II SS RR AA EE LL HH II GG HH -- TT EE CC HH && II NN VV EE SS TT MM EE NN TT RR EE PP OO RR TT A MONTHLY REPORT COVERING NEWS AND INVESTMENT OPPORTUNITIES JOSEPH MORGENSTERN, PUBLISHER

April 1998 Vol. XIV Issue No.4 ISSN 0334-6307

An Intriguing High-Tech Investment Model!

Editorially we point to the impressive returns from or low tech businesses are already invested in “tech- investments in the Israeli high-tech sector. These are nology incubators”. How did the Americans cut documented in depth and clearly support our nearly their deal? The details of the American investment: three decade old thesis that locally developed tech- Dow Chemical signed an agreement with the man- nology is viable and investible. Early stage invest- agement of the Ashkelon Technology Incubator. ments have turned into millions in the instances of Under the agreement, Dow Chemical will become a ESC Medical, Gilat Satellite, Comverse, NICE strategic partner in the incubator, initially with a 5% Systems, Biosense and Ornet, just to mention a few. share, and will also buy 20% of each project devel- Their shareholders have become wealthy. Hindsight oped in it. is 20/20 vision but it is an impossible task to iden- Why did Dow Chemicals choose this method of tify and predict with any measure of accuracy investment? Dow Chemical vice-president Eliezer “future winners” among young startup companies. Manor, who represents the company in , said Evaluating the project and pinpointing its position in that Dow’s decision to become a partner in the a given industry are good starting points. We our- technology incubator was taken with a strategic selves have identified, from time to time “future view to the long term. He said a preliminary review winners”. Yet it is a sure thing that no venture capi- of the sophisticated products being developed in the tal fund or individual investor is astute enough to incubator indicated that they had considerable com- consistently pinpoint those startups which will mercial potential, both for the company itself and mature into profitable companies, and even more so for its subsidiaries around the world under the aegis to pick those companies whose shares will eventual- of the incubator. We think that this is a brilliant ly be traded on a recognized exchange. We favor the strategy and suggest that other multinationals con- “basket approach”. That is, put a number of eggs sider following suit. into the basket and carefully watch them. An intriguing high-tech investment model, is one In this Issue adopted by an American company which recently An Intriguing High-Tech Investment Model! and without much fanfare entered Israel’s high-tech IP Telephony Basics Moves into Arena with Israeli arena. The company first convinced itself that the Technology principle of investing in Israel is correct. Instead of NICE Reports identifying invidual projects, the company invested Funk & Wagnalls Encyclopedia on Internet “Making the World Safe for Electronic Commerce” in a technology incubator. In doing so, the company Scientific Research Investment Pays Off acquired, at a fair evaluation, a basket of companies S&P Revises Outlook on ESC Medical with diversified technologies. NDS Data Broadcast Enhanced by Gilat’s Return-Path Technology We are confident that this landmark investment will Aurec Owners Plan to Issue Amdocs at $1.5 billion serve as a future model for astute foreign investors. Double Approvals for Pharmos Largest Israeli Fiancial Issue on Planning Table. Local businessmen who made fortunes in real estate Techmedia invests $1 million in Pegasus

Copyright 1998: Israel High-Tech & Investment Report Subscription: Bulk copy and reprint information available on request Editorial Offices: P.O.Box 33633, 61336, Israel Tel: 972-3-5235279 Fax: 972-3-5227799 E-mail: [email protected] http://IsHiTech.co.il ISRAEL HIGH-TECH & INVESTMENT REPORT Aprill 1998

account). IP Telephony Basics Gateways is the key to bringing IP telephony into The Internet is a worldwide network of computer the mainstream. By bridging the traditional cir- networks. Computers can send messages to each cuit-switched telephony world with the Internet, other via the Internet (e-mail is the most familiar Gateways offers the advantages of IP telephony to example). However, audio can also be digitized the most common, cheapest, most mobile, and and passed between computers just like any other easiest-to-use terminal in the world: the standard data type. In fact, many Web sites are now geared telephone. Gateways also overcame another sig- for sound. nificant IP telephony problem: addressing. To IP telephony uses the address a remote Two Years Ago Internet to send audio user on a multime- “Quite frankly, the Internet telephony people are on a collision between two or more dia PC, you must course with the telcos. Over a 14.4 modem, [Internet telephony] computer users in know the user’s is not the greatest quality. But with ADSL and cable modems, real time, Internet Protocol that will automatically change. To place a telephone call over so the users can con- (IP) address. To that, you can have tremendous quality”. Trade Magazine verse. VocalTec address a remote introduced the first Seven Months Ago user with a IP telephony soft- Deutsche Telekom acquires a stake in Israel’s VocalTecinternet Gateway product, ware product in early telephony provider. you only need to 1995. Running a know the user’s Today multimedia PC, phone number. Tackling rapidly increasing competition in Germany, theVocalTec Internet Deutsche Phone (and the Telekom is to launch an Internet telephony service costing far How Does It numerous similar less than conventional services. Its T-Online Internet access ser- Work? vice will also cost less, dropping nearly 40% to DM3 ($1.64) an products introduced Conceptually, hour. Business Wire. since) lets users Internet telephone speak into their microphone and listen via their Gateways work like this. speakers. On one side, the Gateway connects to any tele- Within a year of its birth, IP telephony technology phone world. It can communicate with any phone had caught the world’s attention. The technology in the world. A phone line plugs into the Gateway has improved to a point where conversations are on this end. On the other side, the Gateway con- easily possible. And it continues to get better. nects to the Internet world. It can communicate Dozens of companies have introduced products to with any computer in the world. A computer net- commercialize the technology, and virtually every work plugs into the Gateway on this end. major telecommunications company has launched The Gateway takes the standard telephone signal, research to better understand this latest threat to digitizes it (if it is not already digital), significant- their markets. ly compresses it, packetizes it for the Internet In March of 1996, VocalTec announced it was using Internet Protocol (IP), and routes it to a des- working with Dialogic to produce the first IP tination over the Internet. The Gateway reverses telephony Gateway. The original Internet tele- the operation for packets coming in from the net- phone products based on multimedia PCs are work and going out from the phone. tremendous — offering the ability to combine Both operations (coming from and going to the voice and data on one network. They also offer phone network) take place at the same time, low-cost long distance “telephone” service allowing a full-duplex (two-way) conversation. (assuming the user already has a multimedia PC A number of configurations can be built from this and a fixed-rate Internet service provider [ISP] basic operation. Phone-to-PC or PC-to-phone 2 April 1998 ISRAEL HIGH-TECH & INVESTMENT REPORT operation can take place with one Gateway. solution will serve hundreds of lines per platform Phone-to-phone PC operation can occur with two enabling operators to build networks that serve Gateways. millions of users. To offer international long distance service using Company management has made it clear that it gateways, for example, an organization or service considers VocalTec Telephony Gateway Series provider can host one gateway in each country. By 120 together with the VocalTec Ensemble bypassing the international connect charges or Architecture a significant advance over its compe- even paying in-country long distance rates the tition. configuration costs significantly less than tradi- “Access Power is a new and growing Internet tele- tional circuit-switched service. phony service provider that has deployed the VocalTec Telephony Gateway 3.1a in ten North Net Telephony an $8 billion Market American cities with great success,” said Glenn Smith, president and chief executive officer of Microsoft’s announcement that it intends to set the Access Power, Inc. “With the announcement of standard for supplying the technology for Internet the VocalTec Telephony Gateway Series 120, telephony, indicates that the company has identi- VocalTec has once again leaped ahead of the IP fied a massive business possibility. Gateway server competition. Access Power will The market in 2003 will be worth $8 billion for most certainly be deploying this exciting new Internet Service Providers who offer IP telephony product to better serve our fast-growing customer services including voice, fax and video, according base.’’ to some pundits. “With the announcement of the first H.323 RAS Underlying the growth prospects is that businesses Version 2 DSP-based gateway, VocalTec continues are easily motivated by the prospect of reducing to develop new capabilities for IP telephony built their telecommunications expenses by as much as upon Dialogic’s proven computer telephony tech- 50%. IP telephony services will not be a ‘hard nology,’’ said Howard Bubb, chief executive offi- sell’ for ISPs as the technology improves over the cer and president of Dialogic Corporation next few years. (:DLGC). “VocalTec clearly understands the need for network oriented solutions that deliv- Israel’s Major Entry in Internet Telephony er carrier-grade quality and management services VocalTec (Nasdaq: VOCLF), the IP that these markets demand.” Communications company, announced the release VocalTec Communications enables of VocalTec Telephony Gateway™ Series 120, a audio, video, data, text and collaborative commu- DSP-based IP telephony gateway supporting 24 to nications between personal computers and other 120 lines for corporate enterprise networks and devices over the Internet. independent carriers and service providers. The The company is a leader in developing innova- VocalTec Telephony Gateway Series 120 is the tive, open standards products that bridge the first gateway to be compatible with the new H.323 Internet and the traditional public switched tele- RAS Version 2 industry standard for optimal per- phone network (PSTN) and drive the convergence formance in an open, scalable, intelligent and cen- of computing and telephone technologies. trally managed IP telephony network deployment. NICE Reports VocalTec also recently announced a carrier-grade NICE Systems Ltd. reported 4Q EPS of $0.39 vs solution that is being developed with ECI $0.25 on revenues of $22.1 mln vs $11.5 mln last Telecom, a leading international telecommunica- year. Analysts’ mean estimates were $0.38, tions manufacturer and distributor. Available for according to First Call. For FY 97 the company full-scale carrier deployment early next year, this reported an EPS loss of ($0.35) vs $0.71 last year. 3 ISRAEL HIGH-TECH & INVESTMENT REPORT April 1998

NICE stated that its chairman, David Arzi, would launched the Funk & Wagnalls Knowledge retire by the end of the year. Nice Systems also Center, a web-based comprehensive multimedia said it had named another member of its founding reference site. Knowledge Center at group, Benny Levin, as chief executive officer and http://www.funkandwagnalls.com offers Internet said he would become chairman upon Arzi’s access to the world’s first Multimedia retirement. Encyclopedia which is also constantly updated and NICE also announced that it had signed a defini- integrated with animation, photographs, speeches, tive agreement to acquire the assets of IBS music and sound. The development work on the Corporation, a privately held software company interactive encyclopedia was carried out in based in San Diego, California, as part of its strat- Jerusalem. egy to become the dominant player in the call cen- The Funk and Wagnalls Encyclopedia on the ter logging and quality market. With IBS’s base of Internet is also a component of the retail version call center technologies, NICE increases its suite of the CD-ROM and DVD versions of the Funk of quality offerings for the call center market. The and Wagnalls Multimedia Encyclopedia. agreement enables NICE to improve its offering for large corporations with multiple call centers in Scientific Research Investment Pays Off various locations and to address the IBM Main- frame market, providing high-end, fully integrated Approximately $600 million worth of products voice-and-screen monitoring and coaching togeth- emanating from research at the Weizmann er with quality tracking. Institute of Science were sold by Israeli and non- NICE intends to pay $3.9 million in cash and, as Israeli companies in 1997. Israeli companies were additional payment, will issue approximately responsible for half of these sales, mainly for 35,000 American Depository Shares representing export. These figures derive from a survey con- ordinary shares of NICE. The deal is expected to ducted by the Tel Aviv-based accounting firm be closed in April 1998. Kost Levary & Forer, a member of Ernst & Young NICE Systems is a leading global provider of International. Computer Telephony Integrated (CTI) logging, The survey, whose aim was to examine the effect quality measurement and workflow solutions for of Weizmann Institute research on Israel’s econo- voice, fax and data. NICE is headquartered in Tel my, revealed that 19 Israeli start-up companies, Aviv, with offices in the US, Canada and mainly developing products for export, have been Germany. established directly as a result of Institute IBS, a privately held software company, is head- research. Yeda Research and Development Co. quartered in San Diego, Calif. with distributors in Ltd., the Institute’s technology transfer arm, was a theUS and Europe. Since 1985, IBS has been partner in the establishment of 14 of these compa- developing and distributing software products, nies. including the company’s main proprietary tech- In addition to the above-mentioned 19 start-ups, nologies: screen and voice management, and numerous other Israeli companies received screen capturing, for Mainframe, AS400 and vari- licenses to develop and sell products originating at ous client/server environments. least partly from Institute research. Taken together, all companies so licensed employed some 5,300 Funk & Wagnalls Encyclopedia on people in 1997, among them approximately 1,000 new immigrants and more than 100 graduates of Internet the Weizmann Institute’s Feinberg Graduate Offering America’s best selling encyclopedia over School. Approximately 31 years ago, the Institute the Internet, Funk & Wagnalls Knowledge Center initiated and participated in the establishment of is a ready reference source for anyone with a the first park for advanced industries in Israel, modem. Community Network Systems (CNS) Kiryat Weizmann. Today, some 70 companies 4 April 1998 ISRAEL HIGH-TECH & INVESTMENT REPORT operate in that park. Many of them have links tery life It is designed especially for the Windows with the Institute and develop products that origi- environment and is fully compatible with nated from Weizmann Institute research. In 1997, Windows 98, Windows 95 and Windows NT the total aggregate sales of these companies amounted to approximately $600 million. “Making the World Safe for Electronic The Institute also developed the concept of tech- Commerce” nological “incubators” and helped establish the Check Point Software Technologies, Inc. (Nasdaq: first such incubator in Israel. Today, 12 young CHKPF), the worldwide leader in Secure high-tech companies are active within the Kiryat Enterprise Connectivity solutions, communicated Weizmann Incubator for Technological the opening remarks that its president and CEO, Entrepreneurship, which is assisted by the Dr. Deborah Triant, delivered on Internet Security Institute, and nine companies have already left Day at the 1998 Spring Internet World trade show this Incubator and operate independently. Most of in Los Angeles, California. In her speech entitled, these companies work on projects resulting from “Making the World Safe for Electronic the ideas of new immigrant scientists and engi- Commerce,” Dr. Triant challenged conventional neers. thinking about network security, focusing on the “This current state of affairs is a testimony to the opportunities it creates for business, instead of the fact that the investment in scientific research, such risks of inadequate security. as that carried out at the Weizmann Institute of “The right network security allows companies to Science, contributes greatly to the growth of eco- focus on competing, not computing,” says Dr. nomic activity in the fields of investment and Triant. “Electronic commerce is now so broadly high-tech export,” says a member of the team, defined that it touches every business. Through summarizing the survey’s results. “Every dollar integrated security, traffic control, and enterprise invested in scientific research helps to create management, electronic commerce can deliver industrial activities. In other words, from the point more revenue, new markets, new customers, and of view of Israel’s economy, long-term investment breakaway business advantages. Secure enterprise in scientific research is an engine which drives the connectivity allows companies to focus on the entire market.” opportunities presented by the e-commerce age, The Weizmann Institute of Science is a major cen- instead of the risks.” ter of scientific research and graduate study locat- Check Point Software Technologies Ltd. is a lead- ed in Rehovot, Israel. Its 2,400 scientists, students ing provider of policy-based enterprise security and support staff are engaged in more than 1,000 and traffic management solutions. Through its research projects across the spectrum of contem- patented Stateful Inspection technology, the com- porary science. pany is uniquely positioned to deliver Secure Enterprise Connectivity solutions that protect The World's First 56Kbps Windows information assets and enhance the performance Modem CardBus PC Card of enterprise networks. Check Point offerings Israeli based Silicom Ltd. (Nasdaq:SILCF ) include the world’s leading enterprise security announced the release of its unique WinModem56 suite, Check Point FireWall-1®, and the industry’s CardBus PC Card product. The Silicom premier policy-based bandwidth management WinModem56 is the first product on the market solution, Check Point FloodGate-1. The company that offers the industry's fastest modem speeds of has US headquarters in Redwood City, California up to 56Kbps using the high bandwith 32-bit and international headquarters in Israel. CardBus architecture. The WinModem offers a very low power con- Crystal Announces TACT Agreement sumption modem which results in longer PC bat- Crystal Systems Solutions (Nasdaq: CRYSF), a 5 ISRAEL HIGH-TECH & INVESTMENT REPORT April 1998

developer of conversion projects for mainframe Electric Fuel Awarded Defense Contract computer systems, various programming language Electric Fuel Corporation (Nasdaq: EFCX ) upgrades and data field conversions, announced announced that it has been awarded a contract that it has signed an agreement with The A from Israel’s Ministry of Defense to develop an Consulting Team, Inc., TACT (Nasdaq: TACX). advanced zinc-air battery for a propulsion system. TACT is a leading provider of enterprise-wide IT The first phase of the contract runs through the consulting, software and training services. Crystal end of 1998. The feasibility demonstration, pre- Systems Solutions will supply TACT with its C- development contract will be overseen by the MILL conversion tool and expertise so that TACT company ’s new Defense and Safety Division and may service its Fortune 1000 customer list con- will include creating a prototype and demonstra- cerning Year 2000 (Y2K) conversion and compli- tion project. The agreement marks the company ’s ance solutions. third zinc-air defense contract since it began development of high-energy, high-power zinc-air Elbit Systems Wins $7 Million Contract products for defense applications. Elbit Systems Ltd. (Nasdaq: ESLTF) announced Other projects underway within the Defense and at the Asia Aerospace 98 in Singapore that it was Safety Products Division include a development recently awarded a contract for the supply of its contract with the US Army’s Communication- “Whizzard” family of autonomous weapon guid- Electronics Command (CECOM) to develop an ance kits. The contract is valued at approximately advanced portable zinc-air battery. The company $7 million. is also involved in a development program with The “Whizzard” family comprises two kits with STN Atlas Elektronic Gmbh, a major German combined capabilities to counter a full spectrum of defense and marine industry contractor, for the threats by converting general purpose “dumb” development of a primary, high-power, zinc-oxy- bombs into lethally smart munitions. “Opher”, gen battery for torpedoes. based on an infrared seeker, has sophisticated acquisition, tracking and guidance algorithms, S&P Revises Outlook on ESC Medical resulting in accuracy needed to destroy motorized Standard & Poor’s revised its outlook on ESC platforms such as heavily armored tanks, air Medical Systems, Ltd. to positive from stable, fol- defense and ships. “Lizard”, based on a laser seek- lowing the company ’s acquisition of Laser er, incorporates “Opher’s” battle-proven tracing Industries Ltd. (Nasdaq:LASRF). and guidance algorithms plus Elbit Systems’ Importantly, the acquisition increases ESC’s lead- unique high precision linear guidance capabilities, ing global positions in its niche areas. However, resulting in better hit accuracy than existing laser- ESC will be greatly challenged to control and fur- guided bombs. “Lizard” is capable of striking any ther grow operations that were only one-fourth its designated target. current size just one year ago. Competition is Last year Elbit Systems announced the first pur- strong, as several other companies have developed chase of its weapon guidance system by a NATO similar devices to treat the same conditions as country when the Italian Air Force awarded Elbit ESC’s products. Systems with a contract valued at $25 million for Moreover, ESC’s narrow product portfolio and OPHER. Several other countries have expressed dependence on a few products make the company interest in Elbit Systems’ “Whizzard” guidance vulnerable to technological and market changes. kits. Elbit Systems Ltd. is engaged in a wide Continued new product development, successful range of airborne, ground and command, control integration of acquisitions, and maintenance of and communications programs, with a focus on moderate financial policies could lead to a ratings upgrading existing military platforms and develop- upgrade. ing new technologies for defense applications. 6 April 1998 ISRAEL HIGH-TECH & INVESTMENT REPORT

Comverse Network Systems to Develop develop around open international standards such Mobile Unified Messaging Applications as WAP, and will be impacted by how quickly Comverse Network Systems Inc., a wholly-owned these standards are adopted by leading handset subsidiary of Comverse Technology Inc. (Nasdaq: manufacturers. The ultimate size of the market CMVT ), and the world’s leading supplier of will be driven by consumer demand for applica- enhanced services platforms to Global System for tions such as Unified Messaging that are best suit- Mobile communications (GSM) network operators ed to fully leverage and the increas- with systems in more than 90 GSM networks, ingly data-capable digital mobile networks.” announced it is developing a new set of powerful The market for smartphones is forecasted to grow and easy-to-use Mobile Unified Messaging to 8.8 million by 2001. Key features applications for the emerging GSM smartphone are expected to include large Graphical User market. Interface (GUI), Internet connectivity, combined Comverse’s network-based enhanced services voice/data capability, and micro-browser capabili- platforms support a wide range of generating ser- ty. As the number of smartphones used in wireless vices including voice and fax messaging, text- networks increases over time, key application based short message service center (SMSC), pre- areas identified to leverage these devices are: paid services, one-touch call return, single number Unified Messaging, Control of Intelligent service and other personal assistant and personal Network/ Advanced Intelligent Network (IN/AIN) communications services. Features, Information Services, and Personal The GSM smartphone-based Unified Messaging Information Management (PIM) services. applications will give subscribers visual access via Comverse Network Systems Inc., based in the Internet to a network-based Unified Mailbox Wakefield, Mass., is a wholly-owned subsidiary of to allow retrieval of voice, fax and e-mail mes- Comverse Technology Inc. (Nasdaq: CMVT), sages. This interface also streamlines subscribers’ which is headquartered in Woodbury, N.Y. On access to specific messages by allowing them to January 14, 1998, Comverse Technology Inc., “jump” to a desired message for immediate voice which carries out most of its R&D in Isael, playback over the phone, to return messages with merged with Boston Technology Inc. Comverse a single press of a button and to receive notifica- Network Systems Inc. - supplies innovative sys- tions of urgent new messages. Additionally, faxes tems, software and services to wireless and wire- received can be directed to print at any fax line telecommunications network operators includ- machine, and e-mail can be displayed on the ing cellular, PCS, GSM, cable and other commu- screen of the phone, or can be “spoken” over the nications service providers. Comverse announced phone line using Comverse Network Systems’ a Dec. ‘97 fourth quarter earnings of $0.44 vs. text-to-speech technology. Comverse is develop- $0.33 for the same period a year ago and annual ing its smartphone-based Unified Messaging earnings of $1.61 vs. $1.16 for the prior year. applications for its successful Access NP® and TRILOGUE® Infinity™ enhanced services plat- Tadiran Buys CMI’s Microwave Networks forms, and intends to begin trial deployments this Tadiran Ltd. (NYSE: TAD), Israel’s largest elec- year. tronics company, announced an agreement with “Early prototyping for the Wireless Unified California Microwave Inc. (Nasdaq:CMIC-CMI) Messaging application has used Handheld Device to acquire CMI’s Microwave Networks division Makeup Language (HDML) technology from (MN) for $35 million in cash. Microwave Unwired Planet,” said Stewart Hampton, senior Networks is a leading supplier of a wide range of business development manager at Comverse point-to-point microwave radios. Its products are Network Systems. “The market for smartphones aimed at the growing terrestrial wireless infra- and for providing wireless data access is likely to structure market, where MN is a supplier to major 7 ISRAEL HIGH-TECH & INVESTMENT REPORT April 1998

cellular and PCS operating companies worldwide. ing infrastructure of satellite broadcasting to deliv- Sales for the last 12 months exceed $80 million. er information more than 1,000 times faster than An extended network of sales offices and service the Internet and is the quickest and cheapest way centers markets MN’s products worldwide. for PC-users to download multimedia information. The acquisition strengthens Tadiran’s strategic The VSAT return path offers ubiquity of service, goal to focus on and globalize its telecom-munica- higher bandwidth, higher availability and lower tions equipment activities. In particular, MN will cost to users of the DBN network. enable Tadiran to augment its US market pres- “For home users and some corporate users of ence, as well as maximize the strong technical and DBN, the traditional return path of a dial-up marketing synergies that exist between the two modem connection and the public telephone net- companies’ wireless telecommunications business- work is perfectly adequate. However, for corpora- es. Microwave Networks provides microwave tions distributing multimedia information, busi- radios and turnkey systems in frequency bands ness TV or any other electronic content, the VSAT from 2 GHz to 38 GHz. US customers include return path combined with DBN provides a cost- Motorola, AT&T Wireless, Sprint Telecommuni- effective, faster and higher bandwidth solution,” cations Venture, Pacific Bell, Winstar, Western said Dr. Abe Peled, CEO of NDS. PCS, GTE, and other cellular, PCS, Gilat’sVSAT is a technological innovation in the CLECs and private networks operators. field of satellite communications that allows for Tadiran Limited’s defense communications busi- reliable transmission of data via satellite using ness, which gave the Israeli company an unex- comparatively small antennas (0.6 - 1.8 meter). It pected boost to 4Q earnings, is not vulnerable to simply plugs straight into existing terminal equip- imploding Asian economies, an official said. The ment, operating in effect as an aerial modem. A company’s chief financial officer, said the outlook VSAT network consists of a satellite, a central hub for defense communications remained good for with an antenna (between 4.5 and 11 meters) and a this year, although he estimated about 20% of network of up to several thousand VSAT terminals sales were to Asia. “We don’t sell defense equip- with smaller antennas. NDS’s Data Broadcasting ment to South Korea like Tadiran Telecommuni- Network (DBN) using the existing infrastructure cations,” he said. of satellite broadcasting, DBN offers numerous Tadiran Ltd. reported 4Q EPS of $0.62 vs $0.49 benefits for consumers and content providers such on revenues of $257.4 mln vs $268.5 mln last as the ability to download multimedia information year. Analysts’ mean estimates were $0.52, with video, animation and CD-quality sound to according to First Call. For FY 97 the company their PCs. With DBN, broadcasters and publishers reported EPS of $3.16 vs $4.73 last year. can deploy new, revenue-generating business models for delivering value-added services and NDS Data Broadcast Enhanced by Gilat’s products. Return-Path Technology DBN uses a Direct Broadcast Satellite broadcast- ers’ extra satellite transponder space to broadcast Gilat Satellite Networks Ltd. (Nasdaq: GILTF ) content to PCs installed with a low-cost together with NDS, the pioneering provider of board connected to a DBS 18-inch satellite dish. data broadcasting technology, announced a joint After the broadcast is received by the satellite collaboration to offer users of the NDS Data dish, the content is then directed to the user’s Broadcasting Network™ (DBN) a faster and high- PC via a coaxial cable interfaced with a DVB er bandwidth return path through Gilat’s Very compliant PC-board. Once decoded, it is saved on Small Aperture Terminal (VSAT) technology. the PC’s hard disk for later review and use. VSATs are readily available, requiring only an Because the content appears on the hard disk, the easy-to-install card in the receiving PC and a time delays associated with on-line access are small external satellite dish. DBN uses the exist- 8 April 1998 ISRAEL HIGH-TECH & INVESTMENT REPORT removed, creating a much more enjoyable surfing a part of the company ’s pharmaceuticals focus. experience for the user. Teva said the transaction required several NDS is a recognized leader in digital video com- approvals, including that of the Israeli authorities. pression and conditional access, and has proven systems integration and global support capabili- Double Approvals for Pharmos ties. NDS is providing its advanced technologies, Bausch and Lomb Pharmaceuticals and Pharmos products and services to many of the current and Corporation (Nasdaq:PARS ) received US gov- planned satellite and terrestrial broadcasting sys- ernment approval to make and sell two new drugs tems around the world. In addition, over 8 million to treat eye swelling. The drugs, Lotemax and subscribers worldwide use NDS conditional Alrex, are the first proprietary drugs to emerge access systems to receive pay TV satellite and from the three-year partnership of the two compa- cable services. The company continues to make a nies, they said. The companies said they expect to major commitment to R&D, with over 700 of its begin marketing the drugs in the next few weeks. 1,300 plus employees dedicated to its pioneering The FDA approved Lotemax as a topical treat- development work at research centers in Israel, the ment for eye swelling after operations, such as US and the UK. cataract surgery, the companies said in a state- NDS is a subsidiary of the News Data Corporation ment. Limited (NYSE/ADR: NWS), a leading global Alrex was approved as a treatment for eye media company . swelling associated with allergies, particularly to Gilat Satellite (Nasdaq: GILTF) reported revenues pollens, the companies said. Alrex also is intended for the year ended December 31, 1997 of $103.7 to help relieve itching, redness, and tearing. million, an increase of 40 percent over sales for Lotemax and Alrex are the first two of three drugs 1996 which were $74.1 million. Net income for sought for the Bausch & Lomb/Pharmos line of 1997 was $16.9 million ($1.51 per share), an ophthalmic products containing loteprednol increase of 25 percent over the $13.5 million etabonate. Bausch & Lomb Pharmaceuticals is a ($1.22 per share) results for 1996. unit of Bausch & Lomb Inc. Pharmos is a New Revenues for the fourth quarter ended December Jersey-based bio-pharmaceutical company with 31, 1997, were $30.0 million, an increase of 40 research and development facilities in Rehovot. percent over the $21.2 million result for the same period in 1996. Net income for the fourth quarter Indigo’s Results Exceed Expectations was $5.7 million ($0.51 per share), an increase of Indigo NV reported a 4Q EPS loss of ($0.12) vs 50 percent over the $3.7 million figure ($0.34 per ($0.28) on revenues of $34.7 mln vs $23.7 mln share) for the final quarter of 1996. last year. Analysts’ mean estimates were ($0.15), according to First Call. For FY 97 the company Teva Sells Paca reported an EPS loss of ($0.88) vs ($1.48) last Israel’s Teva Pharmaceutical Industries (Nasdaq: year. Indigo NV said it plans to expand its TEVIY) signed an agreement to sell the assets of research and development spending, boost produc- its Paca Ltd. subsidiary to Belima Ltd., a unit of tion and increase its sales force, hurting cash flow Shemen Industries Ltd., for $14.5 million. In an temporarily. announcement to the Tel Aviv Stock Exchange, Teva said it was selling Paca as a going concern. NetVision Israel’s Largest ISP in Black It said the sale did not include Paca’s debt, Teva NetVision, the largest ISP in Israel, moved to $2 shares held by Paca or the land on whch the plant million in net profits in 1997. In 1996 NetVision stand. Teva said it would report a capital gain of lost $2 million. Netvision attributes the profit tp about $10 million before taxes from the sale. Teva increase to the sharp increase in the number of said it was selling the business because it was not subscribers. 9 ISRAEL HIGH-TECH & INVESTMENT REPORT April1998

Deutsche Telekom Uses Orckit Systems silicon alliances with Harris Semiconductor, At multiple sites throughout the CeBIT ‘98 exhibi- Fujitsu Microelectronics and Rockwell tion (Hannover, Germany), Deutsche Telekom AG Semiconductor Systems, telecom equipment (NYSE:DT) demonstrated live interactive on-line providers Fujitsu Network Communications, access using Orckit Communications’ (Nasdaq: SAGEM and Siemens’ Public Communication ORCTF) FastInternet™ DSLAM system. Network Group. At CeBIT, Deutsche Telekom’s booth will act a telecom acted as a “Central Office,” andwas con- Largest Israeli Issue on Planning Table nected via Germany’s T-Net-ATM backbone to The Kahn-SBC group, owners of the Israeli Aurec Deutsche Telekom’s Broadband Services field trial group, plans on an American financing issue for currently taking place in North Rhine-Westphalia. Amdocs. The group is engaged in development Multiple corporate booths throughout the CeBIT and marketing of billing software. The company is exhibition were connected to Deutsche Telekom not yet ready with its prospectus but expectations using Orckit’s FastInternet ADSL DSLAM, with are that the shares will be offered at a company each booth acting as a “residence” or “small value exceeding $1.5 billion. Several American office” subscribing to Deutsche Telekom’s on-line financial houses have been asked to handle the services. offering. Visitor’s to Orckit’s and the other participating Israeli software companies affiliated with the companies’ stands were able to access high speed Kahn-SBC group, Aurec Information Data System World Wide Web applications and other interactive and PS Publishing have been consolidated, in content such as JPEG photo libraries using regular preparation for the planned Amdocs issue, and the personal computers and typical telephone lines at three will be issued as one company. speeds up to 20 times faster than ISDN modems. Amdocs markets billing software internationally, The FastInternet DSLAM (Digital Subscriber Line both for regular and cellular telephony, developed Access Multiplexer) system to be shown at CeBIT by Aurec Information. Amdocs purchases the soft- ‘98 is an advanced version of the system that won ware and programmer hours from Aurec BYTE Magazine’s “Best of CeBIT” for Information. Amdocs’ customers throughout the Communication Hardware at CeBIT ‘97. Orckit’s world are mostly active in the telecommunications FastInternet system, based on Orckit’s ADSL field. Amdocs continues to develop each cus- (Asymmetric Digital Subscriber Line) line cards, tomer’s software, according to individual require- ADSL end-user modems and DSL Concentrator, ments. enables access to the Internet and on-line services at up to 8 Mbps. At the exhibition, Orckit’s Techmedia Invests $1 Mln in Pegasus FastInternet System were demonstrated working Techmedia, an American company with $300 mil- over regular telephone lines (POTS) and over lion in annual sales is investing $1.0 million in ISDN lines. Pegasus Technologies. Pegasus has developed a Orckit Communications is a leading company in wireless three-dimensional joystick for interactive the field of Digital Subscriber Line, or “DSL,” games. solutions, which enable telephone companies and The plan is for Techmedia to use Pegasus’ technol- Internet Service Providers to optimize the band- ogy to develop a new system capable of copying width utilization of the “last mile”of copper wire documents written on paper directly to a computer. in the Local Loop. Orckit possesses both core sili- The plan is to develop a three-dimensional pen con expertise and a wide range of DSL products, the position of which the computer can sense. By including its FastInternet DSLAM System with monitoring the pen’s movements, the computer ADSL and SDSL, and its CopperTrunk® HDSL reproduces the document being written alongside and VDSL product lines. Orckit has key strategic it.

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