More on This Week’s Good News

August 1, 2006 - 5:21 PM by Allison

Business news is just so refreshing these days. Michael Eisenberg offers his take on the recent “big deals” in Israel’s high tech sector.

The announcement that SanDisk was buying M-Systems for $1.3 billion, coupled with HP’s acquisition of Mercury last week caps a banner week for Israeli High tech companies. Now, many pundits and journalists will surely bemoan the fact that Israel is selling off its crown jewels. After all, Dov Moran has build M-systems into a worldwide flash disk powerhouse over the last 10+ years and made it a viable independent business. Amnon Landan and Aryeh Feingold turned a small testing tools company called Mercury into one of the world’s leading software tools companies with a robust selling model that was, in its time, groundbreaking as it was simple.

So these two companies will not become Israel’s Nokia, the oversimplified catch-phrase used to describe a large national crown jewel business. But Israel also won’t et a cold when its Nokia sneezes. (Some could argue that Teva pharmaceuticals fits the bill).

Personally, I tip my hat to Mercury and M-systems and I think this is a vibrant sign for Israel’s high tech industry. Here is why.

1. Recycling – Any time a company gets bought by a bigger company, those employees who do not wish to work in a larger environment inevitably spin off and spawn new companies. This new company formation is the fuel of a growth economy and provides jobs across the market, as small companies have done in the US economy.

2. Management upgrade – Those managers of M-systems and Mercury who choose to stay at their acquirers will learn a set of global management skills on a scale they could not have enjoyed at their current companies. They will learn global management skills in $10+ billion market cap environments that they will later be able to apply to the next great Israeli tech company and will help it grow to be a multi-national giant.

3. Net net, these acquisitions will add jobs in Israel. Almost all of the big acquisitions of recent history including Shopping.com by ebay and Cyota, Nlayers and Kashya by EMC have resulted in expansion of the companies’ local presence. This is great both for the high tech programming jobs as well as the low tech but neccessary services that attend to them: restaurants, furniture etc.

4. These acquisitions are a tremendous shot in the arm to our country while it is fighting the world’s war with the Hezbollah terrorists. What a testimony to the health and depth of Israel’s economy and value just when the country needed it. It is a testimony to the foresight of the founding fathers of the political and economic spheres in Israel.

In a week of difficult times, Israel was blessed this week with some fabulous economic news that came in the form of HP and Sandisk. I for one am looking forward to the great entrepreneurs and managers that come out of these organizations now and in the future. And, I won’t be going out to buy the tissue, neither to wipe tears nor to blow my nose when Israel’s Nokia does not get a cold

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