ma’ariv conference joel maryles citigroup / salomon smith barney
TRANSCRIPT
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Ma’ariv Conference
Joel Maryles
Citigroup / Salomon Smith Barney
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Fundraising by Public and Private Israeli Companies
Private IsraeliCompany Fundraising
550
2,325
1,715
4,016
10
20
28
6
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
19
98
19
99
20
00
20
01
YT
D
US
$ in
Mill
ion
s
0
5
10
15
20
25
30
No
. of T
ran
sactio
ns
US$ in millions Number of Transactions Source: IVC High Tech Survey Sep 2001
1,012
3,092
1,154
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
19
99
20
00
20
01
YT
D
US
$ in
Mill
ion
s
Public IsraeliCompany Fundraising
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How does this compare to the US experience?
2000 Financing by US Technology Companies $272.3 Billion
2001 YTD Financing by US Technology Companies $84.7 Billion
Percentage decline in 2001 69%
2000 Financing by Israeli Companies on NASDAQ $4.0 Billion
2001 YTD Financing by Israeli Companies on NASDAQ $1.7 Billion
Comparable percentage decline in 2001 57%
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Its always darkest before the dawn…….
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Its always darkest before the dawn…….
Stock markets generally anticipate events six months in advance.
We predict an economic rebound in the second half of 2002.
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Global Economic DownturnY/Y Percent ChangePercent Change from Preceding Quarter (SAAR)
2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 1998 1999 2000 2001 2002
History ForecastHistory Forecast
Real GDP 1.3 1.9 1.3 0.3 (1.1) (1.3) 0.8 3.7 4.3 4.1 4.1 1.0 1.2
Personal ConsumptionExpenditures
4.3 3.2 3.0 2.5 0.7 (1.9) 0.3 3.1 4.8 5.0 4.8 2.5 1.1
Fixed Private DomesticInvestment 2.6 0.5 1.9 (9.7) (9.5) (5.7) (2.4) 3.2 11.4 7.8 7.6 (2.1) (2.0)
Interest Rates
Federal Funds (%) 6.52 6.47 5.59 4.33 3.47 2.33 2.25 2.25 5.35 4.97 6.24 3.93 2.25
10-year Treasury Bond (%) 5.89 5.57 5.04 5.28 5.00 4.65 4.88 5.20 5.58 5.87 5.94 4.99 5.50
Corporate Earnings
S&P 500 Earnings Pre-writesoffs ($/shares) 14.33 13.67 12.34 11.72 10.00 10.44 10.60 11.45 44.33 51.02 56.31 44.50 46.50
S&P 500 Earnings Pre-writesoffs (yr/yr) 11.0 (2.0) (9.5) (20.1) (30.2) (23.6) (14.1) (2.3) (1.6) 15.1 10.4 (21.0) 4.5
Source: Salomon Smith Barney Economic & Market Analysis
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Dow Jones and S&P 500 Declines
1) 12/13/1961 06/26/1962 (27.11)% 134
2) 02/09/1966 10/07/1966 (25.21)% 167
3) 12/03/1968 05/26/1970 (35.93)% 367
4) 01/11/1973 12/06/1974 (45.07)% 481
5) 09/21/1976 02/28/1978 (26.87)% 363
6) 04/27/1981 08/12/1982 (24.13)% 333
7) 10/02/1987 10/19/1987 (34.16)% 12
8) 07/16/1990 10/11/1990 (21.16)% 62
9) 07/17/1998 08/31/1998 (19.26)% 32
10) 01/14/2000 09/21/2001 (29.75)% 422
Average (excluding current period) (28.77)% 217
Peak Trough%
Decline# of Trading
Days
Significant Dow Jones Industrial Average Declines Significant S&P 500 Industrial Average Declines
1) 12/13/1961 06/26/1962 (27.97)% 135
2) 02/09/1966 10/07/1966 (22.18)% 167
3) 11/29/1968 05/26/1970 (36.06)% 369
4) 01/11/1973 10/03/1974 (48.20)% 436
5) 09/21/1976 03/06/1978 (19.41)% 366
6) 11/28/1980 08/12/1982 (27.11)% 430
7) 08/25/1987 12/04/1987 (33.51)% 71
8) 07/16/1990 10/11/1990 (19.92)% 62
9) 07/17/1998 08/31/1998 (19.34)% 32
10) 03/24/2000 09/21/2001 (36.77)% 373
Average (excluding current period) (28.19)% 230
Peak Trough%
Decline# of Trading
Days
Source: Salomon Smith Barney
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How have Israeli stocks held up?
AprMayJunJulAugSepOctNovDecJan2001
FebMarAprMayJunJulAugSepOct
Pric
e as a P
ercent of B
ase P
erio
d (%
)
DAILY DATA: MARCH 01, 2000 THROUGH OCTOBER 26, 2001
40
60
80
100
120
140
SSB Israel Index NASDAQ Composite Index
Source: Salomon Smith Barney sb434693.wmf
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Don’t Worry, Be Prepared
Because……….
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What Initially Attracted Foreign Investors to Israel?
Israel’s natural resource is brainpower
Foundation for Israel’s intellectual capital is the country’s military & academic institutions and the wave of immigration in the 90s that brought it to Israel an influx of scientists and engineers
Israeli entrepreneurial spirit
Israeli companies are consistently on the leading edge of technological innovation
NONE OF THIS HAS CHANGED……..
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Companies should focus on:
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Upcoming Opportunities
The need for technology Is not going away
Productivity in global economy driven by adoption of new technologies
Although the weaker are disappearing, the leaders are also getting weaker
Inevitable consolidation will create gaps which will present opportunities
BE PREPARED!
Make sure you are ready when the market rebounds
Use the current downturn to add depth to your management team
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Alternatives to Capital Market Fundraising Various kinds of foreign investment - increasing trend towards
Mergers & Acquisitions (corporate-to-corporate)
Cash-rich corporations are taking advantage of lower valuations
Industry Consolidation
– Israeli companies acquiring international companies in order to increase market share and distribution channels
– International companies acquiring Israeli technology as a source of revenue-generating solutions
Examples of Israeli M&A activity in Israel in 2001:
Marvell’s acquisition of Galileo Technology
BreezeCom / Floware - Merger-of-Equals
Amdocs announces acquisition of Clarify
Hewlett Packard announces acquisition of Indigo NV