Israeli Telecom Startups to Gain From Closure of Lucent, Nortel Subsidiaries

JERUSALEM – Local companies will indirectly benefit from the closure of Wave Access and Armon Networks in Israel last week, which led to 200 layoffs, an Israeli telecom industry analyst said Sunday.
“The companies which will benefit the most will be those with human resource problems,” said Gilai Dolev, of Dolev and Abramovich of Ramat Gan, Israel. “There are companies which have been just waiting for a company to close so they can hire their workers.”

On Thursday, Nortel shut down its Armon Networks subsidiary, putting 50 employees out of work. Bay Networks bought Armon in 1996 for $33 million. In 1998, Nortel took possession of the company when it took over Bay Networks.

Armon had been developing probes to gauge usage of local access networks for quality control purposes.

Also on Thursday, Lucent decided to close Wave Access, as part of its plan to cut 10,000 jobs worldwide. The closing of Wave Access meant the immediate dismissal of 150 employees and ended a working relationship between the companies that had lasted for nearly three years.

In May 1998, Lucent acquired 20 percent of Wave Access for $6 million. Two years ago, Lucent completed an outright acquisition of the rest of the company for an additional $50 million.

Lucent’s interest in Wave Access included an agreement to jointly develop high-speed, low-cost wireless data solutions for network providers based on Internet digital packet transmission protocols.

Dolev said that the international telecom cutbacks in Israel were to be expected and part of a global downsizing of most high-tech sectors recently.

“If small Israeli startup companies have been reducing their staffs or closing down, there is no reason to believe that just because another company is owned by international companies, they should be exempt,” Dolev said.

However, he stressed that since there has been an ongoing shortage of telecommunications engineers in Israel, the closing of these companies will have a smaller impact than they would have otherwise.