For those who think the Israeli economy is based solely on Tourism, Judaica and exporting weapons, it is so much more, last week I posted some of its advancements in medicine. I get this information from a website that was recommended by Yossi Wess, a friend of mine from Israel (and IMHO the best tour guide/teacher in the buisness)

Israel 21C, is a must read for anyone who loves Israel.

Today’s issue has a great story about Israel’s technology industry, which is booming like never before

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By Nicky Blackburn

Ask Yossi Vardi, the father of Israel’s Internet industry, to describe the mood of Israel’s high tech industry today, and he says it’s one of “sober exuberance.” Sober, because nobody can forget that just five years ago the industry was in a serious recession with no end in sight, but exuberance because the industry has now come full circle and is stronger and more successful than ever before.

“There’s a better understanding of what’s going on today, and players are more solid, but we still see lots of enterprise,” says Vardi, who was the founder and chairman of ICQ, the Israeli instant messaging service purchased by America Online for $400m. “We are in a very good period, which will continue. The industry now is celebrating.”

Vardi is not alone in his excitement. Ask any industry expert how the country’s high tech industry is faring today and you will be greeted with enthusiastic replies.

“The last five years have been recovery years,” Eli Reifman, founder and CEO of Emblaze, told ISRAEL21c. “When the bubble burst, people found themselves without jobs, moving their careers from high-tech to completely new areas. Now it’s all coming back in a dramatic way. High tech is hiring once more and people are exploring new frontiers. The high tech industry still has its child-spirit, which it needs to be creative, but there’s experience as well now. People are doing things differently. They are basing decisions on what they know works.”

“Those companies that survived the recession learned a lot about how to behave in the good times so as not to fall into the trap in the bad ones,” adds Yossi Sela, managing partner at Gemini, citing companies like Starhome, Mellanox, Pcube, and Saifun as examples. “Today they are stronger, more agile and more interesting than usual. It’s survival of the fittest.”

Certainly interest in Israeli companies from abroad is higher than ever. Foreign investment in Israeli companies is growing every year, as are mergers and acquisitions. Since the start of 2006, foreign investors have acquired more than 30 Israeli companies, including startups, at a value of more than $10 billion. The Manufacturers Association of Israel expects that direct foreign investment will grow to between $12-13 billion by the end of the year, compared to $5.6b. in 2005.

In July, in the middle of the Lebanon war, personal computer giant, Hewlett-Packard purchased Mercury Interactive for $4.5 billion in the largest ever acquisition of an Israeli high-tech company. This was followed almost immediately afterwards by the $1.55b. purchase of Kfar-Saba based M-Systems, a pioneer in flash disk technology, by SanDisk Corp. EMC purchased three Israeli start-ups this year, Kashya ($153m.), nLayers, and Proactivity. While Xerox acquired XMPie for $54m.

Vardi quotes figures that show that in 2005, venture capitalists invested $1.34 billion in Israeli companies, making the country the second highest destination for VC capital after the US. The UK, for example, a country of 60 million, compared to Israel’s seven million, came in at third place with $1.29b. in VC investment.

The World Economic Forum recently published its yearly 2006-7 report in which it ranked Israel first for availability of scientists and engineers, second for venture capital availability, third for technological readiness, and seventh for innovation.

In addition, over the last few years an increasing number of international technology giants have opened or expanded development centers in Israel, names like Microsoft, Motorola, and Intel, which developed its next generation microprocessor at its Israeli facility.

Earlier this month, Google and IBM both announced that they are expanding their R&D operations in Israel. Google plans to open a new R&D center in Tel Aviv, to compliment the one it has in Haifa, while IBM is opening a software lab dedicated to advancing the computer-maker giant’s search, metadata management, and collaborative real-time technologies.
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