Israel’s economy is booming

Straight From The Jerusalem Boardroom #113, March 29, 2007

Yoram Ettinger

1. Another $250MN Israel-dedicated fund has been announced by DISNEY’S INVESTMENT ARM, SHAMROCK. Shamrock investments in Israeli companies, since 1986 (e.g. Pelephone – $591MN, Koor – $250MN, Tadiran communications – $90MN, etc.), have yielded 31% annually (The Marker, March 25, 2007).

2. WARREN BUFFETT defines his $4BN investment in Israel’s Iscar, located next to the Lebanese border, as “the highlight of the year.“ He added that “At Iscar, as throughout Israel, brains and energy are ubiquitous.” (Annual letter to stockholders of Berkshire Hathaway, New York Sun, March 2).

JUNIPER, the US giant of Networking and Security, expands its Israel R&D center (Israel’s Kagoor, acquired for $70MN in 2005), transforming it into its Voice Over Internet Protocol (VoIP) global center (Globes, Feb. 22).

3. LONG-TERM CONFIDENCE IN ISRAELI COMPANIES has been reflected by the L.A.-based CAPITAL GROUP, which acquired additional $15MN of Israel Chemicals stock, increasing its holdings to $400MN, 5.18% of market value (March 7).

4. ISRAEL’s ECONOMIC INDICATORS. In addition to an all time high of $23.7BN IN OVERSEAS INVESTMENTS, compared with $10.5BN – 2005 and $5.4BN – 2003,

the “London Economist” reported: A 37% increase in ISRAEL’S INDUSTRIAL PRODUCTION during Jan.-Nov. 2006, compared with China’s 14.9%, Singapore’s 14.7%, US’ 3.8%, Japan’s 4.8%, EEC’s 3.6%, Russia’s 3%, Germany’s 6% and Britain’s 0.6% (Ma’ariv, Jan. 15, 2007).

ISRAEL’s EXTERNAL DEBT is the lowest ever – 86% of GDP, compared with 95% in 2005 (Japan – 172%, Belgium – 98%, US – 64%, Britain – 47%). Average external debt:GDP ration in OECD countries is 78%. The reduction in external debt is attributed to the robust GDP growth, success of privatization, decreased deficit, increased tax revenues, etc. (The Marker, Jan. 8).

BUDGET DEFICIT reduced to 0.88%, the lowest since 2000, compared with1.9% – 2005, 3.7% – 2004, 5.4% – 2003, 3.6% – 2002, 4.2% – 2001, 0.7% – 2000 and 2.3% – 1999 (The Marker, Jan. 10).

5. $2.7BN INVESTED IN ISRAEL BY OVERSEAS INVESTORS DURING JAN.-FEB, 2007, $1.23BN in February (directly in companies & real estate – $1.1BN and in stock market & bonds – $1.6BN), according to Bank of Israel (Globes, March 13).

6. $139MN raised, on NASDAQ, by Israel’s BigBand Networks, the fourth Israeli NASDAQ IPO in 2007 (The Marker, March 16).

7. US-based OPTIUM has acquired Israel’s Kailight Phonotics for $35MN in cash (Globes, March 29). The Waylon, MA-based CANDELA has acquired Israel’s InoLase for $16.5MN and royalties (Globes, March 12).

8. CITIGROUPG and UNTERBERG investment banks have led a $29MN round by Israel’s Tower, which could expand to $61MN if options are exercised (March 16).

INTEL CAPITAL and MENLO VENTURES participate in a $20.5MN 3rd round by Israel’s AeroScout (Globes, Feb. 26).

The Boston-based GLOBESPAN CAPITAL has co-led a $16MN round by Israel’s Provigent, joined by SEQUOIA CAPITAL, Dr. ANDREW VITERBI, co-founder of QUALCOMM and ASCEND TECHNOLOGY VENTURES (Globes, March 7).

SEQUOIA, ACCEL PARTNERS and EVERGREEN invested $15MN in Israel’s Pontis (Globes, Feb. 14). TAIWAN’s VENTURETECH ALLIANCE and the US-based BLUERUN VENTURES have co-led a $14MN 3rd round by Israel’s AdvaSense (Globes, March 14).

BENCHMARK and ACCEL PARTNERS invested $12MN in Israel’s Zlango’s 1st round of $12MN (Globes, Feb. 13).

BATTERY VENTURES and NORTHWEST VENTURE PARTNERS participated in a pre-IPO $10MN round by Israel’s Veraz (Globes, Feb. 12).

MOTOROLA FUND and BESSEMER participated in a $7.5MN round by Israel’s ColorChip (Globes, Feb. 21). REYLOCK PARTNERS have led a $4MN round by Israel’s Pioneer (Globes, March 26).

US-based DAWNTRADER VENTURES invested $3MN in Israel’s Peer39 (Globes, March 7).