What are Microsoft, Intel et al doing in Israel?

Last month, bloggers noted that Intel had declared its intentions to build a hightech empire in Israel. “Today Intel Israel is at the core of the global company, with a central role in developing new products like Sandy Bridge and the Ivy Bridge,” observes the firm’s Israeli chief, Maxine Fassberg. Bottom line; after the U.S., China, India, its Israel. Intel invests more in Israel than in Europe.

Not bad for a country the size of Wales with under 8m people and surrounded by geopolitical uncertainty. But is Intel the proverbial exception that proves the rule?

Enter Microsoft:

Microsoft is launching the first startup accelerator* in the company’s history in an effort to encourage more entrepreneurs to build their cloud-based applications using Windows Azure. The program will take place at the Microsoft Israel Research and Development Center, and is a part of the Israel R&D Center’s outreach program Think Next as well as the Microsoft BizSpark program for startups.

Zack Weisfeld, Sr. Director of Strategy and Business Development at Microsoft’s Israel Development Center gave a very simple explanation for his company’s high profile in the Jerusalem and two other locations. There are 4,900 startups and it has the third largest V.C. spending in the world after Silicon Valley and New England. No brainer.

Siemens, GE, GM, IBM and more have all secured a large r&d presence, many concentrated north of Tel Aviv. Broadcom takes a slightly different approach. It has strategic policy of buying successful Israeli start ups. Of the ten purchases, six were snapped up since December 2009. The estimated total investment value  is around US$1.6 billion, and it appears safe to assume that more is on the way.

Shlomo Markel, Broadcom’s VP who handles the company’s M&A operations, is very clear about what motivates their acquisitions. Wealth creation is the name of the game – either extra profits or the opportunity for an exit. Either way, Markel is looking to up the company’s share value.

As someone coined the phrase; modern day commercial miracles in the Holy Land.

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