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Dot.IL's Can't Compete with CNN's War Reports

[JERUSALEM] This week saw continuing carnage among "dot.ILs," but it is not just startups who are struggling for survival; as the Nasdaq plunges, publicly traded Israeli companies are wondering how to persuade CNN-watching investors that Israel's political situation is not affecting business - yet.

"The American institutional investors fear that the war-like situation is threatening the operational status of Israeli companies traded on the Nasdaq, many of which, although their management is in the U.S., have research and development centers in Israel," said Rami Rosen, a technology analyst with Oscar Gruss in Tel Aviv.

For example, edutainment company Multimedia K.I.D. said this week that it has run out of operating funds and will cease trading.

Those companies who seemed to be flying high above all of the turmoil have proven to be just as vulnerable. Gilat Communications (GICOF) , a leader in satellite connectivity, was trading Thursday at $2.68, down from a 52 week high of $45.75. Integrated messaging company Commtouch was down to $4.50 from a high of $68.50.

Even Israeli stalwart Check Point Software, the firewall market leader, which was ascending as Nasdaq plunged, had dropped Thursday from a 52-week high of $177.88 to $122.43.

While Israeli companies on Nasdaq suffer from the same current investor insecurities over impending profit warnings as everyone else, this additional concern over the effects on business of political instability and violence - although it may be unfounded - only adds to their worries.

"In an extreme situation, if Israel was at war with seven Arab countries, they would be affected," said Rosen. "But with the situation we are experiencing right now, I don't think there is any effect at all."

However, trying to calm investors who spend all day watching international news on television is an impossible task, Rosen said.

"In this battle, the public relations battle, [Israeli companies] have lost," he said. "Not because they cannot do good PR, but because the impact of CNN is much more significant."

This is affecting the private arena, too.

Membiz, which israel.internet.com reported just two weeks ago was looking for investors for its online peer-to-peer trading platform, appears not have found them. The company laid of five out of nine staff members, local press said this week.

Other casualities of the dot-bombing include text-mining startup Expertease and online music distribution company MusicMarc. Neither company responded to requests for comment.

Internet advertising technology company Adwise said that it was downsizing in Israel, but in the same breath anounced the appointment of new vice presidents for global marketing and for North American sales.

Investment firm Tri-United Technologies, is also cutting staff in its Jerusalem office.

"Tri-United has let go seven of its 18 employees in Israel," said company press spokesman Ido Atiya, owner of the DoubleClick public relations agency. "With the situation as it is here, Tri-United, which has U.S. offices in Chicago, has decided that it will not be focusing so heavily on investing in Israeli companies and is therefore cutting back the local team."

The situation is epitomized in an announcement appearing in an Israeli high tech e-mail newsletter published by Dolev and Abromovitch on Thursday:

"A chief financial officer from a hi-tec