As privatization approaches, Israel Military Industries bets on a market with enormous growth potential.
After decades of focusing operations on developing and producing missiles, rockets, explosives, and heavy weapons systems, Israel Military Industries Ltd. (IMI) has also come to understand where the big money is. In the past few months, the government-owned defense company launched a new department that will develop cyber systems. Oren Bratt has been appointed to head the new department, which will operate as an internal unit within the R&D department, under VP R&D and Business Development Dan Peretz.
As part of the process of establishing a cyber-security department, IMI will hire employees for the new program in this promising growth area. In so doing, IMI is falling into line with other Israeli defense companies that have already identified the significant growth potential of the field. Other companies that have already begun such programs include: Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), Rafael Advanced Defense Systems Ltd., and Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), which is leading its activity in the field through a close partnership with Cyberia.
IMI says that as part of its involvement in cyber security, it may form partnerships with start-ups in the field.
Peretz said, “Israel is like the rest of the world. Defense budgets have been falling in recent years, and fewer governments and security forces are equipping themselves - this comes at a time when demand for cyber systems is only rising, and should continue to rise. This is a field that has been defined as one of the primary threats on the battlefield, and, therefore, significant portions of defense budgets are invested in them."
The presence of IMI’s new cyber department will be felt at every work meeting that takes place at the company, in preparation for the launch of the new development initiative - in addition to the development of dedicated cyber systems that will meet the defensive and offensive needs of its customers in Israel and abroad, the department’s staff will be called upon to come up with defense solutions for traditional weapons systems that the company is working to develop. This takes into account the fear that a future cyber-attack could target an army’s missile control system, disrupt control and monitoring systems, and indicate incorrect targets.
Peretz said, “Each and every unit in the company will have a representative from the cyber division who will be familiar with the various systems that the unit develops, inside and out, in order to ensure that good defenses are in place for cyber-attack scenarios. The representative will undergo specialized training in the cyber department and will make it possible to establish cyber-defense capabilities for the new systems. This aspect of defense has become a cornerstone of all our programs."
IMI senior executives are being tight lipped about the nature of systems that will be developed by Bratt's new cyber department. However, Peretz says that the company is already working on developing a number of systems that may come to fruition over the coming year. They will then be able to collect handsome profits from customers who are begging for defense products that answer to their current needs: “The bulk of the R&D will be focused on the defense industry, but we are aiming to offer cyber-defense tools to the civilian market in the future as well so as to answer to the needs of large organizations at the state level. There are start-ups that operate in this field and they have good access to markets. We will be able to advance new programs and products in the field through partnerships that we will establish with them. This is a process that will increase the value of all the projects we are leading in parallel, as they will also be protected against future threats,” he said.
Heading towards privatization
Over recent weeks, the processes that are meant to lead to IMI’s historic privatization have been accelerated, following years of talks, proclamations, and failed privatization plans. According to estimates by sources in the defense industry, the government will be able to sell IMI for about NIS 2.5 billion, - including know-how, technology, latest products, and the rest of the company’s infrastructure.
In recent years, the company has updated its product line, and 80% of products were developed over the past 6 years. The products include rockets, and precision guided missiles, which enable customers to arm themselves with smaller quantities of these munitions. The list of the company’s main products includes the Iron Fist system, which is intended to defend vehicles, tanks, and armored vehicles from anti-tank missiles and RPGs on the battlefield. With an updated product offering and with the advanced capabilities that is currently trying to develop in the cyber arena, it is likely that the company will be offered for sale in the coming year as a leading edge company that is relevant in a changing and choosy defense market.
Published by Globes [online], Israel business news - www.globes-online.com - on January 1, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014
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