from the December 2012 issue

3M invests in voice technology company VocalZoom

VocalZoom is developing an optoelectronic microphone that significantly improves the speaker's understanding in any noisy environment. 3M Co. (NYSE: MMM) has announced an equity investment and collaboration in VocalZoom Ltd.. Based in Yokne'am, VocalZoom develops speech enhancement technology and voice-enabled user interfaces that allow voice communication and recognition in any environment. The terms of the investment through its corporate venture capital fund 3M New Ventures were not disclosed although reports in the Israeli media have indicated that it was several million dollars.

VocalZoom chairman Yechiel Kurtz said, "While touch capability has become the de-facto standard for user interfaces, voice activation is also gaining more and more momentum to enable hands-free operation of state-of-the-art devices. VocalZoom's technology will accelerate this trend by enabling the use of voice in even the most demanding environments. 3M's investment and collaboration provides us with new and exciting opportunities, such as integration of our sub-system into 3M's display and touch technology as well as a broad range of additional applications."

VocalZoom was founded in 2010 by CEO Tal Bakish to strive to enable use of speech for communication and voice activation purposes in any natural environment, by developing an optoelectronic microphone that significantly improves the speaker's understanding in any noisy environment. While conventional approaches focus on filtering and signal processing to isolate the voice from ambient noise, VocalZoom is applying its patented technology that integrates a standard acoustic microphone and a special optical sensor to solely detect the speaker's voice. VocalZoom says that the benefits are essential for next generation user interfaces, providing high directivity, speaker isolation, improved signal quality, and precise voice activity detection.

3M New Ventures president Stefan Gabriel said, "For voice activation to become ubiquitous it must seamlessly work in any environment regardless of the level of background noise. VocalZoom is a critical enabler for a new generation of user interfaces that do not just rely on touch or gestures but also on our voice to input data. The investment in VocalZoom will help us to complement our existing technology in this field, and to collaboratively develop new products for our OEM customers."

3M energy and electronics business group VP R&D Robert Visser said, "We see a great variety of applications in which people may prefer voice as a means to interact with their personal device environment, including their industrial work places, hospitals, or commercial kiosks, and even consumer electronics. VocalZoom's signal capturing system adds a critical component to 3M's technology portfolio in user interfaces and acoustics to enable novel solutions for those spaces."

3M Israel managing director Nir Leshem said, "Israel is one of the most vibrant technical and entrepreneurial regions in the world and there are plenty of opportunities for 3M. VocalZoom is our very first investment and we look forward to other investments in Israeli high tech startups."

Tel Aviv capital market veterans will do well to remember an Israeli high-tech firm with as high expectations as Mellanox. The company, which offers a choice of fast interconnect products: adapters, switches, software and silicon that accelerate application runtime, has seen its value soar over the past two years. In 2010, US computer hardware giant Oracle reportedly offered $1 billion to buy Mellanox, after purchasing 10 per cent of the company's shares. This summer, rumours were rife that Oracle had come back with a $6 billion offer, a premium of 30 per cent on the company's share price.

Asked whether the rumours were true, Mellanox founder and chief executive Eyal Waldman says: "We do not comment on specific rumours but I can say that there has been interest in the company. However, we feel that it is in the best interests of our shareholders to grow Mellanox as an independent company." Such a response is likely to be welcomed by many Israelis, who believe that Israeli start-ups have a tendency to sell-out too soon, with high-tech entrepreneurs eager to accept the first offer that comes along.

This is not the first time that Mr Waldman has faced the dilemma of whether to sell a company or maintain its independence. Born in Jerusalem, and a graduate of the Technion, he worked for Intel for four years before co-founding Galileo Technology in 1994, which produced computer switches and hubs. But in 1999, he had a high-profile falling out with its fellow founders. He says: "I think the media have exaggerated what happened for there was no real bad blood. But there was a difference of opinion and I had wanted to grow the company while my colleagues wanted to sell." Mr Waldman left Galileo and set up Mellanox the same year. Galileo was sold the following year to Marvell for $2.8 billion. Yet Mr Waldman has never looked back. After raising $89 million from venture capital funds, the company went public on Nasdaq and the Tel Aviv Stock Exchange in 2007, raising $102 million at a company value of $500 million.

Investors purchasing Mellanox shares at the IPO saw their money increase nearly tenfold in just five years. Mellanox's share price had risen nearly 600 per cent over the past two years and more than doubled during 2012. However, the share slipped back nearly 50 per cent last month after the company lowered the sales forecast for the fourth quarter of 2011, but Mellanox has clawed back much of these losses and Mr Waldman describes the fall in the share as a "market overreaction" and predicts a return to sales growth next quarter. Most analysts still feel the share price can only move upwards. Sales of the company, based in Yokneam near Haifa, are expected to reach $525 million this year, up from $259 million last year, and $155 million in 2010. Unsurprising then that Mr Waldman oozes confidence. He says: "I've always said we can reach $1 billion in annual sales and we will get there. We operate in an annual market of $5 billion going up to $7 billion in the coming years, so we can grow organically. We should be able to grow sales rapidly until $2.5 billion annually, after that it might be more difficult."

Mr Waldman's belief comes from the fact that in the age of cloud computing and increasing storage requirements, as well as ever larger super computers and larger data, there is a huge appetite for connectivity products that enable more data to be transferred more quickly. Mellanox's InfiniBand chips, adapters and switches are considered to be way ahead of their rivals, particularly in terms of speed.

Intel has positioned itself as Mellanox's closest competitor after buying Infiniband developer, QLogic earlier this year. Mr Waldman says: "Of course I'm scared. But I don't think QLogic was very successful with their InfiniBand business, and it's going to take Intel three or four years to catch us up." By then Mellanox would hope to have a new generation of products, leaving Intel to play catch-up again.

"It doesn't bother me that people recognise me and come up to say hi," he says in his phlegmatic tone. Mr Waldman, a generous Technion donor, believes that there are the ideas in Israel to produce a future giant like Google or Facebook. "Those companies began in the universities and Israel's universities can produce a new giant." But does Mellanox have the potential to become a giant, or at least equal the achievements of Teva Pharmaceuticals, Israel's biggest company with annual sales of $20 billion? "$20 billion annual revenue is a long way to go. We certainly aren't going to get there in just three or four years and I'm not looking ahead further than that."

Reprinted from the Israel High-Tech & Investment Report December 2012

Click HERE to request further information.
Click HERE to go BACK.