Every guru has his band of faithful followers, whether he is the leader of a mystical cult, a technology guru, or a new age icon. These followers make him what he is, by crowning him and giving substance to his declarations and actions. Every good guru has his band of detractors as well, who accuse him of being a charlatan, a daydreamer who harms people, and the rest. This group, which makes him a controversial figure, also strengthens his image as a guru. He cannot exist without both.
One world-famous technology guru with his own groups of admirers and critics who recently visited in Israel for the first time in his 67 years is George Gilder. "I'm really excited to be here," he said in an exclusive interview with "Globes." "It's just like Silicon Valley, only better. I really feel at home here." Gilder is the consummate technology expert, but he carries around a green carrier bag containing a jumbled pile of photocopied presentations, and holds in his hand an item that is just about obsolete: a propelling pencil with an eraser tip.
Gilder, who began his career as a speech writer for the late US president Richard Nixon, is a man of vision, who has to his credit many books and futuristic theories, some which accurately predicted how the world would look. He achieved renown, for example, at the end of the 1990s, when he predicted how life would be in the post-television era. He already believed back then that the Internet would replace television, and that eventually everything would reach customers through the Internet.
But Gilder also talked at that time about a development he described as "Telecosm", the convergence of computers with telecommunications systems. He praised the telecoms companies, and the thousands of subscribers to his newsletter followed suit. The problem was that there were two aspects to these companies: the technology and the stock. While Gilder was successful on the first count, he failed on the second after the bubble burst, taking the telecoms companies with it.
Gilder himself took a fall too - both financially and in prestige - and was on the verge of bankruptcy, and so he found himself with an army of opponents as well. They did not, for example, think that sending them to invest in companies like Global Crossing or Worldcom, which collapsed, was such a bright idea, and it's hard to blame them. But the truth is that Gilder was not alone. There were not many who predicted that the bubble would burst, and no-one listened to those that there were, so as not to spoil the party.
Gilder lost his magic spell during the crisis period, but there has always been and still is a concept known as the "Gilder Effect:" The guru mentions a company in his newsletter, occasionally invests in it, causing it to soar. His investment portfolio, which he also features in his newsletters, has delivered a 21% return over the last 52 weeks, compared with 20% on the S&P 500. Since the peak at the beginning of March 2000, Gilder's portfolio has lost 72% while the S&P lost 1%. And here's a positive figure, one which has brought him back to the forefront, making him relevant once more: since the slump in October 2002, Gilder has delivered an impressive 377% return, compared with 94% on the S&P 500. Gilder has, therefore, done the full round - he was at the top when things peaked, took a fall during the slump, and has been climbing back, slowly but surely ever since.
He was back in the headlines in recent weeks with an ambitious venture: the setting up of a hedge fund for high-tech investment called Exacosm, and this is one of the reasons for his visit to Israel. Gilder plans to translate his knowledge and his private investments into something more institutionalized. He acknowledges that until now most of his investments in Israeli companies were made privately. His main investment in Israel is in LanOptics Ltd. (Nasdaq: LNOP; TASE:LNOP), whose activity is actually its subsidiary, network processor developer EZchip Technologies Ltd., managed by Eli Fruchter.
"I identified the company's potential as early as 2000 and I'm a big believer in it," Gilder told an investor and analyst conference organized by EZchip yesterday at the Tel Aviv Stock Exchange (TASE)."
"EZchip is one of my favorite companies, because it meets the important model that I look for in companies: It is both a network-based technology that can be scaled. You can build on it and expand it. This is important in an era of constant change, and it also solves the time problem. It is now critical to reduce transfer times for communications to the home. Today things are measured by the speed of light, not the speed of typing on a keyboard," he says.
Globes: What investments do you plan to make from the new fund?
Gilder: "I'm very limited in what I can say about the fund; we've only just started. What I can tell you is that so far we have invested in one US company and we also plan to make investments in Israeli companies.
How much money is there in the fund, and what is its investment remit?
"We plan to invest in companies that meet the paradigm I look for. Companies whose technology can be found on telecommunications networks, at the heart of the network even, and meet the criteria of scale and time. As for the money, there were stories in the US media that the investments would be in the hundreds of millions of dollars. Well, I hope they're right."
And supposing they're wrong, what's the right figure?
"Actually, there is no right figure. In general, my focus is still on lecturing at conferences, writing books and, principally, continuing to help companies. That's what I like to do, that's what excites me, and I enjoy it." Incidentally, not all Gilder's books are technological, some of them, like "Men and Marriage" deal with personal relationships. Gilder lives in Massachusetts and is married with four children.
Will you come to Israel again?
"Sure. I've discovered that this is the center of the world, no?"
Gilder says that his trip to Israel was organized by the Discovery Institute, an organization which he helped found, and which seeks to promote ideas and knowledge in technology, science, and culture, through books, reports, articles, and conferences. The person who connected him with the seven Israeli companies he met while he was here was Jon Medved, former general partner at Israel Seed Partners, and now a private investor. "Discovery took me to Turkey," says Gilder, "and I told them that if I'm already in the Middle East, I want to see Israel. So in return, I had to give four or five speeches here."
Gilder did not meet Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT) subsidiary Corrigent Systems. "I've heard of it," he says," but I haven't had a chance to meet or get to know it." Among the promising companies he saw while in Israel is Jerusalem-based Xtellus Ltd., which develops liquid crystal-based optic components. Another company is BroadLight Inc., which is active in the hot field of high speed and broadband networks - similar to that of Passave, which was sold to PMC Sierra for $300 million. "BroadLight's technology is critical for bringing fiber optics to homes," says Gilder. "They're still small, and some of their shares are held by Broadcom Corp. (Nasdaq: BRCM). Actually, their technology definitely fills some holes at Broadcom and I am only guessing here, but it definitely looks that they were built so that Broadcom could acquire them, and it might even happen."
Another company that Gilder met is Jerusalem-based optical component developer Al Cielo Ltd., a company founded by Eyal Shekel, and which received investment from by Efi Gildor. Also on the list of companies he saw was Jolt, which has undergone numerous changes, including a merger with MRV Communications Inc. (Nasdaq:MRVC). Gilder notes that many of the companies in its field have fallen so it has an ideal opportunity to integrate optic fibers and wireless communications.
Answers Corporation (Nasdaq:ANSW), to which Medved sold another company that he owned, was also on Gilder’s itinerary. “It’s a sort of Google,” he says, “It’s an interesting company. I’m also putting a lot of focus on search engines, from the angle of the hardware behind the engine. At Google, for example, this hardware is critical to its success, so Answers.com interested me as well.”
In the past, Gilder also recommended Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR), Zoran Corp. (Nasdaq: ZRAN) and Terayon Communication Systems Inc. in his reports. “I liked Terayon a lot, but then it abandoned its high-speed cable project, and stuck to its traditional product only. It’s good equipment but it didn’t excite me, so it came off my list,” he says. “As for Alvarion, I feel that they’re playing more in the third world, places where there’s no infrastructure or fiber optic cables. They have a good business plan but they won’t be dominant in the world, even if they do have backing from Intel.”
As mentioned earlier, Gilder very much likes EZchip, its technology and its potential. EZchip develops network processors. In the first quarter of 2007 it posted a net loss of $1.1 million, or a pro-forma loss of $300,000, on $3.9 million in revenue. Today, two of the world’s three largest equipment providers - Cisco, Juniper, and Alcatel-Lucent - are its customers (Alcatel-Lucent is believed to be the one that isn’t), and LanOptics chairman and EZchip CEO Eli Fruchter says that the company now has 109 design wins with customers, of which almost 40 are already in production.
Published by Globes [online], Israel business news - www.globes.co.il - on June 21, 2007
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