ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the November 2005 issue


Retalix, Comverse and Checkpoint


Retalix Ups 2005 Projections
Point of sale technology company Retalix (Nasdaq: RTLX ; TASE: RTLX) of Ra'anana has updated its guidance for 2005. The company now expects its revenue for 2005 to exceed $190 million. Net profit for 2005 is projected at over $15.5 million. The company's previous guidance was for a profit of $15 million on revenues of $185 million. The analysts' consensus estimate is earnings per share of $0.81 on revenue of $194 million. Retalix is one of the companies, mentioned by IHTIR as having above average growth potential.

Comverse Buying CSG Systems Unit for $251m.
Comverse Technologies (NASDAQ:CMVT), is expanding its presence in the growing global billing industry. The company stated that it has agreed to acquire the GSS division and CSG Systems International Inc. for $251 million in cash.

Comverse will fold GSS, a maker of software-based billing systems, into its real-time billing division. The combination is aimed at allowing Comverse to better provide billing services to wireless, wireline, cable, satellite, and Internet-based service providers.

GSS makes billing solutions for post-paid services, meaning the customer pays for cellular calls after making them.At present, Comverse offers a billing solution only for pre-paid cellular service.

For the six months ending June 30, GSS and the related assets Comverse is buying generated revenue of about $83.6 million dollars. Comverse had revenue of $558.6 million in the six months ended July 31.

Comverse would be adding all the unit's 900 employees to its present 3,500-person workforce. More than 2,000 of these people work at its Ramat Hahayal center in Tel Aviv.

CheckPoint Buying Sourcefire
Sourcefire Inc., a Columbia software firm that began as a pet project of computer-coding hobbyists, is being bought by Israeli security giant Check Point Software Technologies Ltd. for $225 million, marking a victory for the open-source software movement.

Check Point, which sells firewall software to nearly 80,000 customers worldwide, will pay cash.

Over the years, Sourcefire's online friends and fans added to the code -- which it has kept out in the open on the Internet for all to see in order to create an advanced network security system that has been downloaded by more than 2 million people.

The technology, called Snort, has developed a following of loyalists who watch for new versions and spend hours discussing how to advance the software. Like most intrusion detection systems, Snort patrols computer networks looking for worms, viruses and other potential threats, and alerts security personnel when it finds one.

The basic version of Snort remains free, but Sourcefire has attracted about 800 paying customers by packaging it into a more user-friendly product that includes reporting capabilities, analysis technology and customer support features. Sourcefire executivescompare the arrangement to giving away an engine, but offering a whole car for sale.

By 2008 the impact of open-source technologies including sales of open-source-based products and money lost by traditional vendors -- will exceed $5 billion, according to Garner Inc., and analysts say that is just the beginning.

With $100,000 in angel funding, Sourcefire began selling a more polished version of Snort that came with service guarantees and help with installation. After Sourcefire landed some major clients it was able to raise $33.65 million in three rounds of venture funding. Its investors include Greylock Partners of San Mateo, Calif.; Sierra Ventures of Menlo Park, Calif.; and New Enterprise Associates of Baltimore.

Licenses for Sourcefire's products, some of which have been developed on a proprietary basis, start around $4,000 and go as high as $120,000, depending on the complexity of the product.

Check Point's chief executive, Gil Shwed, said Sourcefire's technology will eventually be embedded in all its products. The Israeli firm's firewall systems work to block the same attacks that Sourcefire's software detects.

The market for computer security systems has boomed in recent years. But analysts caution that the market for firewalls is now largely saturated, forcing Check Point to branch into new lines of business. In 2004, Check Point earned $248.4 million, up only slightly from the $243.9 million profit it recorded the previous year. "The firewall market isn't going anywhere," said William R. Becklean, an analyst with Oppenheimer & Co. The Sourcefire purchase is a way for Check Point "to try and maintain the growth of the company," Becklean said.


Reprinted from the Israel High-Tech & Investment Report November 2005

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