Israel’s Babylon Says Arab World to Boost Sales of Translation Software

Babylon Ltd. (BBYL), an Israeli developer of translation and dictionary software, says sales will continue to surge on demand for language products in the Arab world and Brazil, Chief Executive Officer Alon Carmeli said.

“We have reported a growth rate in revenue of nearly 80 percent in dollar terms since the beginning of the year and we expect a similar growth going forward,” Carmeli said in an interview at Babylon’s offices in Or Yehuda.

The software developer, named after the Tower of Babel biblical story about the creation of different languages, says it has more than 100 million users and operates in about 200 markets. The company provides translation for 75 languages, including the recently added Vietnamese and Swahili.

The shares have gained 72 percent this year, giving Babylon a market value of 386 million shekels ($103 million). The benchmark TA-25 index (TA-25) has dropped 18 percent. The Tel Aviv Stock Exchange said last week that Babylon will be added to the Mid Cap-50 equity index on Dec. 15.

Babylon is boosting marketing efforts in Brazil, where it plans to capitalize on translation needs in a country that will host the 2014 World Cup and 2016 Olympics. In Arab areas, the company has strong Web traffic and needs to sell products that garner more revenue, Carmeli said. Babylon started using a call center in the West Bank city of Ramallah to push its services.

“The Arab world is a big proportion of our website traffic but not a big proportion of our revenue,” the 46-year-old CEO said. “We need to be more local in the way we do business with them, because many users don’t have credit cards and we need to find alternative payment methods.”

Internet Power

The “Arab Spring,” a wave of protests that displaced regimes in the Middle East and North Africa this year, built thirst for Internet communications, Carmeli said. Leaders of the uprising that ended Hosni Mubarak’s control of Egypt included a blogger who founded a youth movement on Facebook.

“They are suddenly realizing the power the Internet can give you,” Carmeli said. “They open Facebook accounts, then they start to communicate and then they need Babylon.”

The Israeli company has the seventh most popular website in Libya, while it’s No. 8 in Algeria, 11th in Tunisia and 23rd in Egypt, according to Alexa Internet, a research company.

Stalled peace talks between Israel and the Palestinians shouldn’t be a problem for Babylon, said Natali Gotlieb, an equity analyst at Israel Brokerage & Investments Ltd.

“There is a great need for translation services in these countries to breach the language barrier,” she said. “Babylon is an international Internet company, with no border. So the Israeli-Arab issue is a non-issue.”

30 Million Visitors

Babylon, whose customers include Coca-Cola Co., SAP AG and Nokia Oyj, is attracting 30 million visitors to its site a day, said Carmeli, who has led the company for almost four years. It has 15 advertising partnerships including with Google Inc. and Russia’s Yandex LLC Internet portal.

The company had a price to earnings ratio of 21.83 times as of Dec. 8, compared with an average ratio of 14.79 times for comparable Israeli software firms, according to Bloomberg data.

The software developer plans to add advertising partners in Brazil in the coming year and will build distribution, said Liat Sade-Sternberg, Babylon marketing vice president, who will travel to the country this month. Brazil’s booming economy, as well as the World Cup and Olympics events, are a major opportunity, Carmeli said.

“The whole area of languages in this country is going to get a massive push forward,” he said. “All the service providers will have to offer services in English.’”

Babylon has had annual revenue growth of more than 30 percent since 2007 and reported sales of 118.4 million shekels for 2010, according to Bloomberg data. Sales rose to 57.5 million shekels in the third quarter.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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