Matrix buys Israeli-Arab firm Babcom Centers

Hi-tech activity in Israel’s Arab sector has been become more visible in recent months.

Haredi woman working 311 (photo credit: Courtesy)
Haredi woman working 311
(photo credit: Courtesy)
Hi-tech activity in Israel’s Arab sector has been become more visible in recent months, and the numerous computer-services companies operating in northern Israel are drawing interest. The first exit by an Israeli-Arab hi-tech company has taken place: Matrix IT Ltd. is acquiring the controlling interest in Babcom Centers Ltd..
Babcom (the name is derived from the Arabic word for door, bab) is an outsourcing business-services provider, including customer call centers and software-development services.
Matrix, Israel’s largest computer-services company, has acquired 50.1 percent of Babcom for NIS 15 million, with an option of payment of an additional NIS 4m., subject to Babcom’s results. On the eve of the deal, Babcom will distribute most of its profits as a dividend.
Babcom chairman Imad Telhami founded the company in late 2008.
Shareholders include Dov Lautman and his son, Noam. Telhami and Lautman first met in a completely different industry, textiles, at Lautman’s life work, Delta Galil Industries Ltd. Telhami worked at Delta Galil for 25 years, serving in a range of senior positions, including as Lautman’s right-hand man.
In late 2007, Lautman sold control of Delta to Isaac Debach, and Telhami, disappointed at not being appointed CEO, decided to found Babcom. He linked up with Kav Mashve Employers’ Coalition for Equality for Arab University Graduates, which Lautman founded to increase the number of Arab university graduates employed by Israeli companies.
Babcom is located at the Tefen Industrial Park in the Galilee and has 500 employees. Customers include mobile carrier Cellcom Israel Ltd., DBS Satellite Services (1998) Ltd. (YES) satellite TV broadcaster and semiconductor company DSP Group Inc.
One of Babcom’s advantages is that its development and services costs are 25% lower than competing companies in central Israel.
Babcom operates through two subsidiaries: one for software development, which has 50 employees; and the other for outsourcing of business services, such as customer service.
The synergy with activity such as Matrix’s is obvious. The Herzliyabased computer-services company has extensive near-shore operations (providing remote computer services but still within Israel) via sectors whose employment costs are lower.
Over the past few years, Matrix has worked hard to establish similar operations in the haredi community through the Talpiot Project. This project employs 600 haredim out of the company’s total of 4,300 employees. The work is carried out at two main centers in Beit Shemesh and Modi’in Illit, which mainly engage in software testing and application development.
Matrix knows that operating this kind of development is substantially cheaper than operating a similar unit at the company’s existing centers. The company’s interest in a strategic entry into the Israeli-Arab community is not surprising.
Matrix is not the only company that has put the launch of operations in the Israeli-Arab community on its agenda.
Another Israeli computer-services company is in talks with Babcom, so the Matrix deal may not be the last in the near future, people familiar with matter told Globes.
Besides Babcom, there are several other prominent Israeli-Arab computerservices companies, including Nazarethbased Galil Software Ltd., headed by CEO Inas Said.
Babcom posted NIS 21m. revenue in 2010, double its revenue in 2009.
Net profit rose to NIS 3.1m. from less than NIS 1m. The company had more than NIS 10m. in assets at the end of 2010.
Matrix’s share price rose 0.8% by midday Thursday to NIS 22.42, giving it a market cap of NIS 1.33 billion.