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Hewlett-Packard mulls $50-60m investment in Israel
HP will only invest if it obtains benefits under the strategic track in the new Investment Law.
Hewlett-Packard is considering investing $50-60 million in Israel, Singapore, or China, said HP-Indigo general manager Alon Bar-Shani, during a tour of the company’s ink plant in Kiryat Gat.
If Hewlett-Packard picks Israel, it will add 200 employees to its current workforce of 2,250 manufacturing, marketing and R&D staff.
Hewlett-Packard will invest only if the government agrees to include the investment in the strategic track in the Law for the Encouragement of Capital Investments, which exempts foreign investment in preferential outlying areas from taxes on dividends. To Hewlett-Packard’s displeasure, under the new Capital Investments Law, Kiryat Gat is not eligible for benefits. There is another, more significant, obstacle: the strategic track applies only to investments of $150 million and up.
Bar-Shani said, “In contrast to Intel, which demanded a huge grant from the government, we’re not asking for contributions in tens of millions of dollars in investments. However, we want to be sure that we’ll receive at least as much support in Israel as for a new plant in Singapore or the Scitex Vision plant in China. I’m sure we’ll reach an overall investment of $150 million, but it will be gradual.”
Until now, Hewlett-Packard has obtained approval for investment under the regular tax break track, but it wants to be eligible for the strategic track, which is designed to attract foreign investment.
Bar-Shani said Hewlett-Packard had discussed the matter with former Minister of Finance Benjamin Netanyahu, and later with Minister of Finance and Minister of Industry, Trade and Labor Ehud Olmert, and that talks with the Investment Promotion Center were continuing. However, the Investment Center has taken no decision, and under the current political uncertainty, it was not clear when a decision would be made.
Investment Promotion Center director Hezi Zaieg CPA told “Globes” that HP-Indigo’s investment would not be approved because it did not meet the mandated $150 million threshold for a strategic investment. In order to meet the threshold, Hewlett-Packard asked that its acquisition of Scitex Vision for $220 million be taken into account. However, Zaieg said, “We won’t begin considering acquisitions of Israeli companies as investments eligible for benefits.”
Hewlett-Packard (Israel) managing director Gil Rosenfeld said Hewlett-Packard was positioning Israel as the capital of digital printing. The company’s activities in Israel total $835 million, half of which is exported. 65% of domestic sales are to business customers.
Hewlett-Packard invests $3.5 billion a year in R&D, and developed 650 new products in 2004. $1 billion was invested in digital printing, one tenth of which was invested in Israel. Hewlett-Packard invested $100 million in HP-Indigo’s ink plant in Kiryat Gat. The current investment is intended to expand this plant to produce new products. Hewlett-Packard is also considering setting up new plants to meet demand for digital printers.
Rosenfeld said Hewlett-Packard Israel had signed a new kind of contract with Osem Investments Ltd. , under which Hewlett-Packard provides infrastructure and support for Osem’s Petah Tikva center, with payment on the basis of actual use. He said contracts of this kind cut computer costs for large customers by 20-25% under.
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