The parade of top tech companies planting their flag in Israel continued Thursday with the report that online retail giant Amazon was set to buy Israeli semiconductor development firm Annapurna Labs. Located in Yokne’am, the company has been operating in stealth mode since 2011, and has 90 employees.
Industry sources placed the deal at between $350 million and $400 million. Neither Amazon nor Annapurna have commented on the matter. According to Shlomo Gradman, chairman of the Israel Semiconductor Society, there are now some 300 multinational tech companies that have R&D centers in Israel.
Little is known about Annapurna. The company has no presence on social media, and its website says only that it is “changing the way platforms will be designed and we are having a great time doing it.” However, a highly-placed industry source with close ties to the company told The Times of Israel that the company was working on communications and processing systems for data centers.
Besides being one of the world’s biggest retailers, Amazon is also one of the world’s biggest cloud service providers, and it’s there that the Annapurna acquisition will help the company, the source said. “Like other cloud platform providers Amazon has a large number of data centers, and is constantly looking for faster and more efficient ways to enable their customers to use their services. This is the kind of company they have been looking for since they started ‘shopping’ for Israeli start-ups.”
Amazon has become very well-acquainted with the Israeli tech scene over the past year, when it opened an office in Israel to work with the many Israeli start-ups working with Amazon Web Services (AWS), the company’s cloud computing platform. At a recent event in Tel Aviv, some 1,500 Israeli start-up entrepreneurs and developers attended a series of events sponsored by Amazon on AWS-related topics.
Besides supplying storage space, AWS provides hosted applications, security, database management, and other features that in the past would have required significant investments in hardware and software. With AWS, companies rent time on servers, paying only for service they use.
“It’s a perfect system for start-ups, which are working on shoestring budgets,” said Werner Vogels, Vice President & Chief Technology Officer at Amazon.com. “Instead of spending money on servers and information technology infrastructure, they can use those funds for development and improving their product. With millions of customers around the world, AWS is constantly looking for ways to upgrade its services. Our objectives are to scale with good performance and add services whole reducing costs for us, which we can pass on to our customers.”
The Amazon deal, when finalized, will be the second major acquisition of an Israeli start-up in the space of just a few days. On Wednesday, document storage firm Dropbox announced that it was buying Herzliya-based CloudOn, which allows users to edit Microsoft Office documents from mobile devices. Sources said that the deal was worth about $100 million.
The CEO of Annapurna, Avigdor Willenz, is one of Israel’s most successful semiconductor entrepreneurs. In 2000, he sold chip maker Galileo to Marvell Technologies for $2.7 billion. Galileo became the nucleus of Marvell’s R&D operations in Israel, and the company now has over 1,200 employees – some 20% of its workforce – in Israel. In a recent visit to the center, based in Yokne’am, Marvell co-founder Weili Dai said that the company “has found great talent here in Israel. We believe in that talent and are very happy with what the staff here has produced, helping to push forward the company’s vision.”
When the acquisition goes through, Amazon will be making its first major investment in Israeli tech – just as Alibaba, the largest online retailer in China, did earlier this week, when it announced it was investing in Tel Aviv-based Visualead, which develops “designer” QR (Quick Response) codes. The Israeli firm has been working with Alibaba for over a year to replace boring black and white QR codes with snazzily designed, colorful, and aesthetically pleasing codes that integrate much better with product packaging, advertisements, newspapers and magazines, and anywhere else the codes are used.
Commenting on the prospective deal, Gradman said that it was “a happy day for Annapurna, Amazon, and the Israeli semiconductor industry. In recent years software and mobile development have outshined semiconductor and hardware development in Israel, and many people believed that the semiconductor industry here would not recover. That a company that is barely four years old could achieve such an exit is very impressive and a real boost for other companies working on innovative semiconductor and chip technology.”