December Webinar
Buffett/IBM, Patents, Yandex, and Israel Rising

December 1, 2011

INTRO and MARKET OVERVIEW

Ward Carter

Good day and welcome to our webinar. I'm Ward Carter, Chairman of the Corum Group, speaking from our headquarters here in the Seattle, Washington area. You are part of a group of hundreds of software and tech executives from over 20 countries who have registered for this even today.

Here is our agenda for the next 60 minutes. We will start with a market overview, including some commentary on IBM and Warren Buffett, and then a special report on patents. Corum's research department will then be reporting on technology deals and valuations in the software and technology sectors. We will then move to our featured segment on the technology markets in Israel, followed by our guest speakers from three tech companies who will share their recent experiences in the M&A market. At the end of our sessions, we will open the floor to Q&A.

Our slate of speakers today includes Bruce Milne, Corum's founder and CEO, John Melotte, regional director for Corum from our international office in London, Elon Gasper, director of the World Technology Council, Dougan Milne, Courm's VP of research and members of our research team including Amber Stoner, Tomoki Yasuda, and Alina Soltys. Finally, our guest speakers are Roy Golding, Josef Mandelbaum, and Stefan Fountain.

With that, I'll turn the floor over to Corum's VP of Research, Dougan Milne.

Dougan Milne

Thanks, Ward. We have some great presentations coming up here today. We just saw an amazing two-day rally in the markets with domestic indices jumping nearly 5% in some cases. The Fed is supporting the EU for better or worse, but also home sales were up and we had better than expected hiring in the employment arena. Both Black Friday and Cyber Monday were record breaking days for many retailers this year, but I'll turn things over to Bruce to give us the good, the bad and the ugly from some of these recent headlines.

Bruce Milne

Good morning. For the news you need to know as a tech CEO, let's start with China, the world's biggest cyber thief. I'm not sure that's new news. The case for China stimulus is mounting as inflation cools, and of course, enough's enough with undervalued Yuan, said Obama, and I'm sure that will get them to change their mind about it.

Moving to the rest of Asia, there is news about currencies and cutbacks, but the reality is that growth is good. Look at Indonesia's GDP rising rising 6.5%. Japan's economy expanded at 6%. Thailand's GPD growth is accelerating. Singapore's economic growth may slow in 2012, but it is still triple the US'. The Indian rupee may have plunged as investors fled, but some other headlines said how that affected Indian businesses. Rate cuts are looming from Thailand to the Philippines. It's going a little bit slower, but still way ahead of us.

Moving west to Europe, the Greek “Shocker” has stiffened the resolve of Portugal and Ireland. Berlusconi resigned over the austerity plan. So did Papandreo.

Russia's growth has accelerated, that is good, the first time since last year. Early news this month was German investor confidence falling to a three-year low thanks to recession concerns. European growth in general has failed to accelerate in the third quarter as debt slows demand.

UK consumer confidence has dropped to a record low. German business confidence, on the other hand, has unexpected risen as we move ahead into November. The UK economy grew 0.5% in the third quarter, but the Euro tumbled for its longest losing stretch in 18 months.

Eurozone economic confidence fell to a two-year low, but German retail sales increased more than economists forecast in October. Maybe German confidence is up on the idea of returning to the Mark.

Looking now at sovereign debt, the Italy bond attack breached Euro defenses. We have a couple of headlines here about Spanish yields, and Hungary's credit rating was cut to junk by Moody's. Fitch cut Portugal's credit rating, and S&P reduced Belgium's rating to AA. Let's not talk about the banks, it's even worse.

Moving west to the US, the economy is driving more Americans to extreme poverty. They are skittish. Some good news though, US job openings are the highest in three years, there was no sign of US manufacturing slump, and Michigan's consumer index rose, we'll see more on that in a second. US retail sales rose to beat the forecast on electronics gains, and consumer outlook has improved to a 4-month high. That was early in the month, too. Now we move to later in the month.

Initial US jobless claims fell to a 7-month low. The US super committee was ready to announce failure, which was really no surprise, is it? We didn't expect them to be very successful. That is causing some concerns with the ratings agencies.

The S&P 500 posted the worst losing streak in two months, the market went down, but the last couple of days have been pretty good though, back up.

Economic growth in the 3rd quarter was revised downward, consumer spending and durables orders signaled slower growth.

Over the holidays, however, the S&P 500 had the worst week since 1932, but things turned around.

The US rating outlook was cut to negative by Fitch because of the fact that they couldn't come to grips with the debt and cuts in spending. But the US consumer confidence has started to rise the most since 2003 at the end of the month. US car sales, remember we talked about that last month, they are back up, the best since the cash for clunkers episode.

The ADP said that US companies have added about 206,000 workers, almost double that from a couple of months ago. The PMI index is up, with the best growth in 7 months. So we're seeing the US moving back up.

Real Estate, not so great. Zillow's CEO said that US home prices will fall by 5 to 10%. Home foreclosure in the US has risen for the first time in years as backlogs ease. There were fewer new home sales than forecast in the US. Home prices declined more than forecast as well. We're still not quite at bottom. Pending sales of existing US homes, however, were up 10.4%. That was yesterday's headline. That is good news. Things do seem to be turning around.

On the commodities front, an aluminum slump means 25% of smelters are losing money. Gold traders are the most bullish since 2004 on the debt crisis. Gold stocks are down. Oil advanced to cap the longest run of weekly gains since 2009. Speculators have reduced bullish holdings on commodities the most since 2009.

Moving on to Finance, this was a big month for IPOs. Groupon raised $700 million pricing their stock above range. Wow. Delphi offered shares in an IPO pickup. US banks are facing a European contagion risk according to Fitch. We've seen B of A go down dramatically, wow, down to around $5. Angie's List went public. Treasury yields are below 2% as the Euro debt crisis has fueled refuge demands. People want to be in dollars, it has been very strong for most of the month.

Facebook is said to be planning an IPO with a $100 billion valuation. We look forward to seeing that.

Moving on to Mobile, we've looked at a lot in the mobile space here in our monthly reports. Google has dropped support for Blackberry Gmail and boy if that isn't another nail in the coffin for RIM. Samsung topped Apple to become the world's number one smartphone maker. Google's Android has topped 50% of smartphone sales. Apple has won their patent fight with HTC in the US, then we saw Samsung win one in Australia.

On the Technology front, Intel has risked missing the Ultrabook goal with pricing over $1000. In the spring we reported that Intel planned to get 40% of the market. Not with that price tag. Cisco's profit topped estimates on cloud growth. That's good news. SAP plans to double their Chinese workforce, they're expanding. This is interesting, chipmakers are the losers as the iPad challenges PCs. Do you realize that the iPad has 75% fewer chips? A lot of people aren't aware of that. Finally, Silver Lake and Microsoft are looking at Yahoo! bids, several came out yesterday at $16.

Now let's move to a special report.

IBM and Buffett

You know, the last couple of months we've had two special reports, one on ten reasons why tech M&A will continue to surge, and another on the cash flood. Among those ten reasons, let's call this number 11. Warren Buffett has invested in IBM and disclosed that over the last several months he has become their second largest investor, over $11 billion in. Buffett invested more in this quarter than he has at any time. He took a $10.7 billion IBM stake, and then IBM at the same time announced a $7 billion stock buyback and that they were going to focus more on software, around the same time HP announced the same thing.

This is really important. IBM has been a stellar growth company, as you can see here. Buffett has taken a position here that is very similar to his position with Coca-Cola. He believes in tech. This is a guy that said he wouldn't invest in tech because he didn't really understand it. We think that Buffett investing in IBM is a big stamp of approval for tech and we're going to expect a lot more activity happening in M&A and tech.

With that, I'll turn it back over to you.

Dougan Milne

Thanks, Bruce. To add to that, yesterday Zynga filed to go public, I remember they were racing to get their papers filed back in June. Looking at that IBM chart, it reminds me that the debt crisis in Europe is creating global uncertainty, which is driving global investors to currency safety, growth, sure profits, and like IBM and other tech firms in the US that are generating huge cash flows. This will be a huge boon to public tech valuations which in turn should help increase private company valuations.

Patent News

Now, let's hear about the new patent laws, from our own patent pro, Elon Gasper.

Elon Gasper

Thanks, Dougan. In my May presentation I told how patents had increasing influence on M&A, with international ones growing in relative importance, especially with advantages like those furnished by the Patent Cooperation Treaty, Patent Prosecution Highway. But US patents are still generally the most important.

So let’s check out an enormous change in US law:

President Obama signed the “America Invents Act” a couple months ago. It calls for the most significant changes since at least 1952, when the prior century of case law was codified. For entrepreneurs and small companies, it’s definitely the biggest change since the Constitution and the writing of the basic rules for inventions in the 1700s by the first US Patent Examiner, Thomas Jefferson.

Some parts of the law are already in effect, some are coming next year or in 2013, plus regulations and case law look to be in turmoil for long after that. That uncertainty, the broad impact and some specific parts of the law that will be easier for large organizations to address means that on the whole it appears generally unfavorable to smaller companies.

Turning now to survey these changes, the headliner is that after hundreds of years as a international maverick the US has been rounded up and will join the rest of the world in embracing what is known as the first-to-file system, as opposed its quirky first-to-invent where it mattered more when you did it than when you told the government about it.

Secondly, accompanying the increased importance of that filing date, the concept of what’s called “prior art”, that is, public information that can stop a patent, is redefined.

The law also creates a new 9-month process for challenging each new patent.

Another change is that each year, some of those who can pay extra will get to cut the queue and get their patents faster, on a first-come first-serve and rationed basis.

Other changes fill pages with a breathtakingly arcane density that even the Patent Office itself seems flummoxed by.

But don’t take my word for that; listen to its director, former IBM VP David Kappos, who holds down old Tom Jefferson’s job nowadays. He’s called for help from the legal community to understand, implement and build out rules for the new law, as well as from Congress since he’s going to need a few more employees to help him with that. And why would anyone doubt Congress will come through in time in a budget matter? So with everything under control, the lawyers worldwide, including yours, I’m sure, can now get down to the hard work of figuring out what this all means.

If you’d like to pitch in yourself, we’re going to help you with a white paper on Corum’s site, plus here’s a starter:

First the big one. As one firm put it, “While the first-to-file system will streamline the patent process, it produces a few issues for entrepreneurs and small businesses.” The main one is: money. Surprise! Not being able to to rely on having invented first means more pressure to file quickly, incurring costs earlier and on inventions not fully developed. The better financed companies, which are usually large corporations, have the means to file quickly and frequently. If you are one of those, or about to be, perhaps through M&A, congratulations.

There are some risky strategies, based around the new publication rules, or opting out of patenting to work in secret, but unless you have extra cash, come 2013 the new law will make it more important to get a partner or consummate an M&A deal before filing an important application, and more risky to wait or skip it.

The prior art changes are complicated, with derivation and joint research rules and whatnot, but the gist of it is that you’ll need to keep a better eye on developments worldwide, plus now it matters what exists before the U.S. filing date, not before the date of invention. In the old system, once you built it, you had a year to file it, even if someone else published or sold something like it in the meantime; now, there’s urgency every day.

One secondary effect I am seeing is speculative endeavors to file a host of patents before March 2013. I expect not just a land rush to lock in the benefits during the remaining months, but a bulge of “backlog” delaying the progress of all those 2012 patents through the system, and eventually an M&A valuation difference depending on under which regime patents were filed.

The new law also creates a nine-month window to challenge any patent on any grounds. An anonymous submission showing a preponderance of evidence against even one claim of your patent will tie it up in these proceedings.

On the other side of the coin, and there will be coin involved, this seems to imply you need to monitor every other patent as it issues and challenge it within 9 months if you think it’s wrongly granted and bad for your business. That task is difficult for a little company to do.

But good news! With a new “micro-entity” status, the law will lower your patent fees, if you are a small business whose inventor hasn’t filed many before, or something like that. Though not till next year at earliest, according to Director Kappos again, who needs that time to write up the actual rules.

But those government fees are usually small compared to the attorney’s fees for preparing a patent.
Not to mention the ones you’ll be incurring in the meantime if you want to keep up with really understanding and reacting intelligently to this new AIA law in your strategic business considerations, including planning for M&A, because amid all its uncertainties there’s one thing for sure: at least the America Invents Act will create new jobs...for lawyers.

Dougan Milne

Thanks, Elon. You know the patent game is getting pretty wild out there and Corum has recently started advising clients when looking for new office space, be open to the idea of renting or purchasing underground bunkers.

YANDEX

With that, Alina brings us some very interesting information from Russia's hottest tech company, Yandex. They are the Google of Russia. Alina?

Alina Soltys

We all know about the US Tech giants: Amazon, Google, Facebook, but what about some of the
international players that are giants in their own right? Have you heard of Odnoklassniki, hi5, orkut or Bebo? These are all the international facebooks that all have over 100m+ users each.

And, as Dougan mentioned, Google has a fellow competitor in Russia that many of us don't know about: Yandex. Just like Google, the majority of their revenues come from advertising that’s fed on their search site. In fact, now that they disclose results after their IPO in May, there are posting very impressive numbers. Revenue is up 65%, Net income is up 93% year over year.

They're doing some interesting things on the social indexing side as well that are steps ahead of their competitors. Having reached an agreement with the largest social networking site in Russia, Vkontake, they can connect directly to the user's publicly disclosed information and feed it through to search results. Something that Bing is working on with Facebook.

They also launched a start-up program sort of like TechStars. They get an inside look at new technology and a chance to work with top developing talent first, which has led to many acquisitions as we will see next.

Yandex has gotten more acquisitive over the last 2 years—pulling in about 2 companies a year, and more this year. I’m only going to touch on a few briefly due to time constraints. But if we look at theird first acquisition in 2007, SmartCom, for their team which created Yandex maps for mobile. Then in 2010 they got WebVisor, which has a very cool technology for visitor behavior analysis. It tracks mouse movement, clicks, text, and copying on the site. This company actually came up out of their startup events, as well as the next one, Loginza - providing single secure logon to 30+ popular portals. They announced just 3 days ago the addition of SPB Software. This is the only one we have an estimate on, $38 million. This company will allow Yandex search and services like mobile wallet, games, and web tv integration to come in a prepackaged, appealing UI that is available on Windows and Android phones. SPB also had developed a very cool 3D shell for organizing your apps and we’ll have to see if Yandex gets into the mobile game with their own OS.

Moving on, what are their secrets to success? Yandex has entered new markets very strategically and that's really their secret sauce to winning. In their home market of Russia they have pulled away from Google and have maintained their market share position through their focus on providing solutions that the culture of that geography expects rather than Google who applies their US-bred solutions all around the world. Therein their lies advantage, translated to a steady 65% market share versus Google’s 22%.

The company currently provides services in Russia, Ukraine, Belarus and Kazakhstan, and just launched in Turkey in September.

One cloud on the horizon is the fact that both Yandex and Baidu (the Chinese Google) are looking to
expand internationally, targeting high economic growth countries that have an active web and internet
populations. There will be clashes going forward as they both enter as competitors in countries like Egypt.

The Russian market started as a stepping stone for Yandex and they will remain a very strong competitor with their expanding web services although we won't see them in the US on the search front.

Dougan Milne

Thanks, Alina. We know Yandex, they have made some serious international headlines with their trove of acquisitions, some very smart purchases there.

Corum Research Team

Shifting gears now we're going to shift over to Corum's research department. Tomoki Yasuda and Amber Stoner are going to walk us through the latest data points from the industry and from software and industry M&A. Tomoki, over to you.

Tomoki Yasuda

Thanks, Dougan, and hello to all our listeners out there and welcome to the research portion of the
webinar where we analyze and discuss some important metrics and deals.

The first slide we’ll be starting off with is the overall market performance for second half of 2011
on a daily basis. As we come closer to the end of the year we have a clearer picture of how the
markets have fared overall. Things are looking a little brighter with yesterday’s announcement
by the Federal Reserve and 5 other central banks of alleviating Europe’s debt crisis by making it
cheaper to borrow US dollars. Hopefully this move will ease some of the volatility in the markets
as we’ve seen some big gains in the indices and a bit of leveling off today.

With that in mind how does the Corum Index look Amber?

Amber Stoner

The Corum Index is a table of metrics for technology deals that we track monthly on a yearover-
year basis. What we’ve seen this month is that the number of deals is down 15.3%.
We’ve also seen the largest deal size decrease from over $2b to $814m. That $814m deal is
VeriFone’s acquisition of Point, Northern Europe’s largest provider of payment and gateway
services and solutions for retailers, which will build out VeriFone’s alternative payments
infrastructure.

Tomoki Yasuda

Just to point out Amber on the megadeals trend, we’re seeing a lot of companies hold back on
acquiring targets because of market volatility or push their deadlines back to the start of the
new year with the holidays coming in close. And also to reiterate a point we made in our last
webinar, a majority of major tech buyers have their cash held overseas, limiting their options on
acquiring domestic targets.

Amber Stoner

Yeah, that trend continues with the private equity deals where we have roughly the same
number of deals, but the value of those deals has dropped dramatically. And to go along with
that is a 34% increase in the number of VC backed exits. Moving on to the breakdown of our
six sectors, how is the horizontal sector looking Tomoki?

Tomoki Yasuda

Horizontal is looking fairly healthy, Amber - EBITDA multiples are on the rise while Sales
multiples have trended down a little bit. The deal I’m focusing on is the acquisition of speech recognition vendor Yap by Amazon.

Yap is best known for its voicemail transcription app and backend services for some of
Microsoft’s voice-to-text applications.

This is a very uncharacteristic buy for Amazon - historically they’ve acquired other online
retailers focusing on a specific taste or group of people... for example... Quidsi for their baby
care products, Zappos for their shoe catalogues, and so on... So why the sudden interest
in speech-recognition? One attractive answer that has been floating around the web is that
Amazon is gearing up to compete with Siri.

And although enticing, I don’t think this is the case. Yap’s speciality lies in voice transcription -
literal word-for-word rendering of speech into text.
Instead this is a straight out acquisition for patents. Yap supposedly has IP in very iPhone and
Android device.. And as the mobile device wars heat up, so has the patent lawsuits seemingly
filed by every manufacturer out there. As Amazon builds out its device portfolio, it would rather
cross-license IP than pay a fee to anyone.

Amber Stoner

That’s a really interesting deal Tomoki, you know I saw an unconventional deal in the vertical
space that I found intriguing. PLATO Learning, backed by Thoma Bravo, recently acquired
Educational Options, a provider of web-based educational software as a service for education
markets in the US, including online course management and curriculum development. Now,
what’s interesting is that EdOptions provides schools with online solutions focused on drop-out
prevention, adaptive curriculum, and virtual instruction, which when combined with PLATO will
create a unique offering in the education technology market that will allow PLATO to reach an
even broader customer base.

Tomoki Yasuda

And you know Amber, the education space is going through a lot of dynamic changes. As the
cost of education has been rising in the last decade we’ve seen a plethora of technology in all
shapes and forms come out to keep these costs minimal. And we see firms like PLATO using
this opportunity to consolidate these dynamic technologies into one powerhouse offering.

And speaking of powerhouses, I’d like to jump into the consumer segment and talk about
Microsoft’s pick up of an Israeli startup VideoSurf. VideoSurf provides an online video search
technology able to look at the actual frames inside the video and search on that specific content.
This is an appealing acquisition for Microsoft because it has been aggressively adding new
content sources to Xbox Live and also adding a search layer on top of all those apps - enabling
users to search for bits of content across multiple content providers.

Currently all that searching is being driven by metadata tags from the content providers - which
isn’t really going give you accurate results across all providers, especially YouTube if they get
added to the network. VideoSurf nullifies that, instead being able to identify actors and other key
information within the video.

And this is definitely the right step for Microsoft. It can enrich the user experience on the Xbox
but it also has bigger implications in its overall search capabilities as it could allow Microsoft to
offer rich web-based search through TV — potentially leaping over Google and its current efforts
to do the same with Google TV.

Speaking of search, a lot of people use search on Twitter. So their recent acquisition of Whisper
Systems, which provides mobile voice and data encryption software for Android smart phone
users as well as mobile firewall software, makes a lot of sense as it will strengthen Twitter’s
legitimacy as a real-time reporting system.

Tomoki Yasuda

And you know Amber, Twitter has inked about 15 deals, but this is the first one that focuses on
security. As you said, it adds real weight to it as a communications platform, safeguarding it from malicious attacks or protection against regimes shutting it down as we’ve seen this year.
Similarly in our next sector, we see another Internet firm acquiring a specific technology, the
acquisition of Hunch by eBay.

Hunch is an online recommendations engine. Using a combination of machine learning,
data mining and predictive modeling, the startup will help eBay improve buying and selling
recommendations for its users.

This helps eBay in a number of ways but I think two of the most important points are that:

One, it helps eBay compete with its rival Amazon, which has its own superior recommendations
engine. As retailers like Amazon and eBay build out almost limitless inventories, matching
recommendations to these products becomes even more important.

Two: eBay is also differentiating itself from just a seller of goods - its trying to become a
technology driven company.

Adding Hunch could be another tool on their XCommerce platform, and customers could
plug smart recommendations into their business operations. EBay is really trying to build a
commerce operating system for businesses, and it’s been actively acquiring companies and
putting all these new assets together into one big resource to help enable sales for retailers and
developers. A tool like Hunch to XCommerce customers can make the platform that much more
attractive.

And last but not least, how’s the IT Services sector looking Amber?

Amber Stoner

The IT Services sector is looking about like all the others, seeming pretty steady. One of the larger deals in the space in the past month was Presidio acquiring INX for $89.6m. With INX focused on providing network design and integration services, specializing in data center virtualization and unified communications technologies and Presidio’s focus on network, systems, storage and security integration and software development services, the combined company will be able to offer one of the broadest portfolios of services and advanced IT solutions to businesses and government agencies.

With that, I'll turn it back over to you, Dougan.

Dougan Milne

Thanks, Amber, and thanks Tomoki. Despite some slightly lower numbers in November, we are still seeing a really positive market. From an internal market we are seeing a lot of aggressive bidding for quality companies.

Israel Rising

Speaking of which, and getting further into the meat of our presentation today, John Melotte, Director of Courm's London office is freshly back from Tel Aviv, he has been meeting with a number of interesting and well-run software and internet companies. Corum has done multiple deals with Israeli firms and he'll talk a little bit about that. We're certainly no stranger to the territory. John will talk to us about some of the things that makes this region so significant in our industry. Thanks, John.

John Melotte

Well, thank you Dougan. Israel is often in the news. This small country has more than its fair share of headlines. It also has more than its fair share of software technology companies.

8 million people, living in a country similar in size to New Jersey, smaller than Belgium. Yet, it is second only to the US for computer start-ups and it has the largest number of NASDAQ-listed companies outside North America. BackWeb, Check Point, Click Software, Comverse Technology, and so on. Great global software companies.

Israel has created an environment that welcomes entrepreneurial start-ups, incubates them through their early growth, and then supports the movement of the business from the constraints of a small domestic market, re-basing executives and the sales & marketing operations in the US, but leaving the technology back in Israel, and then hooking up to US finance. This is the “Israeli model” and no one else makes it work as well as they do.

Check Point, ClickSoftware, Amdocs will be considered by most people to be American companies – but they all have an Israeli technology heart. Other companies here, such as Ness, have remained based in Israel. Like all successful global companies these top Israel buyers acquire technology and business from across the world. If the deal is right then geography is no barrier. They have done many deals in the US, but also Romania, Spain, Italy, Hungary, Czech Republic, India, Canada, Ireland, Denmark, UK…oh, and Israel.

We have on this slide a great bit of analysis for the Corum research team. Deal size is definitely on an upward track for the Israeli buyers.

Israeli buyers currently operate at an interesting level, as you can see from this slide of the notable software deals done by Israeli companies in the last couple of years. Good mid-market deals.

Israel: a land of milk and honey. A land of some great emerging software businesses, and the technology heart of good number of acquisitive companies; potential buyers of your mid-market software business.

As successful as the Israeli model has been for Israeli technology companies, not all have moved to the US. There are some great repeat buyers based in Israel. Here we have two: Ness Technologies and NICE Systems. These two companies have acquired ten companies in the last five years. They regularly appear on our lists of potential buyers for the selling clients that we represent. Indeed Corum represented Logos, one of the Ness transactions on this slide, and we have sold businesses to NICE in the past.

And with that, it is my pleasure to introduce Mr. Josef Mandelbaum, CEO of Perion, the company that was until last month known as Incredimail. IncrediMail was founded in 1999, and conducted an IPO in January 2006 on NASDAQ. It currently employs approximately 130 people, and has offices in Tel Aviv, Israel and New York. In August, Incredimail acquired Smilebox, and as Perion has secured additional bank funding for additional acquisitions. Over to Josef.

Josef Mandelbaum

At Perion, our object is really to build simple, safe, and useful products for what we call the second wave of adopters. These are people who are not tech savvy, although they are technically proficient. Technology to them is a means to an end, but such a part of life that they can't get around it, so they are embracing it. But, they are certainly not as savvy and secure in how they embrace technology. We are looking for companies in terms of M&A that really have a product in the productivity sector that addresses the needs of these consumers that we think, through good consumer insight and usability expertise, we can make it simple, safe, and useful to them for our consumers to use. And it goes across all platforms, like mobile and social. It does not include enterprise, we're really going after the consumer segment and we don't really have a geographical preference at this time.

At American Greetings, where I was the CEO for 10 years, in the internet and media division, we bought companies in five different countries, and being based in Israel actually gives us an advantage based on geography and reach. We can manage many different time zones more easily from here than in the United States from that perspective.

As I mentioned, we are not constrained by geography, but for M&A we are looking clearly at the US as for a plethora of startups, looking for different types of companies that have been around for a while, we call them orphan companies, and what I mean by that is we are looking at companies who started as much as seven or eight years ago, who have a great product, a single product in most cases, and because of different reasons, going public is not an option, they are not huge successes, but they have minor success, and the VCs are funding them in many cases, and they have to exit as their funds are expiring.

We think those are good opportunities for us and since they started six, seven, eight years ago, the reality is that they are probably more appropriate for my demographic anyway. We're also looking in Europe, particularly in Eastern Europe as it is very robust, there is lot of activity happening there, and a lot of really good technology and product people coming up with great ideas. So, Eastern Europe, Israel obviously, and the US are the three main places we are looking today for acquisitions.

As I mentioned, our focus is on second wave adopters, but the difference today between a second wave adopter and an early adopter, an early adopter fundamentally embraces a new product or new industry, and they are willing to try anything. Today second wave adopters, we look at mobile, tablets, social, those are all things which aren't new anymore, they are a few years old. Even though a second wave adopter won't be the first one to rush to try, say, Facebook if it were created today, but they would join the social revolution at some point.

So the question is how do we create products and services that really address the needs of my audience on these existing platforms. As we look at the future, clearly mobility is a big issue, whether it is a phone or a tablet, and it is going to grow and our audience, I think, may be bigger users of the tablets and will jump ahead as a consumption factor, maybe even ahead of the mobile phone, and of course social is growing as well. We're clearly looking at those aspects, where the trends are taking us, even for our audience.

Is the tech scene in Israel is unique and poised for future growth? The answer is absolutely yes. There was a book recently written about Israel called Startup Nation which describes the unbelievable technology, talent and entrepreneurial spirit of the country and the people and that is certainly demonstrated in the technology sector. Most big corporations have R&D sectors here, Israel has the most startups per capita in the world after Silicon Valley, the most entrepreneurs, the most public companies on the NASDAQ in the tech sector after the US.

A lot of this is driven by the military, there is a very sophisticated military with a draft, so a lot of people participate in that and go through certain divisions and training which hone skill sets, and just the spirit of the country is really an entrepreneurial one, which really helps drive that. The talent here is really second to none, probably on par with Silicon Valley, which gives you a great opportunity to focus on product development and technology solutions for all aspects of the technology sector, from enterprise to consumer, and especially for a company like Perion, we're certainly taking advantage of that unique concentration of technology here and we are poised for future growth, in our company, but also the country itself as well. Thanks.

John Melotte

Thank you very much Josef, for joining us today. It’s clear that your company is well positioned for significant growth in the next year and we will certainly be watching your developments.

Next I’m equally pleased to introduce live from Tel Aviv, Mr. Roy Golding, the CFO of TelMap,
a maker of mobile navigation software based in Israel. Two months ago, TelMap was acquired by Intel. Details of the deal were not disclosed, but Israeli media said Intel was paying $300 million to $350 million. A major deal, surely, but in past month’s time, TelMap has made two of its own acquisitions -- first of Australian mobile carrier Optus and second: South Africa's third largest mobile operator, Cell C, which will provide mobile mapping, search, and navigation services for Telmap. Roy, it’s been an amazing few months for you. What can you share with our attentive audience about your experiences?

Roy Golding

Thank you, John. It has been a very exciting last few months and I have just been with TelMap for 2.5 years and I can say that these years have been extraordinary, exciting, certainly taking into consideration the dynamics in the market and how face this market has moved.

Within these last two years, TelMap has renewed all its major contracts with the global leaders in tier one mobiles, and we signed additional contracts with NTS, one of the biggest Russian operators. We support a vast majority of operators around the world, including a recently renewal of contracts with all four carriers is Israel.

Through this dynamic market, so much has changed, but we are profitable and cash positive. In addition, we released some time ago what we define as the creation companion, which is TelMap 5, cutting edge technology for location. We have the basis for advertising, local content, social, and commerce, all meeting together in location. We positioned ourselves as a leader and as of a year ago, 46% of paying users are TelMap users.

TelMap is consistently the fastest, consistently growing company in our segment year after year. TelMap did not settle in the position where it is now. We felt about a year ago that the time for TelMap with its new contracts, its business model, its profitability, the cash flow, that it was time for us to move to the next level.

We had many meetings and we thought about the possibility of acquiring and we decided that we wanted to escalate to a level where we could engage with the big players. We started a process, looking at and defining backers. We went to all the suspected guys and chose backers that we felt comfortable with and who had experience in this field. This was a very long and exhausting period.

First of all you just want to find the right partner, a partner with vision who presents itself and gives the company the opportunity to grow and execute its vision. We found that partner with Intel. Both Intel and TelMap position themselves as friendly to the operator. They don't go after the end user, they don't take away the business, we work together and we provide one label for the operators. This obviously supports also the Intel vision. We felt that it was a very good match and Intel acquired TelMap as a stand alone company, meaning we have freedom and we can execute our vision and continue our growth in an ever-changing market.

One of the things that I think is worth mentioning is the joint vision that Intel and TelMap have. Intel's field mobility is one of its growth areas and plays a leading role across the mobility ecosystem, including consumer services. Obviously in that ecosystem, location is a key factor, and TelMap is a market leader in the mobility location industry. TelMap has developed cutting edge technology and IP around mapping, location services, and navigation. As a result we have more than 7 million users using that technology and location companies worldwide.

With that, John, back to you.

John Melotte

Well, Roy, we can’t thank you enough for joining us live from Israel and sharing your insights. Corum’s European team has just returned from a 5-day trip of meetings in Tel Aviv, but we’ll be back soon and we hope to catch up with both out guest speakers then, and with the many Israeli companies that we have mentioned today.

Dougan, that’s our report from Israel. Back to you.

Dougan Milne

John, thanks for your insights on the region and certainly a special thanks to Roy and Josef for taking the time today, congratulations to both of you on your M&A success.

We do have one more speaker, a friend of Corum, Stefan Fountain, he is the founder of Soocial, and Nat Burgess, Corum's President, had the chance to catch up with Stefan for a very candid explanation of his deal, so let's go ahead and roll it.

Nat Burgess

Now we have Stefan Fountain, founder and CEO of Soocial. Soocial was acquired on Tuesday by Viadeo. Stefan, welcome. First, tell us about the name. How did you arrive at the name Soocial with two Os?

Stefan Fountain

It sort of started as a joke, because we realized that Google, Facebook, and Yahoo! all had two Os in the name. We figured that if you want to make it big, clearly you need a name with two Os. And the reason behind Soocial, well the whole idea was that you have all these social networks, and in Holland you had a network called Hide. People were sending each other virtual beers and it was very silly. So we looked at that and felt that the most important social network you have is still on your phone, the people you contact to have a real beer with, the people you go out and have meetings with and if they are not in your phone, then they can't be that important. Hence the name Soocial and the whole idea of backing up and synching your phone address book with other address books.

Nat Burgess

If they're in your phone and you get a new phone, or you entered them in another system, you can solve that problem of making your contacts available anywhere.

Stefan Fountain

That's it in a nutshell.

Nat Burgess

You've had talks with a number of companies that are global household names in social networking, but the company that ultimately bought you is not, especially here, a household name. They are Viadeo. I was looking at them, they have over 40 million users.

Stefan Fountain

Yes, it's very interesting. It seems like these guys have been able to sail under the radar a bit and now they are really gearing up for a much more global exposure. They are really big in France, they're number one there.

Nat Burgess

They're certainly part of a bigger trend that we are seeing with buyers we've never heard of emerging from different geographies. That is exciting to be part of that. Let me ask you a last question, in terms of getting that last transaction done, was there anything that you did that worked particularly well to move that to closure?

Stefan Fountain

I think there are two elements there. I think the one is a balanced enthusiasm, understanding what their vision is and really trying to get behind that vision and seeing if it aligns with your own. That's what happened with these French guys, we found a real click with their CEO and their product officer and we really hit it off. We immediately decided that was where we were going, and I think it was really key to do that.

The other side is playing hard to get a little bit.

Nat Burgess

Well, thanks for checking in with us from Amsterdam. I'm looking forward to hearing your next album. If anyone is interested, go to littlethingsthatkill.bandcamp.com, and there you'll find music with Stefan on bass and backing vocals. Thanks so much, Stefan.

Dougan Milne

Nat, thanks for making that phone call. Folks, that was Soocial in a nutshell right there. Good for Stefan, a great deal for both parties there.

I see our chat window has been filling up with questions, we'll go to our Q&A with some of our speakers and the Corum team now.

Q&A

Ward, we just have a few minutes left, so where should we start?

Ward Carter

Thanks, Dougan, I have a question here for Roy Golding. The question has to do with the growth opportunities you spoke about, specifically, how do you see growth within Europe given the current economic volatility, and secondly, how do you see other geographic regions emerging going forward?

Roy Golding

That's an excellent question. We still have work with the major operators within Europe. Even though you see a significant slowdown there, the smartphones and GPS phones are still consistently being sold. That increases our accessible devices and that gives us additional reach within Europe. In addition, we have significant agreements in India and the Far East, and the Far East is growing. There the growth is incredible, the smartphone is on the rise, and we see incredible opportunities there. We believe we haven't even seen the tip of the iceberg yet.

Ward Carter

Thanks, Roy, sounds like exciting times.

Now we have a question for John Melotte. With so many Israeli companies seeming to be successfully making the move to the US, whereas other companies may really struggle to move here, what are your thoughts on why that might be?

John Melotte

Thanks, Ward. If it were a simple matter, then no doubt many companies would copy the strategy. I would guess it is a combination of factors, the quality of the core technology developed in Israel is just excellent and this is left in Israel, minimizing disruption for the core development team. Secondly, senior executives move into the US from the parent Israeli companies, so that the DNA of the business is fully transferred, which avoids the risk of building a local US team. The third thing is that expansion capital is sourced from the US and not from Israel, allowing the company to draw on the much greater resources in the US. It seems to work.

Ward Carter

Thanks, John. Elon, this is a patent question. The question is, isn't the good law good for small companies because it will streamline litigation and they won't have the expense of proving first invention?

Elon Gasper

Well, sure, once you have a patent and you are passed the new nine-month window for the big guys to take potshots at you with piles of prior filings that will cook slowly through the new invalidation procedures, after that it may cost less, but up to that point it pinches worse, so this law basically shifts the need for money, after you get a granted patent, to earlier, as soon as you invent something new. Now that is not a big deal if you have easy access to capital, but if not, now you need to file faster, at a time when you have more business risks, so you have to drive a worse bargain with investors or acquirers during M&A. It will devalue your unfiled inventions and devalue your granted ones if you don't have cash for defending in the new nine-month after window. The acquirer could argue that it is a liability, maybe even ask for an earn out reserve or an escrow against these uncertain costs of insuring a patent's survival through the new maturation threshold.

Ward Carter

Thanks, Elon. It's certainly going to be an interesting time as this works out. That concludes our hour. Thanks to all of you for joining us, especially our guest speakers, and that concludes our presentation.