Magal – building rings of security

Jacob Even-Ezra makes a living from fear. That sounds harsh, but even Even-Ezra will admit people would not buy products from his company, Magal Security Systems, if they weren’t afraid for their lives.In today’s environment of fear and anxiety, it …

Jacob Even-Ezra makes a living from fear. That sounds harsh, but even Even-Ezra will admit people would not buy products from his company, Magal Security Systems, if they weren’t afraid for their lives.



In today’s environment of fear and anxiety, it comes as no surprise that Magal, based in Yehud, Israel, which sells computerized perimeter security systems, is attracting a great deal of interest.



In the month after the September attacks on the World Trade Center and Pentagon, when virtually every other stock initially crashed, Magal’s share price rose on Nasdaq from $4.99 on Sept. 10, to a high of $13.15 on Oct. 8. Even today, the stock remains at about $7.80. Though Magal has not yet received any new orders as a result of the attacks, the company has been flooded with inquiries.



“Already we have received more inquiries than ever before, and we’re getting them for new places. Governments today are looking to protect places like water reservoirs, because they realize that someone could poison the water,” said Even-Ezra.



“We can’t yet translate these inquiries into orders, but we have no doubt that they will follow. We believe that in the second half of 2002, we will start to see the flow of orders, as governments begin to move into action.”



Though the world’s current situation has undoubtedly had a big impact on Magal’s prospects, Even-Ezra says that the company was on the rise even before the latest troubles. The company’s share price rose several months before the Sept. 11 attack.



“I believe that people started to look for under-valued shares like ours,” said Even-Ezra. “All of a sudden, the market found itself looking for old economy companies with real profits.



“We fit the bill. We have an excellent balance sheet and are growing every year. We have a future. People like the stock now. They were too busy before and were blind to what was going on.”



Magal is growing in fits and starts but the trend is upward. After a brief dip in 1999, when the company saw revenues of $31.9 million, down a marginal 0.4 percent from $32.1 million in 1998, sales have been climbing. In 2000, revenues grew to $38.5 million, of which $2.8 million was profit. This year, sales are likely to reach $40 million.



The company has also recently set up a new company in New York, Smart Interactive Systems, which specializes in real-time video monitoring security services. Even-Ezra, who plans to invest up to $20 million in the company, estimates it will see $600,000 in profits per quarter by the last quarter of 2002, and will break even in two years.



Magal’s main products are perimeter security systems that automatically detect, locate and identify intruders. It sells 28 different types of systems, ranging from video motion detection sensors that detect intruders, to mounted sensors that detect vibrations from climbing on or cutting fences, and volumetric sensors that detect intruders moving through an invisible detection field.



The company also has a security management system called MagNet, which integrates outdoor and indoor sensors, access control and CCTV systems into one multi-operator graphic system.



Customers include army, air force and naval installations, prisons, oil refineries, pipelines, air carriers, borders, parliaments, civil airports, warehouses, industrial and communication facilities and power stations. Even Queen Elizabeth’s residences in Britain are protected by Magal, which has a 40 percent share of the worldwide market and operates in 70 countries.



Over the years, Magal, which went public on Wall Street in 1993, has also been active in acquisitions. Since 1993, it has purchased four Daimler-Benz subsidiaries Stellar Security Products of California, Senstar Corp. of Great Britain), Senstar of Canada, and German-based Senstar GmbH. In 1997, it also acquired Perimeter Products in the U.S. for $4 million, and in 1999 bought another US company, Racon.



Even-Ezra believes these subsidiaries give Magal clout. Aside from increasing Magal’s critical mass, they have also enlarged the company’s product line and expanded its distribution capability in poorly represented markets.



“When you work on a project you might sell $1 million of equipment, but the people working on the integration side make between $5 million and $10 million per project,” said Even-Ezra.



In 1999, the company won its first turnkey project in India, worth $3.5 million. Last year, the company won another, worth $5.5 million. In July, Magal began its newest venture, Smart Interactive Systems. The company will integrate sensors and video cameras located in a protected area and then transmit the images picked up by the cameras to a central monitoring station for analysis and response.

About Nicky Blackburn

Editor and Israel Director, Nicky Blackburn has worked extensively as a journalist and editor both in Britain and Israel for a range of national and international publications including The Cambridge Evening News, London News, Travel Weekly, Israel High Tech Investor, and The Times of London. She was the Associate Editor at LINK Israel’s Business and Technology Magazine, and the High-Tech Correspondent for The Jerusalem Post.