Gilat Communications Ltd.
Group Members:
Shay Adler
Guy Poreh
Neeli Rotem
Itey Oleinik
Ayala roitman
Gilat Communications – Company Analysis
GILAT COMMUNICATIONS LTD. ................................................................................... 1
EXECUTIVE SUMMARY .................................................................................................... 3
THE COMPANY ....................................................................................................................... 3
TARGET.................................................................................................................................. 3
THE REVOLUTION .................................................................................................................. 3
THE REASONS FOR GILAT’S SUCCESS ..................................................................................... 4
THE REASONS FOR THE CRISIS................................................................................................ 4
OTHER RELATED PROBLEMS ................................................................................................... 5
STEPS TAKEN IN ORDER TO OVERCOME THESE PROBLEMS- .................................................... 6
INTRODUCTION................................................................................................................... 9
COMPANIES MILE STONES............................................................................................ 10
GILAT'S MANAGEMENT TEAM .................................................................................... 11
THE E-LEARNING MARKET .......................................................................................... 13
INTRODUCTION .................................................................................................................... 13
THE EDUCATION MARKET ................................................................................................... 13
TECHNOLOGICAL EDUCATION MARKET............................................................................... 13
MARKET SEGMENTATION ACCORDING TO CUSTOMERS ........................................................ 14
MARKET SEGMENTATION ACCORDING TO SERVICES ............................................................ 20
WHY IS THE E-LEARNING MARKET EXPECTED TO GROW DRASTICALLY OR WHAT’S SO
GOOD ABOUT E-LEARNING? ................................................................................................. 21
MARKET TRENDS ................................................................................................................. 23
MAIN MARKET CHARACTERISTICS: ...................................................................................... 24
BUSINESS MODEL ............................................................................................................. 25
GILAT COMMUNICATION'S EL SOLUTIONS ........................................................................... 25
SALES AND MARKETING ...................................................................................................... 29
RESEARCH AND DEVELOPMENT............................................................................................ 29
INTELLECTUAL PROPERTY ................................................................................................... 30
RISK FACTORS IN MARKETING............................................................................................. 30
COMPETITION ................................................................................................................... 32
INTRODUCTION TO ............................................................................................................... 33
LIVE ONLINE LEARNING ....................................................................................................... 33
BROADBAND ........................................................................................................................ 34
NARROW BANDWIDTH SYSTEMS .......................................................................................... 38
STRATEGIC ALLIANCES ................................................................................................. 42
SWOT..................................................................................................................................... 43
STRENGTHS .......................................................................................................................... 43
WEAKNESSES ....................................................................................................................... 43
OPPORTUNITIES ................................................................................................................... 43
THREATS .............................................................................................................................. 43
PROBLEM DESCRIPTION ............................................................................................... 45
CONCLUSIONS AND RECOMMENDATIONS.............................................................. 47
2
Gilat Communications – Company Analysis
Executive Summary
The Company
Gilat Communications Ltd. (here and after Gilat), was founded in 1990 as subsidiary of
Gilat Satellite Networks (here and after GS).
Its core business was cable TV consulting and satellite communication services. Since 1995,
the company had changed its focus into a communicatipn and E-learning (here and after
EL).
The document deals with the company’s evolution, it struggle to penetrate the E-Learning
market and
the problem it is facing today .
Target
Since the year of 2000 the company had began suffering from a decline in its share value
and its position in the market. This document deals with the reasons for the decline, the steps
the company took to resolve the problems and our analysis of the company’s failures and
successes.
In this article, we will also attempt to suggest and estimate what does the future lay ahead for
Gilat Communications .
The Revolution
Until 1995 Gilatsold mainly satellite communication services to Israeli customers. In an
attempt to find new markets for its satellite services, the company joined an EL project in
cooperation with the Open University and a company called Arel.. In this project, the OpenU
supplied content, Arel (one of Gilat’s main competitors 0today)supplied the E-Learning
platform and Gilat was responsible of the satellite communication.
As a result of this project, Gilat made its first step into the E-Learning market and started
developing its own E-Learning systems .
The development of its sophisticated live E-Learning system and the world’s growing
interest in E-Learning had put Gilat in the center of attention by many institutions around the
world . This, in turn, caused Gilat to change its core business into E-Learning and changing
it self from a services company into mainly a software developing company .
Over the years Gilat had enjoyed the booming Hi-tech market and had grown to be a 540
million dollar company, known as a leader in the E-Learning field.
It’s important to note, that Gilat’s success in the E-Learning field was mainly conceptual and
never financial. It was always seemed to be financially successful due to the fact that its
3
Gilat Communications – Company Analysis
financial reports were combined with its satellite services division’s (Gilat Satcom) reports
which were always on the ‘bright’ side.
The reasons for Gilat’s Success
First and formost the correlation and the promotional umbrella given by the name Gilat
(which was mainly correlated with the success of GS) . Futhermore live E-Learning was a
new and emerging market with very few players in it. The only real competitor at that time
was One Touch which pioneered in the US market with a non-PC based system.
One of Gilat’s main advantage over its competitors was the different concept of using a PC
as the learning platform rather than a TV and a special console . The use of a PC as a ELearning platform gave an advantage of improved interactivity and many improved
features unavailable on the older platform .
In the beginning of 2000Gilat entered a crisis. Within half a year, the company’s value fell
from $540M to $18M - a drop of 96 percent.
The reasons for the Crisis
The main reason for Gilat’s downfall was a technological gap that had opened between her
and the market. Gilat was mainly active in third world countries where communication relies
on satellites. Gilat’s technology was therefore mainly based on the satellite’s broadband
communication and not suitable for the narrow band Internet. Gilat did not see the internet
technology as the leading format for E-Learning and believed that satellites will still be the
preferred way for conducting live E-Learning lessons.
The main E-Learning market in the world is located in the United States and Europe were a
very advanced Internet infrastructure was created. The higher cost of satellite communication
caused more and more companies to prefer the the low cost, narrow band Internet over the
satellite. This in turn meant that Gilat was loosing market share in those regions was satellite
communication was not a necessity. .
In orer to overcome the technological gap, and provide solution for narrow band
environments Gilat purchased LearnLinc, a supplier of internet based live E-Learning.
Learnlinc’s product complies with the standard, but is not a first rank product. In an attempt
to broaden its product range , Gilat purchased Allan, a supplier of a-synchronies content.
These steps seemed promising at first, and led to the rise in Gilat’s stock price (along side
with the booming NASDQ).
4
Gilat Communications – Company Analysis
As months passed, it became evident that the older strategy of the company (based on low
volume sales – high sale value) was not working anymore. The drop of the NASDQ and the
fact that the united Gilat group couldn’t not justify the trust of the investors ledto an cut in
the stock price.
The main problems of Gilat were the fact that it has failed in recognizing the market shift
into the Internet and its reliance on satellite communication (which helped her in the first
stage) had turned out to be her downfall.
Integration of the companies it acquired failed to provide the proper value, partly due to the
geographical distance between the companies and partly because the purchases were not of
the most profitable and successful companies in the first place. Gilat found out that it could
not maximize the potential of the companys it acquired without further investment (mainly
in development) and the only effect of the acquistion was on the cash flow. The investors
failedto see how these acqusitions would increase the earning power of Gilat leading to a loss
of faith on the part of the investors.
Other related problems
1) Lack of sales force. One of the most important success factors in this market since it
is very hard to acquire a customer but on the other hand there is strong customer
loyalty.
2) 2) Lack of focus. Gilat’s management was indecisive and not focused leading to
comprehensive business model.
Moreover there are many problems with the EL market:

Unstable market

Customers wants EL as a free experiment rather than an investment.

There is a change in the market trend. In the past, investors believed that it was
alright to be a loosing company – not true anymore today.
Today there are few companies in the EL market which are earning money. Gilat claims that
they were the first of many companies to be hit by these new trends.
Sales are hard to execute since they are very large, the overhead is great, and the company
needs to invest lots of time and money before completing a deal. Moreover, the purchasing
5
Gilat Communications – Company Analysis
agent is usually not senior and does not have a big budget. This fact makes sales even
harder.
Steps taken in order to overcome these problemsTwo new CEO’s took the place of Mr. Tirosh, the former CEO, who steped down.
Gilat plans to separate its satellite services (Gilat Satcom) business from the E-Learning
businesses . This will have, undoubtedly, an immense effect on Gilat’s cashflow but it will
enable Gilat to act according to its own needs and assess its situation properly.
Gilat is trying to build a new business model. In order to complete its product, Gilat will
offer full E-Learning services in addition to the services it offers today. The company will
continue to address the corpoarte segment because they believe that that is where the money
is Furthermore, they want to utilize their limited sales force.
The company will continue to focus on the use of video, as it did from the beginning.
It. Furthermore, Gilat intends to position itself not as a remote learning company with little
appeal to the investors, but as an instruction company, which is more appealing.
We believe that Gilat can and should address other sectors in the market and not limit
themselves to the corporate sector since the needs of other sectors are very much the same as
those of the corporate sector. In order to to so, they must enlargen their sales force.
Furthermore, we believe that Gilat should focus on its core business, be attentive to the
market and its needs, and invest time and energy in integrating the activities of all its
subsidiaries.
6
Gilat Communications – Company Analysis
Gilat Communications Ltd.
7
Gilat Communications – Company Analysis
8
Gilat Communications – Company Analysis
Introduction
Gilat Communication (here and after Gilat) is a global provider of complete e-learning
(electronically learning, here and after EL) solutions for the creation, delivery and
management of training and education programs for organizations. Its solutions implement
EL through a wide range of communication platforms, including corporate Intranets and the
Internet by going over conventional and broadband networks . Gilat's EL solutions enable its
customers to increase their training capacity, expand core competencies and enhance
productivity.
Gilat try to address customers' specific needs, by designing and providing customized EL
solutions, which enable the customers to deliver knowledge to broadly dispersed users, and
to monitor and measure student learning process.
Gilat is distinguished from other companies by the fact that they provide a fully integrated ELearning solution that includes : Proprietary and third-party content, Courses creation tools,
Content delivery technology, Hosting services for applications, Courseware development.
Gilat’s secondary business is selling satellite-based communications services in Israel.
A business that provides 18 percent of consolidated revenues and position her as a dominant
provider of satellite communication in Israel.
9
Gilat Communications – Company Analysis
Companies Mile Stones
Gilat Communication was founded in Israel in 1990 and has been providing satellite-based
communications services since 1992 and E-Learning platforms since 1995.
It began as a cable TV consulting company which worked mainly in Israel and was called
‘Gilat networks engineering’. Its main business was helping cable companies design and
build their cable networks countrywide (one of its main clients was Matav cable TV).
From 1992 onwards Gilat started providing satellite networking services to various Israeli
clients like Mifal Ha’pais, Kupat Holim Macabee etc
Production and sales of interactive distance learning systems began in 1995 after a united
project with the Open University and Arel (now a competitor of Gilat). The first product to
go into production was the LeamNet, in 1996.
In 1997, Gilat introduced a new interactive distance-learning product, TrainNet, aimed at the
corporate training market, and completed its initial public offering in the forth quarter of that
year.
Since November 1999, Gilat completed the following three acquisitions, which complement
its core EL technologies:

Allen Communication: a leading provider of consulting and advanced courseware
development services, located in the USA.

LearnLinc Corporation: a pioneer provider of live, Internet based E-Learning.
.located in the USA.

John Bryce Training Ltd: a leading provider of IT training in Israel, with expertise in
course design and development.
In May 2000, Gilat announced the launch of Mentergy, Inc., a wholly owned U.S. subsidiary
(formally known as Gilat USA), which is intended to integrate the expertise of Gilat’s recent
acquisitions and to offer a combined comprehensive E-Learning solution.
The united group has more than 5,000 customers in the United States alone, including
approximately 60% of the Fortune 500 companies. Its customers include companies such as
Aetna U.S. Healthcare, MCI WorldCom, ExecuTrain, Citibank, U.S. Air Force, Procter and
Gamble, Rockwell Collins, and Countrywide Home Loan.
10
Gilat Communications – Company Analysis
Gilat's Management Team
Gilat's executive officers, key executives and directors as of June 15, 2000 are as follows:
Name
Age
Position
Shlomo Tirosh(1)
55
Chairman of the Board of Directors and Chief
Executive Officer
Noam Fink
42
Executive Vice President, Chief Financial Officer
and Director
Degerhan Usluel
28
General Manager e-learning, Vice President
Research and Development and Director
Dr. Steven W. Allen
57
Chairman, Mentergy, Inc.
Dr. Jack Wilson
55
Chief Scientist, Mentergy, Inc.
Naftaly Barak
52
Managing Director, Gilat Satcom Ltd
Oz Bornstein (2)
32
Director
Basil S. Gamsu (2)
53
Director
Amiram Levinberg (1) (2)
45
Director
Gershon Patron (1)
56
Director
Lenny Recanati (1)
47
Director
(1) Member of the Stock Option Committee.
(2) Member of the Audit Committee.
11
Gilat Communications – Company Analysis
Shlomo Tirosh is a co-founder of the Company and has been a Director since the
Company’s inception, serving as Chairman of the Board of Directors and President of the
Company. Mr. Tirosh is a member of the Stock Options Committee of the Board. Mr. Tirosh
is also a director of GS (whose shares are quoted on the NASDAQ National Market) and
served as the Chairman of the Board of Directors of GS between 1987 and 1995. Mr. Tirosh
served in the Israel Defense Forces (“IDF”), where he held a variety of professional and field
command positions and retired with the rank of colonel. Mr. Tirosh fulfilled a wide range of
top management positions through different governmental and private technological
development companies. Mr. Tirosh holds a Bachelor of Arts degree (summa cum laude) in
economics from Bar-Ilan University in Ramat Gan.
Mr. Tirosh has recently stepped down from the CEO position and was replaced by 2 yuong
CEO’s.
Noam Fink joined the Company in 1990 and he currently serves as the Company’s
Executive Vice President and Chief Financial Officer. Prior to joining the Company, Mr.
Fink was a senior communication systems engineer for Motorola Israel. Mr. Fink holds a
Bachelor of Science degree in electrical engineering from Tel Aviv University.
Naftaly Barak is General Manager of Gilat Satcom. He joined the Company in 1991. Prior
to joining the Company, Mr. Barak served in the IDF (1969-1986), where he held a variety of
professional positions. Mr. Barak holds a Bachelor of Science degree from the Technion.
Avraham Rozenbach became is Vice President of Marketing and Sales in March 1999 and
he is responsible for the direction and implementation of all sales and marketing strategies.
Prior to joining Gilat, Mr. Rosenbach served as general manager of NetXchange, a pioneer in
enhanced Internet telephony applications, where he established and managed the products
and marketing operations. Prior to that, Mr. Rosenbach served as director of sales and
marketing for Bay Networks (now Nortel Networks), was a founder and held senior
management positions at Armon Networking, a market leader in network management
systems. Early in his career, he served as an R&D manager at Tecnomatics and at Amdhal
Corporation. Mr. Rosenbach holds a B.Sc. in Mathematics and Computer Science and M.Sc.
in Computer Science from the Hebrew University in Jerusalem.
12
Gilat Communications – Company Analysis
The E-learning Market
Introduction
Analysis of the E-Learning market analysis is based on studies conducted by IDC, Meryl
Lynch and others. Most of the studies concentrate on the US market which is the most
dominant and
The Education Market
Education is the second largest industry in the USA, After Health care. The Education
Industry grows at a rate of 3-6% a year.
Expenditure on education in the US in 1999 was 750 Billion Dollars. Most of the education
is done via instructors – a method which increases expenses dramatically. More over – the
results of this method differ greatly. There is great pressure to reduce expenses, increase
results and availability.
The size of the Education market in the USA was estimated around 1.1 billion dollars in
1999 and it’s expected to grow to 11.4 billion dollars in 2003 – an annual growth rate of
80%.
Technological Education Market
The use of technology-based learning and training products is growing rapidly. The demand
for these products is increasing as it becomes apparent that distance learning and training is a
cost-effective means to provide high quality training and education for geographically
dispersed populations. The education and training market for adults and the corporate
training market have been expanding in recent years.
Technology spending by public schools in the USA has increased at an annual rate of 14%:
from $2.1 billion in 1990 to $4.8 billion over the past 6 years. This represents only 16% of
the total expenditure.
13
Gilat Communications – Company Analysis
Market segmentation according to customers
The distance learning market is divided to 4 main segments:
Elementary and High schools- 389 billion dollars were spent by this segment in
the USA in 1999. This segment is expected to grow to an estimated $545 billion by
2008, i.e. an annual growth rate of 3%. Despite a slowing growth rate of the number
of students, there is no slowing of spending in this sector. Due to the large size of this
segment (huge number of students, teachers and schools) and due to the great need of
result improvement, this segment has a huge growth potential.
Educational te chnology funding in s chools
(billions of $)
6
5.4
5
4
3.6
3
2
2.1
2.5
3.9
4.3
4.8
Series1
2.8
1
0
19
91
19 2
92
19 3
93
19 4
94
19 5
95
19 6
96
19 7
97
19 8
97
-9
A.
This is a market that is ripe for improvement by using online tools since
Internet access has become a major policy initiative in schools. For
example, in 1999, 95% of the schools and 63% of the classrooms in the
USA had Internet access. 70% of the students have PC’s at home.
EL can supply students with what they lack most – personal attention. Elearning systems in the near future will be able to track each user's way of
learning and areas in which the user needs to improve and work
accordingly.
Another challenge the companies are facing in this sector – winning over
the teachers: they need to be convinced that the Internet is a valuable tool
and to start feeling comfortable with the technology.
14
Gilat Communications – Company Analysis
This sector is greatly fragmented and is influenced by politics, thus
entering this market may be tough. In this sector there is another problem
– the company must answer to students and parents – two totally different
kinds of customers.
The dissatisfaction of parents from public schools will be a strong drive
towards EL. The dissatisfaction works as a barrier remover in this sense.
On the other hand, platform providers have an opportunity to build lock in
for their products in a variety of ways such as integrating their product
with other computer systems within the school. This kind of solution will
create customer loyalty, which is very important in this field due to large
expenses in recruiting a customer. Customers in this segment are generally
most loyal because students, teachers and parents have a hard time
learning and adjusting themselves to a new computer system.
There are no brand names in this sector, such as in the higher education
sector.
In this sector there are companies supplying hardware services (platforms)
and companies supplying software services (teaching programs, programs
for evaluating students, keeping track of their grades etc.)
We should mention ZapMe!, NetSchools and BigChalk.com.
There are Companies such as Lightspan, ThinkWave, and Family
Education Network, which have portals connecting parents, students and
teachers. In addition, these Portals supply work tools for teacher and
different educational programs.
To sum it up – this is a sector with a lot of potential, though with a lot of
entry barriers as well. It holds lots of challenges for the companies
wanting to address it.
B.
Higher education- This sector includes colleges, universities, Professional
technological schools, graduate school and vocational schools. In the USA alone 232
Billion dollars were spent in 1999 in this sector. In the last eight years the annual
growth rate of spending in this sector was 6%. Between 1999 and 2002 the expected
15
Gilat Communications – Company Analysis
annual growth rate is 6%. The number. of students in higher education is growing
rapidly and therefore the expenditure in this sector is growing. This sector can be
divided to two main parts:
1. Traditional universities that have their educational program on the net.
Two of the main companies giving services in this field are
Blackboard and Campus Pipeline.
2. Private schools, working for profit and dealing with adult education.
These schools are in different stages of transferring their educational
program onto the Net. This part is 4 or 5 times bigger than that of the
traditional universities but it is highly fragmented and so it may take
much longer until e-learning is adopted. On the other hand – this is a
highly profitable market since these schools must give their students
the best there is to offer, otherwise – they won’t survive financially.
C.
Corporate-In today's knowledge-based economy, the primary key to the success of an
organization is timely access to a constantly changing body of information.
Information needs to be distributed rapidly, efficiently and effectively so that it may
be used to improve productivity and enhance performance within the organization. In
addition, organizations need to present and deliver to their workforce the opportunity
for continuous learning and career advancement.
Historically, organizations have provided education and training through traditional
classroom and distance learning methods such as mail exchanges, correspondence,
video broadcasting, video conferencing and CD-ROMs. These methodologies have
become less effective because they are logistically complicated, difficult to customize
and update, not focused on the individual, do not support convenient tracking of
performance, costly and slow.
Organizations are therefore turning increasingly to interactive, computer-based and
Web-based technologies as a more effective training delivery method. While
organizations can obtain each of the principal components of a technology-based
training system-content, services and enabling technologies-from separate vendors,
integrating those components into an effective solution can be time-consuming and
16
Gilat Communications – Company Analysis
expensive, and require specialized expertise. Therefore, organizations will turn
increasingly to providers that can offer comprehensive, end-to-end solutions.
The corporate sector includes courses given to workers by the firms/institutions they
work for, within their work places or at home and instructions given to customers by
firms. In the USA alone 63 billion dollars were spent in 1999 in this segment. This
includes expenses for training by the firm itself and by outsourcing. Most of the
money is spent on training by the firm itself but outsourcing has been growing at an
annual rate of 9% in the last 5 years. The annual growth rate of this sector is 4%.
According to International Data Corporation, the online corporate learning market is
projected to grow from $550 million in 1998 to more than $11.4 billion in 2003.
Training Magazine reported that U.S. domestic corporations with over 100 employees
budgeted approximately $62.5 billion for training in 1999, including costs of internal
training, compared to $48.2 billion in 1993. Surveys predict that until 2002 50% of
instruction will be done through EL. The Eliot Mazy Center predicts that at that time
81% of the firms will have some sort of EL.
Firms used to use EL for IT training only but now days, it is used for training in all
fields.
Corporate training market (in billion $)
70
60
50
43.2
45
52.2
48.2 50.6
55.7
58.6 60.7
40
Series1
30
20
10
0
1991 1992 1993 1994 1995 1996 1997 1998
D.
Consumer/Home- There is no association or government agency keeping track of
this sector so it is hard to track its situation.
This sector is estimated at 40 billion dollars, although it may be bigger.
17
Gilat Communications – Company Analysis
The consumer sector may be divided into 3 groups:
A.
Professionals such as doctors or accountants who are required to take a certain
amount of continuing education to maintain their professional designation.
Among the companies addressing this market are:
MedCases- developing a case study approach to medical learning via the
multimedia capabilities of the Internet. The Harvard Medical School was one
of the first customers to sign up for the service.
Webed – A company mainly addressing the school sector. This company has
developed a series of accredited continuing educational courses for teachers
delivered asynchronously on a 24 hour/7 days a week basis.
B.
Academic learners who aren’t enrolled as full time students. There are a few portals
helping people find the course they want – Hungry minds (courses from establishes
institutions), SmartPlannet (paid courses) Acadio (general courses).
C.
Life long learners – People with no specific agenda, learning for their selfimprovement.
The problem with this sector is that it is hard to attract customers at a reasonable
acquisition cost.Here are some examples of companies addressing this market and the
ways they attain customers:
Corpedia –puts material based on famed teachers lessons on the net and thus attract many
customers.
Hungry Minds – has affiliated itself with a number of highly regard0ed universities in
order to penetrate this market.
Learn2.com – in order to penetrate this market this company is trying to build a brand
name. It is partnering with companies like Compaq to include certificates for a no. of
00hours of online computer training with the purchase of a Compaq computer.
18
Gilat Communications – Company Analysis
Market segmentation according to customers
9%
6%
school
higher edu.
54%
32%
corp.
home
19
Gilat Communications – Company Analysis
Market segmentation according to services
We shall divide the market according to 3 main kinds of services:
Content:
This sector included courses, Multimedia, simulations, testing and assessment tools. The
product may be a shelf product or a product specifically designed for a certain customer
according to his needs. The annual growth rate of this sector is expected to be 70% in the
next few years. Content is divided into two groups:
i. IT (Information Technology) – This is the field that gave e-learning progress
in its first stages. In 1999, 78% of expenses on e-learning were spent in this
field.
ii. Non IT (or “soft skills”) – This is the field that is going to grow rapidly in the
next few years, 54% of expenses on e-learning will be spent in this field.
Delivery solutions
Supplying platforms for E-learning. This includes virtual classrooms and collaboration
software. This sector has the lowest annual growth rate: 59%, over the 4 next years. In 19981999 firms spent 190% of what they spent before on platforms. Among the companies
addressing this sector are Digitalthink, Click2learn, Smartforce and Centra Software.
Services
Companies giving need assessment services, planning an information program (tools for
course development, integration of different studying systems etc.), support and reporting.
The leading companies in this sector are Saba ,Click2learn ,Smartforce and Digitalthink,
which entered this market by purchasing Arista knowledge systems.
This sector’s annual growth rate is expected to be 113%.
20
Gilat Communications – Company Analysis
Why is the e-learning market expected to grow drastically or What’s so good about Elearning?
1. The Internet is the perfect tool – high availability, endless graphical and technical options etc.
2. Organizations nowadays are very large and have workers all over the world. There
are many international companies who have workers abroad constantly. There is a
need to be in contact with these workers and to transfer information to them quickly
and efficiently.
3. Extensive mergers cause many organizational cultures to come together. These
don’t always blend. There is, therefore, a great need for extensive and efficient
instruction, in order to straighten the lines. Many organizations view inner
instruction organs as suppliers of the “cement” that will stick all the merged
organization together.
4. The importance of knowledge is growing rapidly. Organizations are constant
learners. An organization that fails to convey relevant information to its workers
efficiently won’t survive. 57% of the workers in the USA 1996 used information
first and foremost, and the numbers have been growing over the years. The workers
themselves expect their workplace to supply updated information so that their
economical value in the job market won’t decline.
5. Exchanging opinions between the workers and automatic feedback causes the
learning process to be much more fruitful.
6. E-learning enables many students to enjoy the best teacher the organization has to
offer.
7. E-learning enables each student to learn according to his pace and at his leisure.
8. There is a need to cut expenses connected to instruction. E-learning saves cost of
classrooms, teachers, traveling to studying sessions abroad etc. Centra Software, a
company that supplies virtual classrooms, collaboration software and online
services estimated that using its product enables the firm to save 3.4 million dollars.
9. The E-learning systems enable the firm to track the way different people learn. This
will enable the firm to improve the teaching methods and measure investment
versus results.
10. E-learning enables the firm to instruct its customers efficiently and cheaply.
21
Gilat Communications – Company Analysis
11. There is a growing life long student population on one hand and a shortage of free
time on the other. This is due to many reasons, among which is the importance of
being updated when looking for a job. E-learning fulfils these needs.
22
Gilat Communications – Company Analysis
Market trends
1. A growing use of E-learning. It isn’t expected that E-learning will substitute
traditional learning all together.
2. Corporate universities- Many organizations, such as Dyimler Kryzler, British
aerospace and Ernest & Young have established academic institutions, similar
to universities, together with establishes academic institutions, in order to
enhance the content of studies conveyed to their workers.
3. There is much cooperation between different firms and academic institutions,
without establishing universities as stated above. In the e-learning market there
are hardly any brand names and the firms want to use brand names of wellknown universities to enhance their sales. The universities, on the other hand,
need to keep up and want to present themselves as modern, well equipped and
efficient institutions. They do so by cooperating with the firms.
4. Moving from using E-learning in the IT field only to other fields, which are
generally called “soft skills”. Since E-learning was used for IT only in the past,
there are firms, which give services in this field only. In future, customers will
demand a total E-learning solution, for two of the fields, in order to avoid
working with many vendors. Thus, firms which will adapt themselves and be
able to give services in two of these fields (by M&A, cooperation with other
firms etc.) will be the firms that succeed.
5. Standardizing trend- Customers want the content package to suit all platforms.
This will be more convenient and save implementation costs. At present there is
no standard, but it is to be expected. Airline Industry CBT Committee, for
example, is forming a standard for flying training programs, which was adopted
by other industries as well.
6. At present there are two models of service supplying- In the first case the
software is implemented on the customers computer. In the second- the software
is implemented on the providers computer and the customer uses it via the web.
At present most customers prefer the first mode, due to security reasons. It is
expected that in future customers will prefer the second model since
implementation costs are smaller, updating the software is easier and any
problem is detected and taken care of in a short period of time. Moreover –
23
Gilat Communications – Company Analysis
safety methods are expected to develop. Thus, most companies are expected to
switch to the second model.
7. Switching from independent E-learning platforms to platforms which are
integrated with the other systems in the organization for example: E-learning in
school will be integrated with the grade system, the enrolment system etc.
8. The side market (including all artifacts students buy such as clothes, books etc.)
was identified as an extremely profitable market and is becoming computerized.
For example, iCollege has created a card that can be used for shopping around
the campus. Parents may charge this card with money through the web and
control their children’s spending.
9. Firms that in the past addressed one client segment will address other segments
as well since services demanded by the different segments are very much alike.
This will enable the firms to enlarge their market share and therefore their
earnings.
Main market characteristics:
1. Customer loyalty- Changing service suppliers is very expensive and inconvenient.
Therefore the firm who addresses a certain ELient first has a great head start. The
importance of marketing is huge.
2. Clients are careful in choosing their supplier, since they figure it’s a long lasting
relationship. Therefore – the cost of attaining a customer is pretty high.
3. Versatility- There are different customers in the market with different needs. They
differ in the way they pay for the services as well. Therefore companies addressing
several segments will have to hold different marketing teams, instruction teams etc.
4. High Segmentation.
5. The competition in the market hasn’t reached its peak yet, since the market is young
and there is still enough work for all firms. It is expected that the competition will
grow as time passes.
24
Gilat Communications – Company Analysis
Business Model
Gilat Communication's EL solutions
Gilat’s complete enterprise EL solutions are comprised of an end-to-end integrated set of
products and services built on strong instructional design principles and Internet
technologies. The customer-focused approach is designed to be tailored and implemented in
the manner most suitable to Gilat’s customers' business strategies and objectives. Gilat’s
offerings can be implemented as a whole integrated solution or as individual elements. The
solution allows organizations (Gilat does not operate directly with private clients) to
effectively meet their internal and external learning needs thus increasing productivity and
maintaining their competitive position.
The steps that are implemented in creating and customizing EL solutions include the
following:
E-Learning Strategy
The process begins with the need assessment undertaken with the organization to jointly
define the customer's EL requirements. Gilat’s highly experienced learning and training
experts employ internally developed methodologies and analytical tools, which help map the
learning activities to match the organization's strategic goals. Then the most appropriate
tools, applications, technologies and methodologies are identified to achieve the objectives
defined through the needs assessment.
Development
Developing an E-Learning solution involves the use of tools and services that help create
content and courseware. In addition, affiliated companies can provide non-customized
training content for an organization, and third party content publishers can be readily
integrated into the overall solution.
25
Gilat Communications – Company Analysis
Implementing
Gilat’s solutions are implemented through a wide range of communications platforms,
including Intranet and the Internet, and are designed for delivery over conventional as well as
broadband technologies. Its products and tools can also interface with other learning
management systems, so that customers can engage Gilat to complement and complete their
existing systems into a comprehensive EL solution.
Assessing
Gilat’s solutions also encompass the support, testing and evaluation tools and functions
necessary to ensure a successful solution assessment. These tools, such as TestLinc, help
measure the student's performance as well as the productivity gains and cost savings for the
customer.
Strategy
Gilat’s objective is to capitalize on its enhanced offerings, advanced technology and systems
integration capability to strengthen its position as a leading full solution EL provider. The
key elements of its strategy are to:
1.
Establish brand identity as a leading provider of EL solutions.
Gilat intends to pursue an aggressive brand development strategy through targeted
advertising, promotion and press campaigns. They believe that there is a lack of a
dominant brand in this category and such brand development strategy (under the
name of Mentergy) will give Gilat a competitive advantage in the e-learning market.
2.
Enhance its suite of EL products and services.
Gilat will continue to expand its content, technologies and services through internal
development, acquisition or strategic partnerships in order to meet the customers'
evolving needs and to appeal to a broader customer base.
26
Gilat Communications – Company Analysis
3.
Continue expanding operations in the United States.
Through its recent acquisitions, Gilat significantly increased its presence in the
United States. The company intends to continue to expand its corporate infrastructure
in North America, in order to increase its presence in the largest EL market.
4.
Develop additional strategic alliances with content providers and other
technology and application vendors.
5.
Leverage Gilat’s in-house technological capabilities.
6.
Leverage existing customer base to achieve cross-selling synergies. Each of Gilat'
s recent acquisitions has a strong customer base in the markets in which it is active.
The integrated marketing and sales staff is now able to offer more than 5,000
customers an opportunity to expand Gilat’s products and services, which they already
use into a full-service EL solution.
7.
Build long- term relationships with the customers.
By continuously addressing its customers' needs and providing full customer support,
Gilat develops long-term relationships with its customers. This allows Gilat to
position itself as the customers' primary provider of EL solutions.
Services and Products
Gilat combines tools and services to provide a complete EL enterprise solution that assists its
customers through the entire learning process. Gilat works with its customers to define their
overall strategy, develop a solution using various commercially available and proprietary
tools, implement the solution, and then assess its overall effectiveness and impact. The
company's tools and services offer a single comprehensive enterprise EL environment.
However, Gilat also recognizes the need within some organizations to use an individual
component of the solution. Therefore, the highly scalable tools and services offerings are
modularized, which allows organizations to meet both departmental as well as enterprisewide learning needs.
Gilat also offers its customers Consulting services, Courseware development services,
Hosting services, IT Training Services and Standard Internet technology tools.
27
Gilat Communications – Company Analysis
Customers
Gilat' s expansive customer base, of more than 5,000 U.S. customers, includes approximately
60% of the Fortune 500 companies. Below is a representative list of customers by industry
segment:
Training
ExecuTrain, New Horizons Computer Learning Centers, AchieveGlobal, Certified Learning
Systems.
Education
The Open University in Israel, Lassalle University, Northwestern State University, Tulane
University.
Financial Services
Citibank, Countrywide Home Loan, Morgan Stanley Dean Witter, BenefitMall.com, Orient
Government/ Military
NATO, Federal Reserve, Internal Revenue Service, U.S. Air Force, U.S. Army
High Tech
AdWare Systems, Computer Associates International, Sharp Electronics, Rockwell Collins,
Autodesk, Siemens Medical Systems
Manufacturing
The Clorox Company, Winnebago Industries, Procter and Gamble, SmithKline Beecham,
DaimlerChrysler
Télécommunications
MCI WorldCom, Telstra, Convergys
Aviation
FlightSafety International, United Airlines, Continental Airlines
Other
Aetna U.S. Healthcare, Newsday.com, Unocal
28
Gilat Communications – Company Analysis
Sales and Marketing
In the United States, Gilat sells its EL solutions primarily through a direct selling effort
supplemented with telemarketing and value-added reseller channels. Its sales team for the
U.S. market, which includes 25 direct and telesales personnel, is the largest and reflects the
importance that Gilat attributes to this market. The direct selling effort in the United States is
organized in three regions, which are subdivided into 9 districts. Each district is covered by
two salespersons that are supported by senior design consultants. The design consultants are
responsible for developing and proposing courseware development contracts. Gilat also
maintains a separate government sales team that focuses on sales to the Federal Government.
In addition, a telesales team qualifies potential customers and generates new sales leads. The
management and growth of the value added reseller distribution channel, which consists of
more than 20 resellers, will be delegated to the district territory representatives under the
direction of the national value added reseller manager.
In the European market, Gilat's products and services are marketed and sold primarily
through a 16-person London-based reseller. The company sells in other international markets
through local representatives or value added resellers who are well trained in its products and
services. These operations are managed out of Gilat' s Israel-based offices. There are
currently three area sales managers covering Latin America, Asia and India and Australia, in
which Gilat has had a one-person representation office since late 1999.
Research and development
Gilat' s research and development team, consisting of 44 software developers, quality
assurance and systems engineers, is actively involved in the development of new products
0and technologies. In addition, this team is in the process of integrating recently acquired
products offerings into one seamless EL solution. Gilat also has educational and training
experts who contribute to the instructional design and to the content and courseware creation
of its EL solutions.
Gilat has received grants from the generic research consortia in which it participates, which
are partially funded by the Office of the Chief Scientist of the Israeli Ministry of Industry and
Trade. The Office of the Chief Scientist provides up to 50% of Gilat' s approved research and
development expenditures for particular projects. Through December 31, 1999, Gilat had
29
Gilat Communications – Company Analysis
received or accrued approximately $2.6 million in grants from the Office of the Chief
Scientist through the consortia, including $157,000 for fixed assets.
In 1999, the Israel-United States Binational Industrial Research and Development
Foundation approved Gilat' s proposed research and development project with Spacenet Inc.,
a related party. The project is for the development of a very small aperture terminal based
network appliance for interactive distance learning applications. The foundation is to
contribute 50% of the budget, Spacenet is to contribute 20% and Gilat will contribute the
remaining 30%.
Intellectual Property
Gilat relies primarily on a combination of trade secrets, copyright and trademark laws,
customer licensing agreements and nondisclosure agreements with customers, consultants,
subcontractors and employees to establish and protect proprietary rights in its products. Gilat
has filed applications to register its trademarks in Israel and in the United States.
Additionally, there are already some registered trademarks in the United States.
Risk Factors in Marketing
Gilat may not have adequate resources to compete effectively in the EL market. If Gilat fails
to adapt to changes in the industry it could lose existing customers or fail to gain new
customers.
The EL market is also highly fragmented with no single competitor accounting for a
dominant market share. Gilat does not often compete head-to-head with any particular
company. Competition, however, is intense and Gilat competes primarily with Third-party
suppliers of instructor-led education and learning, Internal education departments and Other
suppliers of technology-based learning solutions.
The competitors vary in size and in the scope and breadth of the services they offer. Several
of the competitors have longer operating histories and significantly greater financial,
technical and marketing resources than Gilat' s. In addition, larger companies may enter the
EL market through the acquisition of the competitors. We anticipate that the lack of
significant entry barriers to the EL market will allow other competitors to enter the market,
and will increase competition.
30
Gilat Communications – Company Analysis
If EL solutions do not become widely accepted, Gilat' s business will be adversely affected.
If Gilat fails to develop, introduce and market new technologies its business will not be
successful.
Should the market for EL fail to develop or develop more slowly or differently than we
expect, Gilat will not achieve its growth and revenue targets and the value of its ordinary
shares will likely decline.
Gilat may be unsuccessful in promoting brand awareness, which will block the business
growth.
It is important to note, that the Israeli communications services market is relatively 0small
and Gilat' s opportunity to grow in Israel is therefore limited.
31
Competition
The EL market is highly competitive, subject to rapid technological changes, shifts in
customer demands and constantly evolving learning methodologies. The c-learning
market is also highly fragmented with no single competitor accounting for a dominant
market share. Since no other company offers a comprehensive c-learning solution
similar to Gilat 's, there is no competing head-to-head with any particular company.
There is, however, competition with a number of companies with respect to some of
Gilat 's services and products.
Within the EL field, Gilat 's competitors vary in the range of services or products they
offer. Some of the competitors have been engaged in the field for longer than Gilat
has and have greater financial, technical and marketing resources than Gilat’s. It is
possible that some of its competitors may begin to compete with Gilat in more aspects
of its comprehensive solutions. We anticipate that the lack of significant entry barriers
to the EL market will allow other competitors to enter the market, increasing
competition.
To succeed, Gilat needs to continue to distinguish its comprehensive solutions from
the services and products of its competitors'. Gilat must continually upgrade its
technology, enhance its tools and keep apace of the available platforms through which
it can make its comprehensive offerings available to its customers.
As competition increases, Gilat anticipates facing price pressures from customers.
Increased competition, or Gilat' s inability to compete successfully against current and
future competitors, could result in reduced profitability, as well as in loss of market
share and reduction in brand recognition.
Gilat Communications – Company Analysis
Introduction to Live online learning
Live online learning is also known as synchronous learning, or a virtual classroom.
Courses are taught via the Web or an intranet, but are taught at specific times and
have an instructor. Learners tune in by computer and by audio, either Web-based
audio or via the telephone. Live online learning is more like traditional classroom
learning, but with some of the bells and whistles of the latest EL tools.
Broadband and narrow band systems
The live EL market is roughly divided into two main segments :
1) Broadband systems
2) Narrow band systems
In the broadband field we can find systems that began working with satellite
communications in order to provide an advanced interactive (with full size and high
quality video) EL systems.
Among the companies that lead this market we can find Gilat, Arel and Onetouch.
These companies deliver in any broadband environment like DSL, cable etc., although
originally they were active in the satellite field.
Although video is considered a big advantage in the distance learning field, many
companies began realizing that the price paid for having this video - huge overhead
costs (satellite time, broadband connections etc) was not always worthwhile the
advantage they got from it.
Realizing so, opened the way for narrow band companies like Centra, Interwise and
Learnlinc that enable instant distance learning where ever you are regardless of the
infrastructure that you have (the only thing you need is a laptop and a dialup
connection).
Today the market is still divided into these two segments with many companies
looking the ‘other way’ and trying to offer either narrow/broad band solutions that
will enable them to work in the ‘other environment’ to maintain market share and
customers.
33
Gilat Communications – Company Analysis
Broadband
Arel
Company Profile
Arel Communications and Software (NASDAQ: ARLC) is one of Gilat’s main
competitors in the field of broadband EL.
The company is a part of Arelnet Ltd. (TASE: ARNT) (14% owned subsidiary) a
leading provider of Voice over IP (VoIP) systems, specializing in carrier grade
solutions, Arel's core business is focused primarily on North America, the largest IDL
market. The company markets its products directly in the United States through its US
subsidiary, Arel Communications and Software, Inc. and through independent Value
Added Resellers (VARs) worldwide.
Arel is Publicly traded on Nasdaq since 1994. The company claims that an average
annual growth of 300% over the last three years, with revenue projections for 2000
currently estimated at $15 million.
Arel's produces two main systems – the ‘IDEAL’ system and the ‘Arel Spotlight’.
Both system are fully integrated, enterprise-wide, scalable systems that deliver live,
interactive training and corporate communications to geographically dispersed
networked classrooms and desktop PCs, anytime, anywhere. Combining video, voice,
data and live web pages via a highly effective single instructor-learner interaction,
Arel's technology offers unique business benefits by providing cost effective rapid
knowledge transfer, which improves enterprise productivity, accelerates revenue and
increases profits.
The IDEAL
Arel's Interactive Distance Education And Learning system, IDEAL, instructs
students while sitting at their own desk with their own PC or in a classroom. The
instructor, on the other hand, makes use of all the latest teaching aids to enrich
lessons, operating all the didactic features and functions from a simple-to-operate and
intuitive icon based touch screen.
34
Gilat Communications – Company Analysis
The participants in the remote sites can interact with the instructor by activating
simple keystrokes on personal Interactive Response Units and participate in live
discussions. Individuals can join a live session from their desktop, using a standard
multimedia PC running the Arel Spotlight application via the Internet or corporate
Intranet.
Spotlight
Arel Spotlight (partly compatible with Gilat’s TrainNet PC) uses the participants PC
as a virtual classroom, inviting remote participation in live interactive training
sessions -- from anywhere. Arel Spotlight extends the reach of corporate and
educational institutions' EL infrastructures, eliminating traditional geographical,
technical or communication barriers between instructors and students. The browserbased application supports full integration of high-resolution graphics, full-duplex
audio and robust data interactivity on standard PCs. Arel Spotlight can be deployed on
any type of broadband satellite or terrestrial network.
35
Gilat Communications – Company Analysis
ONE TOUCH
Headquartered in San Jose, Calif., ONE TOUCH Systems is the leading provider of
EL solutions that are fully integrated, enterprise-wide and scalable, capable of
reaching networked classrooms and desktop PCs. ONE TOUCH EL enjoys an
installed base of 28,000 sites in 55 countries. Customers rely on the ONE TOUCH
solution, with more than 150,000 EL seats installed worldwide, to train an estimated 2
million employees annually.
ONE TOUCH's patented, interactive technology enables individual experts to
communicate in real time with participants at multiple locations anywhere in the
world. ONE TOUCH was recently recognized by Arthur Andersen, the world's
leading professional services organization, for best practices in exceeding customer
expectations.
Owned by the Hughes Network Systems and the Apollo Group since 1988, ONE
TOUCH ‘produces’ several products :
The KnowledgeSite Classroom
Compatible with Gilat’s TrainNet ITV, the KnowledgeSite is mainly used in classes
where an expert presenter can reach, train, communicate and collaborate with any
number of employees located world wide. The system uses one-way video with
two-way voice and data interaction. This advanced EL application gives a presenter
easy control over a dynamic, enterprise learning environment.
The system uses a TV screen and touch pads and can see and hear the instructor that
present live content or issue test questions.
ONE TOUCH Front Row
ONE TOUCH Front Row (compatible with Gilat’s TrainNet PC) delivers live,
interactive training online, directly to employees, wherever they work – directly to
their PC. Front Row seamlessly integrates real-time streaming video, high-resolution
graphics, full-duplex audio, two-way data interaction, and application sharing
36
Gilat Communications – Company Analysis
capabilities, providing the most advanced and powerful distributed learning solution
available.
ONE TOUCH Front Row OnDemand
Front Row® OnDemand allows organizations to use ONE TOUCH Knowledge
Systems' recognized EL interactivity and presentation capabilities for on-demand,
self-paced training and communications. With Front Row OnDemand, presenters can
capture, prepare, and publish live presentations—preserving interactive questions and
quizzes—for asynchronous delivery of on-the-job and PC applications training,
business and sales presentations, and corporate communications. This set of software
applications extends the value of ONE TOUCH live training and communications
capabilities—providing continuous learning at significantly lower cost per user.
37
Gilat Communications – Company Analysis
Narrow bandwidth systems
Interwise
One of the strongest and youngest competitors in the low bandwidth EL fileld,
InterWise has quickly emerged as a top competitor in the "synchronous online
learning" market in the six months since establishing a North American presence.
Founded in 1994 in Tel Aviv, the company quickly became a world leader in terms of
quality and penetration.
InterWise develops virtual classroom technology targeting mostly multinational
corporations and academic institutions. The Company’s flagship product is
Millennium 3.2, a suite of software products and services enabling live, synchronous
instructor-led training over the Internet. It consists of four integrated software
components: InterWise Instructor, InterWise Student, InterWise Campus, and the
Millennium Server. InterWise Instructor enables instructors to take advantage of the
same broad range of instructional techniques and interactivity they would use in a
physical classroom. Content materials can be developed in formats, such as
PowerPoint, Microsoft Office, Web sites, video/audio clips, CBT, PDF files, or any
other desktop application. The materials are presented to student desktops via a
whiteboard with live drawing tools. Instructors interact with students via public or
private two-way audio, written notes and online polling, questions, and tests.
InterWise’s Class-at-a-Glance user interface allows the instructor (and students) to see
and monitor each student as they would in a traditional class. In addition, the system
supports breakout sessions during a class, multiple instructors, remote application
sharing, and peer-to-peer interaction through threaded messaging.
In addition to its Millennium platform, the Company offers LiveCycle Services, a
suite of services that include need assessment, project planning, implementation
management, product training, instructional design for live EL, event preparation,
just-in-time support, and on-air event monitoring.
Still a private company, Interwise is based in Santa Clara, with research and
development sitting in Tel Aviv and additional offices located in New York, London,
Geneva, Singapore and Johannesburg.
38
Gilat Communications – Company Analysis
InterWise Millenium
InterWise Millenium enables live, instructor-led EL over the internet (compatible
with Gilat’s Learnlinc 5.0) allowing students to study while remaining at their desks
at work or at home.
The system provides a software infrastructure that makes it possible to develop live
web based learning using features like application sharing, slides presentatin etc.
Hosting services
InterWise Hostes Systems Services is an outsourcing solution that enables any
training organization to deploy EL programs faster and easier than if managed
internally. Interwise hosting services allow EL providers to save money, time and
personnel commitments that would have otherwise been dedicated to infrastructure
support.
Developing from the rough internet environment in Israel, Interwise has succeeded in
producing a fine product that uses the best technology available to become a market
leader that causes Gilat many troubles both in the local and the international field.
39
Gilat Communications – Company Analysis
Centra
Considered as one of the leading web based EL companies in the US, Centra provides
the strongest competition for Gilat’s LearnLinc 5.0 in the US.
Rolling out its first product in 1997 the company has been the leader of the web based
IDL market ever since, with features like recording, break out groups etc., that only
now are implemented at the competitors products.
Centra provides Web enabled enterprise software and networked services that allow
businesses to interact live over the intranet or Internet with their customers, partners
and employees in a variety of business contexts, such as sales meetings and
presentations, marketing seminars, as well as learning, training and interactive
teamwork. Centra's Web-based enterprise solutions include Centra Symposium, an
enterprise Web application for highly interactive EL and team collaboration; Centra
Conference, an enterprise web application for live interactive seminars and corporate
briefings for large dispersed audiences; Centra eMeeting, an enterprise web
application for ad-hoc virtual meetings where users can schedule, organize and run
their own meeting; and CentraNow, a network service for live, voice-enabled business
meetings and events.
Centra Symposium
Centra Symposium is the most widely used solution for the delivery of EL across the
enterprise. Centra Symposium offers a complete set of capabilities for live EL in a
scalable, extensible, and easily deployed, enterprise-class Web application. Ideal for
highly interactive team collaboration, virtual classrooms, and hands-on training
applications, each Centra Symposium event can support up to 250 simultaneous users
in a live, structured environment.
Centra Conference
Centra Conference takes your Web-based sales, marketing, and corporate
communications to the next level, and is far more effective than email, broadcasts,
streaming media, or static Web pages. Through live, interactive seminars, company
meetings, product demonstrations, and presentations, you can quickly and efficiently
40
Gilat Communications – Company Analysis
target a large audience and engage them for the exchange and delivery of new
information and ideas.
Centra eMeeting
Far more effective than teleconferencing or expensive video systems, Centra
E-meeting augments face-to-face meetings, sales presentations, partner briefings, and
other ad hoc business interactions in a secure, highly interactive, online work
environment. This powerful, easy-to-use virtual meeting facility enables you to easily
coordinate all aspects of meeting scheduling, attendee participation, information, and
content for your Web meetings. Participants only need a PC and Web browser to
begin meeting you online
CentraNow Web Parts
CentraNow Services include speaker practice sessions, coordination of invitations and
instructions for an attendee list, and attendance reports.
CentraNow is now available as a Web Part for the Microsoft Digital Dashboard, a
customized portal based on Microsoft Office 2000 that allows individual users to
consolidate personal, group, corporate, and Internet-based information on their
desktops.
41
Gilat Communications – Company Analysis
Strategic Alliances
Gilat is trying to create a comprehensive strategic alliances network (one of the goals
it announces on). Unfortunately, most of the efforts were pointed for acquisitions
instead of creating successful strategic alliances with either content, technology or
application companies.
Nevertheless, following is a list of the strategic alliances Gilat has:

Gilat
Satellite
Networks/Spacenet
-
The
major
international
manufacturer of Very Small Aperture Terminals (VSAT) products for
diverse satellite communication applications, including data delivery,
telephony and Internet access.

NDS (News Datacom Services) - Provides end-to-end solutions for
digital broadcasting to over 10 million subscribers. Gilat and NDS
have entered into a cooperation agreement to integrate TrainNet with
NDS products to reach the at-home learning and training market.

RTN (Reliance Training Networks) - A leading provider of live,
satellite-delivered accredited training and new services for the U.S.
health care, fashion, and sports industries.

Open University of Israel (OUI) - Close cooperation with OUI, Israel's
highly respected Distance Education institution, is a valuable resource
for the company's IDL research and development.

Gilat’s newly bought subsidiary companies have their own strategic
alliances. One of them is John Bryce’s strategic alliance with Tescom
to use Tescom as a content provider using Tescom specialties in
testing.
42
Gilat Communications – Company Analysis
SWOT
Strengths
1. Good reputation and brand name.
2. Subsidiaries have a good reputation and large customer base.
3. Offers its customers a total end to end solution.
4. Mentergy group has a wide base of customers.
5. Advanced technology in terms if video quality and scalability.
Weaknesses
1. Technology that doesn't suit the market trends (satellite vs. Internet).
2. Subsidiaries aren’t integrated properly.
3. Expensive customer solutions- can't appeal to wider market.
4. High overhead- brings to lower profitability.
5. Small sales force.
6. Skeptic investors.
7. Unfocused management team.
8. Late penetration into the North American and European market.
9. Subsidiaries are geographically dispersed.
Opportunities
1. Growing market with few competitors.
2. Proper integration of subsidiaries may enhance the whole company
solution offering possibilities.
3. New markets (Europe) and sectors (educational) emerging.
4. Possible cooperation with competitors, which will enrich Gilat's
capabilities.
5. Usage of John Bryce IT material as a leverage to enter clients.
Threats
1. Gilat may not have adequate resources to compete effectively in the
EL market.
2. If Gilat fails to adapt to changes in the industry it could lose existing
customers or fail to gain new customers.
43
Gilat Communications – Company Analysis
3. Larger companies may enter the EL market through the acquisition of
the competitors.
4. Lack of significant entry barriers to the EL market will allow other
competitors to enter the market, and will increase competition.
5. If EL solutions do not become widely accepted, Gilat's business will be
adversely affected.
6. If the market for EL fails to develop or develops more slowly or
differently than expected, Gilat will not achieve its growth and revenue
targets and the value of its ordinary shares will likely decline.
7. If Gilat is unsuccessful in promoting brand awareness, it may be
unable to grow its business.
8. If Gilat fails to develop, introduce and market new technologies its
business will not be successful.
44
Problem Description
Gilat went public on 5.12.97 getting $21M with a stock price of 8.5$. Since then, the
stock soar to the highest value of 45.75$ on 3.3.00 and then diving to a price of 3.75$
per share on December 2000, cutting more than 90% of the company’s value.
These dramatic changes are the symptoms of the problems Gilat is facing. We will try
to describe the path Gilat took and the problems and mistakes that we saw along the
way:
1) Technological gap – During 1999 Gilat decided to close the gap that it
suffered compared to her competitors in the EL via the Internet. Gilat
practically missed the opportunity to enter into this market/technology,
leaving its competitors to fill the gap and develop mature products,
which have at least 1.5 years advantage in development time.
2) Rapid buying of complementary companies – When Gilat recognized
that the EL market will be heavily depended on Internet abilities and
recognized its disadvantage related to its competitors in this market, it
looked for a way to close the growing gap.
In order to close the gap and stay competitive in this market, Gilat
decided to buy the technology from external companies instead of
developing it in-house; during a period of 14 months Gilat made the
following acquisitions:

30% of RTN

John Bryce LTD – John Bryce itself acquired a few companies
since that acquisition.

Allen communication

LearnLinc
The rapid acquisitions caused severe integration problems in the Company,
leading to a longer integration period than expected and high costs.
3) Cash Flow – Gilat is now suffering from a major cash flow problem
following the rapid acquisitions, which consumed large cash resources,
as well as the problem of long lasting integration process. The cash
Gilat Communications – Company Analysis
flow shortage is also derived from the investors' reluctance to put more
money into the Company (see problem number 4).
4) Trust crisis – Gilat' s investors, along with the analysts covering Gilat's
reports, are disappointed from the financial results the Company
presented. During October Gilat published a warning regarding its
results. The company’s investors are in a very delicate position now. It
will take some time before they will resume their trust in the company.
5) Lack of focus – Gilat's core business is EL. However, some of the
businesses/firms, which Gilat is still involved in, belong to the old
Company's businesses (communication business, satellite business and
other). This causes Gilat lack of focus its core business and therefore
loss of profit.
The above-mentioned points are part of the main problem or its symptoms. The main
problem is managerial and relates to the basic point of short-term vision:
i) Gilat was unable to forecast the process of the Internet becoming one
of the major tools for EL infrastructure. This caused the Company not
to develop applications, which will accommodate this new
infrastructure, forcing Gilat to buy external companies that already had
such technology.
ii) Purchase of three different companies in a very short time frame
resulted in difficulties in integrating the companies into Gilat's
synergic portfolio. In addition it consumed significant cash resources
rising cash flow problem.
46
Gilat Communications – Company Analysis
Conclusions and Recommendations
Gilat acts in a fast growing and very harsh market. Every competitor is striving to get
new features, give a comprehensive solution (infrastructure, application and content),
get a larger market share and above all make "more money".
Gilat, one of the pioneers in this field, had lost its leading position to smaller, more
focused companies that got their advantage mostly by adjusting to the Internet
environment (or even building themselves relying only on the Internet). Gilat is doing
its best efforts in order to resolve the problems it faces and to restore its leading
position.
In order to overcome the first problem (the technological gap) Gilat acquired
companies that have the knowledge and the technology it missed. However, the rapid
acquisitions caused a new problem of integrating all the new companies under the
mother company, resulting in difficulties in creating a new synergic solution.
Like an avalanche, all the other problems came in an extremely fast pace: cash flow
problems, investors trust crisis and, of course, the company’s stock market value
reduction of more than 90%.
All these problems are derived from one basic problem – Short-term vision.
The high level management that strategically decides where the Company is heading
is usually responsible for the long term vision of the company. In Gilat’s case, what is
evident is a race after the market without any guiding hand to supervise and guide the
company to its right path. Although it looks like Gilat is doing all the right moves, all
these actions are taken too late and cause even bigger problems without having the
proper managerial force to overcome them.
Our recommendations to Gilat are:
1) Focus on core business. Instead of handling many different companies
in different technological fields, Gilat should sell all the non core
businesses that it owns (Satcom, G.C.DBS) and focus on its only core
business: EL.
2) Find where the market is going and adjust to it. The EL market is a
very fast m0oving one. If Gilat is not ready for video streaming on
narrow bands (today’s problem) or broadband applications when the
time comes, the Company will lose precious time once again.
47
Gilat Communications – Company Analysis
3) Gilat should concentrate on bringing the different companies on
their feet again and integrate them better into one synergic unit, which
means creating a program that will focus each group in its specific
field and make each company the best in its field. In addition, Gilat
should create a better mechanism to overcome the integration problem
the company is suffering.
Taking these steps will get Gilat to solve all the other above mentioned problems
(cash flow crisis, trust crisis and other).
We think Gilat is on the right way (personal changes in top management; R&D
working harder to close the technological gap; new synergic approach, which offers
various solutions to different customers). However, there is still a long way to go. If
the management is not going to solve the integration problem and focus entirely on
the core business, Gilat might dive into deeper abyss than the one it is in now.
48