China’s new Tel Aviv digs reflect Israel’s move east, says expert

The Chinese Embassy in Tel Aviv has a new home. According to sources in the Tel Aviv real estate business, China has struck a NIS 20 million (over $5 million) deal to buy the former headquarters of Israeli high-tech firm Comverse Technologies.

The six-story building, with 16,000 square meters (just over 170,000 square feet) of office space includes 350 parking spaces, plus large conference rooms, dining halls and amenities, including a gym and showers for employees.

The sale of the building, upon which the name “Comverse House” is still emblazoned, reflects changes that the company — and the Israeli tech economy in general — has been undergoing in recent years, said Dror Filberg, an investor in several start-ups who has been following Comverse, from the days when it was a small Tel Aviv start-up itself until the company’s implosion over the past several years.

“This is the third major change for the company in recent months, reflecting general trends that are affecting the Israeli economy,” said the investor.

The most obvious, he said, was the purchase of the building by the Chinese, which reflects a growing business relationship between China and Israel. According to a report in the business daily Globes, China has been looking for a new location for its embassy, having outgrown its old one — and it’s said to be paying billions of shekels for the building.

There was no comment from the Chinese Embassy on the report, which is itself of significance, because most foreign missions rent their space.

“That the Chinese think that much of their business relationship with Israel that they would put so much money into such a large building — with the Chinese Embassy rivaling only the American and British embassies for size — is significant,” added Filberg.

Just as significant are the changes Comverse itself has undergone in recent months, Filberg explained. Although Comverse no longer owns the building associated with it — it was sold last year to a Tel Aviv real estate developer — Comverse itself has been part of Israel’s recent “turn to the east. Earlier this year, the company struck a deal with India’s Tech Mahindra to do R&D in Israel.”

According to Manish Vyas, president of Tech Mahindra’s communications group, the engineering talent in Israel — and at Comverse — fits in with the company’s plans for growth. “Engineering is a very large part of our business, but we want to make it even bigger. We believe it can be a billion dollars annually in the next few years,” he told Reuters. “Given the culture of entrepreneurship in Israel, we need to be here.”

And Comverse’s latest change reflects yet another major change — the move from old-line corporate organization to start-up style management and innovation. As of September, in fact, Comverse, a name associated with mobile technology and messaging from the 1990s and the first decade of the 2000s — became known as Xura, a name that sounds much more “innovative,” said Filberg. “Like many other big tech firms, Comverse realizes it needs to adopt start-up management techniques — cutting the management fat, allowing more independent thinking and innovation in order to come up with better ideas.”

Comverse — or what’s left of it — was itself a victim of corporate excess. The company, which thrived as a developer of communications systems for wireless platforms, was implicated in a major stock-option scandal in 2006, from which it never really recovered. Comverse Technologies shut itself down in 2012 and 2013, spinning itself off into two subsidiaries — Verint and Comverse Inc. — the latter of which renamed itself in September. Last month the company let go dozens of local employees as part of its recent collective bargaining agreement with the Histadrut labor union.

While there’s always concern when an old system withers away, Israelis can feel confident embracing the new start-up culture — and doing business with China, according to China-Israel investment expert Andrew Zhang.

“I work with several Chinese investment firms as a scout, helping them find Israeli tech firms to invest in. And even now, in the midst of the stock market crisis, my clients are telling me to go full force and find them good opportunities,” said Zhang. “The Chinese — investors and governments alike — are realizing that a tech economy, like the one Israel has, is their best growth option, and in the coming years, this is going to be good news for both the Israelis and the Chinese.”