TEL AVIV, Israel -- Once again underscoring the huge potential of the Israeli high-tech sector,
earlier this week acquired the start-up Mobilitec, a developer of mobile content management software for telcos.
"This is another occasion in which a large corporation realizes that Israeli tech firms have the innovative solutions that they seek to enhance their existing product portfolios," says Kobi Gershoni, director of research at D&A Hi-Tech Information, a technology research firm based in Tel Aviv.
That said, "this deal is not surprising, since Lucent was already a major shareholder in this company," Gershoni adds. Lucent had previously participated in Mobilitec's financing rounds -- including a $10 million round in 2001 at a $30 million valuation -- together with
and several venture capital funds, according to the analyst.
The deal, Lucent's third-ever acquisition in Israel, is estimated to be worth about $75 million. Lucent expects the deal to close by the end of the year, roughly around the same time as its pending $10.8 billion merger with
Mobilitec's technology, which offers a platform for managing and streaming content services over third-generation cellular networks, will enable Lucent to pack additional features into its existing product line. It will also enhance its capability to offer its clients, mainly telecom operators, everything from ringtone downloading to photos and live news feeds.
Mobilitec's 70 research-and-development employees in its Haifa, Israel-based R&D center will continue to work as part of Lucent Israel, according to news reports.
Gesrshoni expects another imminent acquisition in the mobile Internet realm, this time an Israeli instant-messaging company called
, by an unknown suitor. According to various estimates the company is worth about $150 million and is believed to have roughly $10 million in annual sales.
Followap, which has 20 network operator clients, with a combined user base of over 200 million subscribers, reached a strategic agreement last week with
to deploy its IP multimedia subsystem (IMS) in Nortel's product portfolio, which includes instant messaging, VoIP, push-to-talk and multimedia gaming.
Upstart firms such as Mobilitec, Followap, the mobile search engine developer
and many others in Israel are tackling the main problem that telecom operators face: how to sell content to cellular-phone users. In terms of adoption rate, fewer than 20% of cell phone subscribers actually use content such as music and video that is offered by operators. Obviously all operators are hungry to grab more of that share, but nobody is really sure how to do it.
"Mobile Internet today is about where the Internet was in '74," says Avichai Levy, CEO of Herzliya, Israel-based Targetize. "So the question is: Who's going to lead the growth in this area? Will it be the content providers or the telecom operators? It is a bet you have to take, and we are betting on the content providers to gain the most dominance in selling content."
Levy believes the reason the adoption rate of mobile content is so low is that users "are frustrated by trying to access data that is either limited in scope or difficult to reach due to keyboard and screen limitations." Despite efforts by mobile operators to stream data and media content to users according to their preferences, location, etc., "the user still gives up pretty quickly when what he needs takes too much effort to get," he says.
Targetize, which recently started to sell its search and discovery engine to content providers such as
Universal Music Group
, developed a search technology that retrieves data from the open Web, rather than from a closed-ended database (in industry jargon it's called "walled garden"). Targetize's AnySong product allows a mobile phone user to intuitively search for any song or artist by typing in as little as the first two letters, retrieve it on a first hit regardless of where it is on the Web, and instantly purchase it.
In this respect, the Israeli company competes with search giants such as
. Targetize, however, works on vertical markets such as music and photos while the others aim for letting users reach everything possible on the Web. "Our aim is to get the user to purchase, so I don't really care if the user wants to read about Napoleon; I want them to buy a song or download a video," Levy says.
Meanwhile, other giants such as
have already taken aim at the mobile Internet search market. Earlier this year, the software maker purchased Paris-based
for roughly $40 million, according to industry sources. MotionBridge is a provider of search technology designed specifically for mobile operators and the mobile Internet.