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Optical/IP

Startup Makes Home in Palestine

Life for any startup these days isn't easy. But Exalt Technologies Ltd. is fighting a particularly tough battle for survival.

The tiny 28-person optical startup is headquartered in one of the most widely publicized war zones in the world, the occupied territory of the West Bank. The company, which had been part of the optical division of Siemens AG (NYSE: SI; Frankfurt: SIE), spun out on its own 10 months ago. Since then, Exalt's been working in stealth mode to deliver a suite of metro optical transport products.

While its relationship with Siemens lends technological legitimacy, the company still faces many challenges as Israelis and Palestinians struggle to find peace.

Located in Ramallah, about nine miles north of Jerusalem, the company’s HQ is just a 15-minute car ride from where Palestinian President Yasser Arafat has been holed up for the past two years of Israeli occupation. Despite bombings and raids by Israeli troops throughout 2001 and 2002, Tareq Ma'ayah, founder and managing director of Exalt, says the city of hilltop homes, shops, and refugee camps is relatively safe today.

"If we had the political stability, I’d say that this is the best place in the world to live," Ma'ayah says. Though media coverage paints a dismal picture of Palestine, he maintains that it’s actually an ideal location for a technical startup: Real estate is cheap, and there's access to an almost unlimited supply of well-educated engineers from Birzeit University, located north of Ramallah.

"We would never be able to do what we are doing now in Germany or in the U.S. without raising a lot of capital. We’re going through a nice self-financed stage," he says.

Ma'ayah first began doing contract work for Siemens in 1997. Eventually, Siemens took an interest in Exalt, which developed a demarcation device used to monitor the quality of traffic traveling from one carrier network to another. Siemens later became the majority shareholder in Exalt.

But the bursting of the telecom bubble forced Siemens to make cuts to its optical division (see Siemens Restructures ICN). As a result, it divested its interest in Exalt, and Ma'ayah took over the investment himself. For the past ten months, Exalt has been operating on its own, mostly with money left over from its contract days with Siemens and cash invested in it by Ma'ayah.

While he wouldn't talk about specifics related to the products or the current funding, Ma'ayah says that the company is well positioned financially and should finish product development by the end of the year. It is already contracting with Flextronics Corp. (Nasdaq: FLEX) to outsource its manufacturing.

Like other businessmen in the region, Ma'ayah downplays the current political situation and its impact on his company, but he admits to some inconveniences. Checkpoints in and out of Ramallah and throughout the West Bank make traveling difficult and time-consuming. To alleviate this problem, the company has built a bunkroom upstairs from its office, where engineers can live days and weeks at a time.

There are other challenges that could threaten the company’s survival. Importing components and equipment used in development of products has proven difficult, as many of these items get stuck in customs awaiting security clearance.

The problem has been widespread among technology and telecom companies in Palestine, Ma'ayah says. The Palestinian Information Technology Association (PITA), an organization that represents over 60 technology companies in Palestine as well as Palestinian representatives of international companies (such as Siemens), filed complaints earlier this year alleging that Israeli customs has been withholding communications equipment and computers worth millions of dollars.

At least one analyst says these problems need not hamper Exalt's success in the long run, particularly if the company can form solid partnerships like the one it had with Siemens. "Technology is agnostic to political situations," Michael Howard, founder and principal analyst with Infonetics Research Inc.. "Even though it’s more challenging for them than other startups, if they have the intellectual property, they could still make headway with a Cisco, an Ericsson, or a Nortel."

— Marguerite Reardon, Senior Editor, Light Reading

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DarkWriting 12/4/2012 | 11:34:26 PM
re: Startup Makes Home in Palestine "If we had the political stability, IGÇÖd say that this is the best place in the world to live," Ma'ayah says.

*******************

I'd call that a show stopper!

DW
fhe 12/4/2012 | 11:34:24 PM
re: Startup Makes Home in Palestine Every single place is the "best place in the world to live" if it doesn't have war/natural disasters/or whatever bad stuff that is happening, etc...

Oh wait, I guess it is yet another "best place to off-shore". LOL!
BBBoa 12/4/2012 | 11:34:23 PM
re: Startup Makes Home in Palestine "If we had the political stability, IGÇÖd say that this is the best place in the world to live," Ma'ayah says.

*******************

What does that say for California?
Godzila 12/4/2012 | 11:34:22 PM
re: Startup Makes Home in Palestine there was no country called Palestine. Check your facts dear LR. Even the company itself does not give its location as "Palestine".
Soup 12/4/2012 | 11:34:22 PM
re: Startup Makes Home in Palestine Uh oh, not another BobbyMax?!?!?

The lack of political stability discussed herein likely refers to people running around blowing themselves and a group of innocents to hell in the name of whatever, not a lame-ass state governor and opportunistic celebrities.

amerhhh 12/4/2012 | 11:34:21 PM
re: Startup Makes Home in Palestine This article gives a great perspective on how technology and innovation has no borders. I give this company a lot of credit for working against "all" odds.
ArAmOp 12/4/2012 | 11:34:20 PM
re: Startup Makes Home in Palestine Last time I really checked, I was a Palestinian. my father is, my mother is, my 12 brothers and sisters, and so are over 6.5 millions of people. Now I wonder how anyone can give himself or herself the right to deny us from this identity, which both history and the bible have given us, no matter how much hatred and abhorrence they might have against any human group (I just hope some donGÇÖt even deny us this right either!)
chip0145 12/4/2012 | 11:34:19 PM
re: Startup Makes Home in Palestine Maybe this would be the best! Send them all to Iowa!! The State could use some hi tech population.They could both build a fence across Iowa so they would be truely separated.

This way, the Jewish VCs could really invest in America.Tensions in the Middle East would be removed to local containment and we could all visit the timeless land of our religous birth at our leisure and without fear.
grapsfan 12/4/2012 | 11:34:11 PM
re: Startup Makes Home in Palestine I think it's a great story...a bunch of people pulling together, ignoring the senseless chaos outside their walls, and working on something they believe in.

That said, how can they conduct the business of marketing and selling their product? There's no way they can bring potential customers in for demos and pitches. Just flying in and out must be nearly impossible, and you'd have to leave a ton of schedule leeway and backup plans. Maintaining a lab has got to be a nightmare in a place that probably doesn't have power a lot of times.

It may be a great place to live (other than all the death and destruction, of course), but why would a businessman want to fight all of those obstacles?
slickmitzy 12/4/2012 | 11:34:11 PM
re: Startup Makes Home in Palestine Before i add my 2 cents to this board it's important to say in advance: i'm an israeli.

Rgarding the palestinians startup:
I was very happy to read about it.
Some sanity in the crazy area and era we live in.
I wasn't surprised at all. The palestinians are indeed very talented and educated people.
Much like the jews, the palestinians give great emphsis on education.
In the arab world they are known to hold many technical and positions.

Regarding the politics:
My personal opinion is that between the jordan river and the mideteranian sea there should be to states Israel and Palestine which i hope will be good neighbors.
What i hope will happen is that after peace will be signed by the political leaders it's strength will come from economical co-operation between israelis and palestinians. Both sides could hugely benefit from such cooperation.

Rgarding the Board,

Both sides of the argument here show great ignorance on middle east history.
Also every side sees things in an absolute good and truth aginst absolut bad and constant lier.

Rality is far more complicated then those statements made on this board.

I guess those were the longest two cents i've ever written.

Cheers
slick
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