CopperGate, the Fabless Semiconductor start up founded in 2000, was sold to Sigma Designs for $160 million in stock and cash. While this is one of the largest exits in Israel in recent months, critics say that it is yet another example of why high-tech companies can’t become large in Israel. Once they reach some initial traction, they are quickly snatched by foreign investors.
Coppergate is headquartered in Tel Aviv with offices in US, Taiwan, Japan,
Korea, China, India, & France. It manufactures silicon-based modem products that enable distribution of Home Entertainment Networking (IPTV, Triple Play and MDU) by passing broadband digital content over all three types of wires in the home: coaxial cable, phone and power.
The company’s clients include telecom giants like AT&T as well as Motorola, Cisco, Alcatel-Lucent and more. Coppergate has shipped over 8 Million chipsets worldwide and has been profitable since 2007, with annual revenues of $60 million in 2008, and booked sales of $70 million in 2009 – in the worst economic crisis. CopperGate has raised only $25 million from investors to date. Tamir Fishman investment house was one of the original investors, and now owns a 31% share in the company. Other investors include Carmel Ventures, Motorola Ventures and The Challenge Fund II.
Sigma Designs was one of many suitors for CopperGate. The California-based company develops complimentary technology: System-on-a-Chip (SoC) semiconductors for multimedia processing. Together, the two technologies form a portfolio of end to end solutions, open doors to new clients and create plenty of cross selling opportunities.
“Both companies share a dedication to excellence in product innovation and have advanced the technology roadmaps in the IPTV market. We believe joining Sigma will allow us to increase our investments in next-generation products and leverage Sigma’s manufacturing expertise and RF/Analog skill set.”
In an interview to Israeli newspaper Haaretz Hilevitz explained why he chose the merger with Sigma over an IPO:
“A company considering a flotation has to think about what will happen four to eight quarters down the line. At the time we were dependent on AT&T, our main customer, which accounted for 90% of our business, although this is no longer the case.
There was no point in putting the firm under the kind of pressure involved in being a publicly traded company. Moreover, we had other avenues for raising money other than the public – for instance, investors who were willing to loan us money and invest in CopperGate.”
Too early to say if the sale was premature. When your biggest customer may be going out of business, cash in the bank is better than the uncertainty of the public market. The San Jose Business Journal reports that Coppertgate will get $92 million in cash. Kol A kavod (use Google translate to interpret).