Sources inform ”Globes” that that Shani and Ashmore’s divorce is over disagreements on ECI’s future and the expiry of Ashmore’s funds through which the investment was made. During the two years that Ashmore sought to sell ECI, it refused to allow the company to increase its R&D spending. Shani opposed a sale. ECI reportedly received tens of millions of dollars a year in capital injections from its owners to support its operations and R&D.
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The timing of ECI’s acquisition in 2007 was especially bad as far as the shareholders were concerned. The telecommunications equipment industry in general, and ECI in particular, have suffered from the aggressive entry by Chinese manufacturers, especially Huawei, which hit companies’ revenue and profits. The industry was also hit by the drop in investment by carriers during the 2008-09 economic crisis. ECI, with a turnover of $500 million, posted a loss in 2012.
The business problems hit the company’s workforce hard. It workforce has been slashed from 3, 000 at the time of the takeover, to 1, 700, following several rounds of layoffs, including one underway now. Half the workforce is in Israel.
Telecom industry veteran Darryl Edwards was appointed ECI CEO in August 2012, and he has tried to stabilize the company. In August 2013, chairman Rafi Maor, who was ECI’s CEO at the time of the takeover, was appointed chairman of Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1). The chairmanship has since been held by an Ashmore executive, and Shani may reassume the job or appoint someone from the telecommunications industry.
ECI has been trying for years to change its strategy and focus on the development of new products, which have not yet proven themselves. As part of its plan to expand in optics and to offer more software solutions in its legacy business, it may raise more capital to support these efforts.
Published by www.globes-online.com