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Mobile Market Spurs Entrepreneurs

By | August 2, 2004

      A positive sign for any industry is when entrepreneurial ventures with promise attract strong management teams and financing. That combination of factors is in place at McLean, Va.-based Raysat, a provider of satellite antennas for mobile television users.

      The company was created earlier this year after the purchase of the assets from Skygate, a 7-year-old Bulgarian company that had focused on research and development. The use of Bulgarian engineers helps the company to keep its costs low and produce products “faster and cheaper” than competitors, it believes.

      According to Raysat’s founders, the company’s one-way mobile satellite TV antenna is unique because it is the only one that can be used with satellite TV systems in the United States, Europe and Asia. Both the company’s existing one-way antenna and its planned two-way antenna will generate the need for new space segment from satellite operators.

      Two seasoned entrepreneurs, Yoel Gat and Samer Salameh, are driving the effort after each previously created and managed telecommunications companies. Raysat Chairman Gat is best known for serving as chairman and CEO of Gilat Satellite Networks Ltd. [GILTF], a Very Small Aperture Terminal (VSAT) satellite communications company, while Salameh recently joined as president and CEO after stints as president and CEO of rStar Corporation, which provides satellite-based telephony and high-speed Internet access, president and CEO at Telmex North America Ventures, and chairman and CEO of Prodigy Communications.

      Gat founded Gilat in 1987 and led the company until it peaked in 2000 with more than $500 million in annual sales and with roughly 2,500 people on the payroll. At Prodigy, Salameh grew revenues from $20 million to more than $300 million in two years, transforming the company into one of the largest consumer DSL-powered Internet service providers in the United States.

      Together, they share visions of a bold future for Raysat.

      The two entrepreneurs are joined by CFO Liav Even-Chen, a former partner at Ernst & Young, who brings to the table experience in the financing of high-tech companies. The company also will receive input from Arad Naveh of Benchmark Capital, and Michael Eisenberg of Seed Partners, both of whom sit on the company’s board of directors.

      After leading Gilat through a restructuring, Gat left the company and considered retirement before finding the opportunity with Raysat. In an exclusive interview with Satellite News Senior Editor and Senior Analyst Paul Dykewicz, Gat expressed fascination with the concept of building terminals for in-motion applications via cars, RVs and boats. He also praised Salameh as a “great consumer marketing guy” who will help to position company’s antenna products in the market. The company currently is conducting market studies to see what people would like to do in their cars.

      “You have to be where the battle field is and not in your office,” said Gat, while riding in a rental car with Salameh in Troy, Mich. Without identifying which automobile- related companies they undoubtedly were visiting in that state, Gat said the success of Raysat eventually will entail getting its product installed in vehicles by original equipment manufacturers (OEMs). However, it will take many years because the sales cycle is so long in the automobile industry, Gat said.

      “We’re just at the beginning,” Gat said. “It is a very fascinating story. In my mind, it is going to be one of the hottest stories in the industry. The most important element with our product architecture is that we have developed applications that our competitors cannot do. We provide a platform for many kinds of satellite systems. The flexible architecture will go beyond satellite TV to two-way products. There is a long and visionary road ahead.”

      Raysat’s TorpedoRay already enables Wi-Fi broadband Internet access on high-speed trains in Europe. Such service now is available to business users who have laptops onboard high-speed trains in the United Kingdom, Sweden and France. The company also has the potential to answer the growing need for rear-seat entertainment in the automotive industry with the launch of its StingRay product in 2004 and its EagleRay Internet-access antenna in 2005.

      “[StingRay] is one of the first few products that goes into the consumer market for mobile satellite television services,” Salameh said. “Now, you can watch over 300 video channels and listen to more than 100 audio channels in your car as you drive around. That is really unique.”

      Aside from satellite TV and Wi-Fi, the new venture will introduce two-way products to open up applications for new types of fields.

      “It would probably start with vertical markets, such as emergency, defense and truck tracking,” Gat said, adding low costs and price points will allow more applications to be delivered by the company at an affordable price for consumers.

      “I am absolutely excited,” he said. “We are building a new category that will enable people around the world to do things that they cannot do right now. You are creating something that does not exist today.”

      Raysat took a big step forward June 24 when it announced the closing of a $10 million, first-round investment led by Palos Alto, Calif.-based Benchmark Capital and assisted by Israel’s Seed Partners. Benchmark, managing more than $2 billion, is one of the best-performing venture capital firms in the world, according to Salameh. Another plus is that the company should be cash flow positive by the end of next year, Gat told us.

      Key competitive advantages for Raysat are its “deep knowledge base” of satellite technology, cost-effective use of 67 engineers from Sofia, Bulgaria, and its existing one-way satellite antenna that works with El Segundo, Calif.’s DirecTV, Littleton, Colo.’s EchoStar Communications [DISH] and Canada’s ExpressVu satellite television systems, Salameh said. The antenna also works in Europe With BSkyB [BSY] and with virtually any satellite television operator in the world, he added. The one-way satellite antenna, priced at $2,300, can be used in the United States, Asia and elsewhere.

      The company’s new two-way broadband product is under development and will extend the company’s product line. In addition, no similar two-way mobile antenna product is available in the market today, Salameh said.

      “This is a chance to conquer the ultimate frontier of the digital barrier,” Salameh said. “The last place that people can have access to data is in their vehicles.”

      D.K. Sachdev, president of the Vienna, Va.-based SpaceTel Consultancy, said, “Direct reception of satellite broadcasts in moving vehicles has, until now, been the exclusive domain of satellite radio. Reception of Ku-band television broadcasts in moving vehicles has been difficult due to the need for tracking the much narrower beams of such signals. Use of phase array technology not only reduces the profile of such antennas but also provides a much faster tracking ability.”

      As a result, Raysat is introducing the technology to leverage its experience with similar antennas in European high-speed trains, Sachdev said. KVH Industries [KVH] also recently introduced similar one-way antennas in the U.S. market, he added.

      –Paul Dykewicz

      (Yoel Gat, Samer Salameh, Raysat, 703/345-6841; D.K. Sachdev, SpaceTel Consultancy, 703/757-5880)

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