Project Natal, a revolutionary new way to play: no controller required. See a ball? Kick it, hit it, trap it or catch it.

As reported by Globes, Moshe Lichtman, Microsoft corporate vice president and head of Israel R&D said:

“Fourteen development projects are taking place at the center today, twelve of them completely new and destined to become Microsoft products in new markets… the R&D center helped Microsoft in buying the intellectual property of 3DV Systems, and in the wake of that dozens of the company’s employees were recruited to work at the development center.”

The announcement is linked to Project Natal, a new Microsoft gaming system that lets the user control games through body movement and words. It’s like a Nitendo Wii on steroids, eliminating the need for a joystick and adding voice recognition. Sounds familiar? That’s because it is believed that Microsoft is using 3DV Systems’ patented technology as well as technology developed by Israel’s Prime Sense, a sensor that tracks and reacst to user movements outside the computer. 3DV Natal was revealed two weeks ago at the E3 games exhibition.

Watch the video (it’s awesome):

The new system will be compatible with every Xbox, but its cost remains a mystery.

In January, Microsoft – Israel R&D Center has laid off 50 of its 600 employees, after experiencing rapid growth since it was created three years ago.  Today, the center is regarded as Microsoft’s third largest in the world. It currently has 14 R&D projects under development primarily in security and telecommunications. 12 of the projects are new potential products for the software giant.

In the press conference, Mr Lichtman mentioned a few of the developments, including a new area of focus: online. Microsoft plans to leverage the acquisition of Israeli advertising company Yadata made 18 months ago, in order to help contribute to the agressive revenue goals from online advertising, a quarter of the company’s total revenue.

3DV Systems has developed the Z-Cam (formerly Z-Sense), a sensor-packed  camera, which lets gamers control the game through body gestures alone, eliminating the need for any kind of joystick. Microsoft is hoping to gain an edge on Nintendo Wii, by integrating 3DV’s technology into the Xbox 360. 

Other applications to the Z-Cam include video conferencing technology, but its unclear what Microsoft is planning on leveraging that front.

The Z-Cam

PrimeSense is in fact a gaming company, creating technology that enables consumer electronic devices understand the world in 3D, the way humans do. PrimeSense’s patented technology enables some really cool applications, inspired by the success of the Nintendo Wii and the iPod. For example:

* Gaming - Similar to 3DV Systems, PrimeSense removes the need for a joystick to play video games in front of the TV. Imagine a the next generation Wii game, where the player’s body IS the joystick: kicking, shooting fireballs and using hand movements to cast a spell on their opponent.

*  Consumer Electronics- PrimeSense brings 3D to digital devices, removing the need for a mouse or a keyboard through touch-screen menu interaction.

* Video Communication – virtual drawing boards, background replacement and more.

The company is led by president Aviad Maizels, CTO Alexander Shpunt, Ophir Sharon, Tamir Berliner and CEO Inon Bracha, who was the former CEO of the DSP Group. In a comment to Globes Bracha said:

Prime Sense was founded in 2005 by a team of entrepreneurs who are self-proclaimed gamers who were looking to improve the user experience and make gaming controls more intuitive.

Bracha added to TheMarker that PrimeSense has tough competition out there including Israel’s 3DV Systems, who is fighting for the same turf developing gaming applications and Canasta Inc, who patented a virtual input device such as an image of a keyboard.

To date, the company has raised $29.4 million, last round of $9 million was raised in August 2006. Recently,PrimeSense has reached a big agreement with a consumer elecronics manufacturer, and several applications are scheduled to come out in the near future.

The International CES conference is produced by the Consumer Electronics Association (CEA) and has been a prominent platform for companies producing “all things consumer electronics” to get launched / noticed / partnered up for over 40 years. This year’s conference will feature exhibitors from 30 product categories – ranging from a radio for the hearing-impaired to a wireless HDTV LCD screen.

Among the exhibitors will be 16 Israeli companies. Here’s a short overview on the companies and their latest consumer gadgets:

1) 3DV Systems - A few weeks ago I covered 3DV’s breakthrough game controller on VC Cafe. It makes the Nintendo Wii look obsolete. Israel-based 3DV developed a camera that uses imaging technology to capture the three dimensions of objects, enabling users to control games and personal space through intuitive body gestures and to replace video background in real-time.

2) Celeno Communications – a leading provider of WiFi semiconductor solutions for emerging multimedia home networking applications. Celeno’s technology enables consumers and service providers to quickly and easily deploy robust, whole-home entertainment home networks.

3) Epos - is a leading provider of advanced digital positioning technology. Together with its partners, EPOS brings next-generation, positioning-based consumer electronics products to the input device, touch-screen, and interactive whiteboard markets, among others. In the conference, Epos will demonstrate the following products: Digital Pen & Mouse, Digital Pen & USB Flash Drive, Touch-Screen and Interactive Whiteboard technologies.

4) Horizon Semiconductors - Horizon designs, develops and supplies complete SoC solutions enabling secured video and audio compression & transmission for the consumer electronics and home entertainment markets targeting satellite, digital cable & IPTV STB’s, HD-DVD and Blu-Ray player/recorders, HDTV, and Home Media Centers.

5) Jungo - a subsidiary of the NDS Group (NASDAQ: NNDS), the leading supplier of open end-to-end digital pay-TV solutions for the secure delivery of entertainment and information to television set-top boxes and personal computers. Jungo Ltd is a leading provider of residential and business gateway software platforms and applications.

6) Lumus - I covered Lumus on VC Cafe exactly one year ago, calling it “the mission impossible high tech glasses” founded in 2000 by Dr. Yaakov Amitai, whose disruptive and patented LOE technology is the basis for the company’s core technology and business. Lumus created see-through video eyeglasses that represent a new dimension in personal displays using cutting edge transparent display technology.

7) Mempile - Mempile’s game-changing 2-photon 3D technology will revolutionize consumer and enterprise archiving – with high capacity, low cost, permanence, removability and ease of use. Mempile has demonstrated its TeraDisc™ technology to be capable of storing up to 1TB of data on a DVD-size optical disc.

8) Metalink - Publicly traded Metalink Ltd. (NASDAQ: MTLK) is a leading provider of silicon solutions for high performance wireless and wireline broadband communications. Metalink’s prLAN and DSL technologies revolutionize the broadband experience by facilitating the convergence of telecommunication, networking and entertainment in high-speed.

9) modu - still in stealth, it’s hard to tell what Modu is all about. However, I was able to find out that it was previously called “Infone-tech” and that it was founded in 2007 and looking to “change paradigms in the mobile world by bringing freedom and boundless possibilities to the world of personal communication”. Modu’s CEO Dov Moran was previously the founder, Chairman and CEO of msystems (NSDQ: FLSH), that grew in 18 years to close to $1B in Sales. Should be interesting to follow.

10) Morel - manufactures a wide range of award-winning speakers and audio drivers for car and home, delivering uncompromising sound quality at competitive prices. Celebrating over 30 years of technological innovation and design excellence, Morel products are sold in over 55 countries around the world.

11) Primesense - the first company to offer affordable 3D machine vision technologies for the consumer market. Primesense develops of a revolutionary technology for low cost, real-time capturing of colors and depth. It enables users to control digital entertainment and consumer electronics devices using natural and intuitive hands and body gestures as well as manipulate background in video calls. Primesense is led by CEO Inon Beracha, who previously led the DSP Group (NASDAQ: DSPG) and by Aviad Maizels, who co-founded the company in 2005.

12) RCS Rampal Cellular Stockmarket- the world’s largest international trader of mobile phones began trading digital cameras & portable electronics in 2006. RCS’ website is the industry’s leading online platform and a pioneer for B2B online trading. RCS maintains strong connections with over 3,000 cellular phone manufacturers, operators, distributors and wholesalers in 128 countries.

13) Runcom Technologies – a technology company pioneering OFDMA based silicon solutions for User Terminals and Base Stations that comply with the IEEE802.16e-2005 standard for WiBro and Mobile WiMax applications; Runcom Products include the PHY and MAC communication layers.
14) Spetrotec - Founded in 1985, Spetrotec specializes in the design, development and manufacturing of advanced Automatic Vehicle Location Systems (AVL) and automobile security systems. Israel-based Spetrotec manufactures and designs the following products:AVL fleet tracking devices, GPRS, iDEN, GPS, call center software, car security, anti-hijacking, RF proximity cards, “hands-free” keyless car entry, biometric immobilizers, motorcycle alarms and vehicle security sensors.

15) Walletex Microelectronics – maker of Wallet Friendly USB devices. Housed in a credit card sized USB Flash drive, they are the world’s slimmest USB devices, and the only ones that can be carried in a wallet. Walletex has a proven track record in developing and marketing super-slim consumer electronics.

16) Yoggie Security Systems – creator of award-winning Yoggie Gatekeeper™ and Yoggie Pico™: miniature security servers that connect to laptops and PCs, providing 13 levels of security. The company was founded by Shlomo Touboul, former CEO of Finjan and inventor of behavior-based blocking technology.

I wish all the companies a successful show. If I had to put my money on it (how appropriate to Vegas), I’m betting that 3DV Systems and Primesense will generate some buzz and and that Modu might announce a smart phone, or a technology to integrate VOIP into other devices/ appliances.

But isn’t it like the Nintendo’s Wii or Sony’s Eyetoy? No, according to Tomer Barel, 3DV’s VP of marketing and product management, Zcam is a big step forward. Devices like the EyeToy work in 2D only, and that limits their effectiveness for games like boxing. The Wiimote’s movement is limited -with Zcam you can actually pick up your tennis club.

ZCam uses patented technology which enables the camera to perceive depth recognize human gestures, translating movements in the physical world into on-screen action. As gamers become the interface, the game design will determine how the inputs work: motion can be navigated simply with a thumb or the entire body can become the controller through three-dimensional movement. The player can be represented in the game with his/her own real-time image and the game can be operated either bare-handed or with a designated object, replacing the need for a control pad.

A video is worth a 1000 images. Click on the links bellow to see the power of 3Dv’s technology:

• Throw a ball at your TV
• Video conferencing with the background of your choice
• A new gaming experience

For additional demo clips of Zcam, check out the gallery section .

The implications of this technology can go far beyond gaming. Leveraging the potential of Zcam could change all human-machine interfaces in industries such as automotive, security, robotics and consumer electronics.

The firm was founded ten years ago and is based in Yokneam, Israel. It is led by CEO Zvika Klier, a serial entrepreneur and previously the founder and CEO of GammaSense. Investors include Kleiner Perkins, Pitango, Elron Electronics Industries and the Rafael Development Corporation (RDC).

Continue reading in other sources:

• Differing views on ZCam’s impact
• Official press release