating Scitex from its name because Scitex has decided to dump CreoScitex shares. The final, final end of an era.

 

* (from Toronto ON, Canada) Thanks for sending me the reminder to go and visit the site, which I have not visited for a while. It has improved tremendously and I know that it means a lot of hard work for you guys. The fact that current employees who have access to the Intranet can post the internal memo on the exscite.net makes for very interesting reading for the ex-Scitex guys like you and me.

 

* (from NY NY) I wish to Salute the publishers of ExScite. Please keep it up and enhance your magnificent endeavor.

(Atlanta GA) I first came to know Scitex in 1982 as a user and later joined the company. I saw this dynamic company as an innovative leader in the industry. Never imagined I would see what now has become of this great Scitex Company.

 

* (Anonymous) Do you have photos of members? If yes, then how to find them and how to add photos?

(Reply to Anonymous) Currently we don’t have member photos as part of the member list. We are looking to do that in the future (and will probably add that capability soon). For now we have photos as part of the gossip column and we encourage you to send us a photo accompanying your breathtaking story.

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Mail pertaining to Creo takeover

 

I have held onto this mail for some time, but I think its time to publish it. I think it is very revealing about the way Creo viewed Scitex during the takeover.

Notice the email address for “Ex-Creo only” Star Trek fans may see a similarity with “The Borg”….

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From: Boudewijn Neijens Sent: ‘Thursday, July 13, 200012:00 PM .

To: **Names Removed** .

Cc: Europe Office {ex-Creo only); Alon lumbroso; Paul Kelly; Michel Couchard .

Subject: RE: Work organization of ex”Creo” team

 

Hi guys, I read all your comments and I can understand most of them. Now put yourself in the shoes of your manager: she/he has been “forced” for years to work in a very restrictive environment where everything was controlled and driven by budgetary constraints (and a fair serving of autocratic decision making at the “top” for some areas). After a while you learn how to operate under these constraints and you start conditioning your troops to do the same. That’s where the Blue team comes in with its very different operating principles, and of course the Red managers are puzzled if not scared by the new principles. let’s not forget that it’s actually much more difficult to be a team leader (or manager) in the Creo system than in the Scitex system: it’s much tougher to achieve results by gaining consensus and ensuring everybody is fully informed than by simply “barking orders” (OK, this is an exageration but you get my point).

So it’s clearly the top management’s role to “condition” the middle management and prompt these guys/gals to adopt new working methods. So far we have had very little success here as the top management was disfunctional. This is now changing and we’re making rapid progress. We’re indeed preparing a meeting of all middle management end of August (not possible earlier with most on hols). The purpose will be to present -and get buy-in ~ to the operating principle of the company. Up the the first tier of middle management to then relay this “further down”. We will make very sure this happens.

One of the first changes we wanted to make is already implemented and is showing good results: every new candidate to a position {internal or external) is now interviewed by a group of people (as opposed to HR and the direct manager alone) and hiring decisions are made by this group. Needless to say this first change was also a crucial one: it ensures that we build a “new” organisation based on the right people. You might think of this as a small step but it is not: again, put yourself in the manager’s shoes. All of the sudden you are stripped of the power to hire and fire alone in your department. For many managers this is a huge change in authority, and a clear appetiser of things to come. So it forces every manager to start thinking very carefully on the merits and implications of such a more participatory system.

Am I happy with the way things are going? Yes and no. Yes because there is a genuine understanding in the new MD&VP team that this needs to happen asap and thoroughly. No because many of the Boston Principle can be interpreted narrowly or widely, and the current tendency is to take the narrow view, also based on the assumption that most ex-Red people cannot “absorb” the full extent of the Boston Principles. This to me is BS but only time will tell, and hey -we need to start somewhere.

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Paradigm has taken a different path.

ELDAD WEISS KNEW THE time to do something had ar­rived in late 2001, when the share price of his company had dropped to $3. It wasn’t because Paradigm, which Weiss founded in 1988 and which began trading on the NASDAQ stock exchange in June 1998, was doing badly. In fact, revenues of the firm which provides software technology to the oil-exploration industry were headed towards a new annual high of $72.8 mil­lion and were rising by over 30 percent a year.Eldad_Weiss

The problem, recalls Weiss, a youthful 47 with pale, almost-white hair, sitting in his spacious office in the high-tech area of Herzliyah Pituah, north of Tel Aviv, was that the share price reflected the state of the stock market, not the value or success of the company. Paradigm which was spun out of Scitex in 1988, when that firm focused on printing technology was moving forward. But Weiss feared that the depressed share price would turn it into a “zombie” company, whose shares were vir­tually dormant and hardly traded.

“The share price was ridiculous,” says Weiss. After all, Paradigm then had 21 of­fices in 18 countries, and had established itself as the world’s largest independent provider of software for oil and gas ex­ploration, using a combination of seismic data and mathematical algorithms to build three-dimensional models of underground oil fields. “Paradigm was hurt by the gen­eral atmosphere after the September 11 terror attacks and the lack of confidence, worldwide, in the high-tech industry,” he says.

The $3 per share less than half of the $7 price when Paradigm went public in 1998, and a third of its high of$ 10, in 2000 also raised concern that the lack of in­vestor confidence might spill over into the more than 500 customers of Paradigm’s still-thriving business, who include Exxon, Shell, Esso, Mobil and others among the world’s leading drillers.

Some months earlier, Weiss had received inquiries from Fox Paine, a San Francisco-based firm that manages over $1.5 billion in liquid assets and $6 billion in investments, which special­izes in providing capital for “friendly” buyouts of exist­ing companies by manage­ment, for investors or on its own behalf. These buyouts often involve “going pri­vate” the conversion of a company whose shares are traded on a stock market into private ownership, by purchasing all of its publicly traded shares.

paradigm_3DThe idea of going private which at first seems the antithesis of the dream of young companies to “go public” with an initial stock market offering tempted Weiss. For one thing, it would lift the pres­sure of worrying about how Paradigm’s quarterly balance sheet would affect the share price, enabling management to move its focus from the short-run to long-term growth.

“We’re an ambitious company, and we felt that to make Paradigm the company we believed it should be, in terms of its size and performance, we needed to move away from the frustrating position on the stock market,” Weiss confides, adding that the change would also provide the cash needed for expansion.

“Let me make one thing clear, it was a positive thing, not because we were in trou­ble” interjects Shai Buber, 38, a Paradigm vice president.

The strategy of going private is a sound one in the current global and local invest­ment climate, agrees Ze’ev Holtzman, chairman of Tel Aviv-based Giza Venture Capital. “Being a public company is some­times a liability,” he explains, citing the difficulty to raise needed funds and new U.S. Securities and Exchange Commission regulations, which impose conditions that cost up to $1 million in directors’ insur­ance and licenses.”

Paradigm and Fox Paine began serious negotiations on going private, and reached agreement within six months. On May 22, the two sides announced that they had signed on a $102-million deal.

The deal was seen as a vote of confi­dence in Israeli companies, if not the Israeli economy as a whole. Particular signifi­cance was attributed to the fact that it was the first Israeli acquisition by a major in­vestment fund like Fox Paine, whose pre­vious acquisitions include two large telecommunications firms in Alaska, Mex­ico’s top provider of agricultural seeds, large medical equipment and health care providers, and Penhaligon’s, a 130-year-old London-based manufacturer and retail­er of luxury gifts and fragrances.

At the time of the acquisition, Saul Fox, one of Fox Paine’s founders, said he thought Paradigm “was very exciting” but had not been able to get fair value on the open market because of the high-tech crisis. His firm paid$5.15 per Paradigm share, up 15 percent on the market price the day of the deal and 70 percent higher than the $3 that had made Weiss start thinking of a deal in the first place.

Though Fox had always had some in­terest in Israel, Weiss makes it clear that the agreement was strictly business. Since the transfer of ownership was completed last August, Weiss says, Paradigm has been moving forward towards its eventual vi­sion, revenues in the annual $200 million-$300 million range.

He reinforces his point by describing a recent gas find in the Krishna-Godavari Basin, in southeastern India. “We helped Reliance, India’s second largest oil com­pany, locate India’s largest gas resource. It’s very rewarding because this particular find has changed the Indian economy,” he says. “When it is developed, it can change the country. Rather than buying gas as they now do, from Bangladesh or Qatar, the Indians will be able to use their own resources. ‘(According to New Delhi’s au­thoritative Times of India newspaper, the find has the potential of tripling India’s share of world fossil fuel production from its current 0.9 percent.). The Indian discovery “gives us a good feeling,” Weiss says. Beyond that, he ex­pects it to provide added value that will attract new customers to Paradigm.

The enthusiastic executive doesn’t, however, see the Fox Paine sale as the final chapter in the ownership of Paradigm, where Eldad has stayed on as CEO. In fact, he doesn’t rule out putting the firm back into the stock market some day, as a more mature and experienced enterprise. If that happens, he smiles, “having Fox Paine ownership as part of our track record would certainly be an asset for us.”

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Scitex negotiating with Creo & Nur to sell business units, shares climb

Scitex Is in Talks to Sell Two Units, Report Says By Bloomberg

Monday , Dec 13, 1999 Sun-Thu at 18:00 (GMT+2) Source: High Tech News, Globes of Israel Scitex, an Israeli maker of digital printers, is in talks to sell two of its main units, Yediot Ahronot reported, citing unidentified sources. The company plans to sell part of its digital printing business to Canada’s Creo Products for about $400 million, the newspaper said. Also, the company is in talks to sell its wide-format color printers unit to Nur Macroprinters, which makes competing products, in exchange for shares. Last month, Scitex said three of its biggest shareholders agreed to acquire the 13.3 percent stake owned by International Paper, the No. 1 paper maker, for $80 million.

 

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Rony Ross selling her Panorama Software technology to Microsoft

 

 Eight years after its first financing round, selling its technology to Microsoft for $20 million, Panorama Software Systems is holding a new financing round.Gilad Nass   13 Apr 03   16:32

Roni Ross

Roni Ross

Ross was the first Israeli to sell a company – to be accurate, most of a company – to Microsoft (Nasdaq:MSFT). At entrepreneur conferences, which are not exactly bastions of feminism, she and Ornet cofounder Dr. Orna Berry (now chairperson of Lambda Crossing) are always cited as proof that ?you don?t have to be a man to succeed in high-tech.?


After working for years in various positions in Israeli companies, Ross went to the US in the 1980s to complete a Ph.D. in computer sciences. She founded a company to market voice mail systems, which failed. After joining CAD/CAM (Computer Aided Design / Computer Aided Manufacturing) company MetalSoft, she returned to Israel, after convincing its owners to set up a development center in Israel. Ross later sought alternatives after it became apparent that global demand for CAD/CAM solutions was stagnant, and founded a new company to develop Microsoft Windows applications.


The company?s activities in Israel exposed Ross and her team to market needs, and she decided to switch to OLAP (online analytical processing) business intelligence software, which provide executives with graphic depictions of market conditions, instead of having to wade through mountains of data. In contrast to companies that still based their programs on DOS interface, Ross gambled on Windows.


Ross financed her company from her own pocket, after local venture capital funds declined financing. She did not want a grant from the Office of the Chief Scientist. She founded Panorama Software in 1993, and began amassing Israeli customers within two years. She still needed money, and in July 1995, Ross convinced Ariel Landau, a former executive at Elbit Systems (Nasdaq: ESLT; TASE:ESLT) and Elscint (NYSE: ELT ) and now manager of Pamot Rehovot Advisors, and another partner to invest $200,000 – less than half the amount she had asked of the venture capital funds.


Picture-taking in front of Microsoft


The rest is history. A stubborn pursuit of OLAP expert Nigel Pense led to a meeting in an English pub. Pense was so impressed that he promised to help the tiny company, and shortly afterwards published a report praising Ross?s technology.


At this point, Ross decided the time had come to expand outside of Israel. In 1996, she began meeting with international software companies, including forming personal connections with Microsoft staff in Seattle. ?I even traveled to Microsoft to be photographed in front of the company?s sign to tell them I had been there. I couldn?t think about anything else,? she relates.


Panorama Software?s staff presented their software to Microsoft?s team, after which they were asked to stay for another meeting. Three hours later, Microsoft offered to buy the company. Ross owned 87% of Panorama Software at the time.


?We had 60 customers in Israel at the time, including major companies like IDI Israel Direct Insurance, Sahar Israel Insurance Co., the Israel Prison Service, Cellcom, and Elite (TASE:ELEI1),? says Ross. ?Microsoft didn?t plan to acquire our product and sell it as is. They wanted the development plans in order to integrate them into their work environment.


?How would that have affected our existing customers in Israel? Who would support them? I therefore proposed they buy the technology, rather than the company. They also realized the logic of having a partner in at least one place who could sell existing customers the product developments derived from the technology that they would later try to market. They did not reduce their offer, but actually raised it a little, because the Israeli customers were a kind of liability, and they would have had to invest more resources in continuing to handle them, were they to take over the entire company.?


?Globes?: It was widely rumored that the deal was worth $20 million. You?ve always declined to comment about the amount, despite attempts to reveal such information.


Ross: ?It was in the area of the amount you mentioned. I?m so used to being careful not to reveal the price that I don?t even talk about it to myself.?


Multi-exits


The deal was completed in October 1996, and Panorama Software?s original development team moved to Microsoft?s offices. ?The fact that Microsoft bought the technology and not the company kept me alive,? admits Ross. ?If I had sold the company, I?d have been left without a framework to exploit opportunities that came up a few months later, when Microsoft decided to stay in the field and provide the technology on the server side. In effect, Microsoft enabled us to reenter the field by offering client-side products. As in similar agreements, we signed commitments not to work in the side for five years afterwards. Since they stayed in the server field, they didn?t care that we sold supplementary products to the other side.?


Because the Microsoft deal caused Panorama Software?s original development team to move to the US, the company hired a new team, headed by Kobi Averbuch, who,four years later, is still R&D director . The old team trained the new team for a few months to support the company?s existing customers. Once Ross realized that Microsoft was leaving the client field open, the new team began working on new developments.


The five-year non-competition clause in the agreement ended in 2001. Coincidentally or not, Microsoft then acquired Israeli start-up Maximal, which became the basis for Microsoft?s Data Analyzer. This is a wholly client side product that, for $150, displays the user?s Excel data graphically .


Ross was not satisfied with just one exit. In 1999, she signed an agreement with Canadian business intelligence company, Cognos Incorporated (Nasdaq:COGN; TSX:CSN). The agreement stipulates that Cognos will have exclusive worldwide marketing rights (outside Israel) to Panorama Software?s second-generation product. Ross says that after waiting for Cognos to act, she realized they had no intention of marketing the product, and she cancelled the agreement in 2001.


The contract stipulated that Cognos would pay several million dollars in advance on future royalties, with no right to demand a refund if sales failed to materialize. ?There?s never any harm in earning money, especially for a small company,? said Ross, with a mischievous smile.


?I add every function the customer wants to the product.?


Ross has said in the past, and reiterates now, that she preferred not to get a grant from the Chief Scientist, in order to avoid future obstacles, in the event that she wanted to sell the company to a foreign buyer.


Did you always plan to found a company for sale?

?It was a very hard decision to take. I had received a grant from the Chief Scientist for my first company, so I knew exactly how the procedure works. I nevertheless decided to fund Panorama Systems myself. When I met with Microsoft, they asked me if there was any reason that deal might not go through, and I could tell honestly them, no.


?It?s not that I had planned from day one to found a company for sale, but it was obvious that if I wanted to reach international markets, I had to plan in advance to collaborate with international companies. There aren?t any clever tricks – in order to break into the international market, and grow over time, you have to enter into these partnerships.?


The decision not to seek the assistance of the Chief Scientist was just one facet of Ross?s three-step plan. The second stage was a mad rush to win Israeli customers, in contrast to most Israeli high-tech companies that view the Israeli market as a secondary market at best. ?I believed that if I could approach a large partner with a large customer list, I would be more credible. When I told Microsoft that I had 60 customers in Israel, some of them major companies, it proved I was serious.?


Panorama Software?s third facet is its technology, and Ross claims it is the secret of the company?s current success. ?I add every function the customer wants to the product. That?s a heavy burden on my development team. At one point, I had 20 versions of the product. Since all the customers were only a half-hour drive away, it was a lot easier to visit them and meet their demands. An international company can?t do that.


?Sometimes, the weirdest customer demands have become our most popular products. In Business Intelligence, you almost always find to an enterprise that already a particular kind of system, and they know exactly what they want the next product to do. It?s therefore crucial to listen to each customer?s specific demands. I worked with Cognos?s staff, and it was another world. Their development guys never saw or spoke with a customer in their lives.?


Leaving the driver’s seat

The interview with Ross was conducted moments after she had lectured at a joint Panorama Software-Microsoft conference. The companies maintain close cooperation. It took place two weeks after it was clear that the company had completed a multimillion dollar financing round, its first since 1995, from US venture capital funds Ross declined to name them.


Panorama Software moved its development center, which has 35 employees, to Toronto, after the company?s Canadian investors proposed that city as the base from which to conquer the North American market. The fact that besides, New York, Toronto is the only North American city with direct flights from Tel Aviv was also a consideration, says Ross. In a related measure, Janice P. Anderson, a former director of customer relations at Lucent technologies (Nasdaq:LU), was appointed CEO. Ross kept her position as executive chairperson.


Ross naturally decline to expand on the company?s revenue, noting, ?Part of business intelligence includes keeping secrets from competitors. She claims revenue in 2002 was 40% higher than in 2001. Ross believes it is now easier to explain to companies why they need business intelligence solutions. ?Despite the cuts in IT investment, companies need to know why and where they?re losing customers more than during the period of euphoria. We provide the tools to help them figure it out,? she says.


On stage before 300 conference participants, Ross looks like someone to whom it is important to clarify that a financing round is not a sign of financial distress. ?Following the announcement about the round, people began asking me what had happened. We managed for so long without external capital, and suddenly we were raising money. The financing round is intended to invest more in growth, including paying an American CEO and opening a regional office. The fact that we now have more partners in decision-making processes improves our position,? she says.


I envision a different scenario: Panorama Software has acquisition offers, possibly from Microsoft, and you want to raise the value of the company. You?ll use the money in the coming months to win new customers in precisely those regions that are important to the potential buyer.

?This investment is intended to raise the company?s value, but we have no acquisition offers at the moment, not from Microsoft or anyone else. At least, no offers that are relevant to us. We believe that the IPO market will recover in three of four years, and we?re definitely considering that option. But Microsoft has already surprised me once, and they might do so again.

?I think that until now I?ve done the best I can for me and my partners, but the time has come to begin something different. After driving for many years, it?s amazing to sit in the passenger seat and watch the awesome ride.?
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Eldad_Weiss






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Getting its shares traded on a stock market used to be the dream of every young
Israeli company. Paradigm has taken a different path.

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