Babylon Has Record Plunge as Google Deal Ends: Tel Aviv Mover

Babylon Ltd. (BBYL) tumbled the most on record after the Israeli translation software provider said Google Inc. (GOOG) decided not to renew a partnership following customer complaints.

The shares of the company that got more than 40 percent of its revenue from the collaboration, plunged 62 percent, the most since they started trading in Israel, to 7.40 shekels at the close in Israel. That pared Babylon’s market value to 369 million shekels ($105 million). Tel Aviv-based Perion Network Ltd. (PERI), a digital media company, dropped 9.9 percent to 39.67 shekels.

Google told Babylon it won’t renew the contract ending Nov. 30 following complaints about the Or Yehuda, Israel-based company’s toolbar, according to a statement to the Tel-Aviv Stock Exchange. The end to the deal could wipe out most of Babylon’s revenue as Yahoo! Inc. (YHOO) reconsiders its partnership with the company on similar complaints, according to Beni Dekel, an analyst at Tel Aviv-based Union Bank of Israel Ltd.

“This is a catastrophe for the company,” Dekel, who had a buy rating on the shares until the Yahoo! discord emerged earlier this month, said by telephone. “Without Google, and with the Yahoo! partnership on shaky grounds, how can the company possibly recover?”

Babylon, whose controlling shareholders include online gaming entrepreneur Noam Lanir, last year planned a U.S. public offering of shares to raise $115 million. The company put those plans on hold as it entered talks to merge with IronSource Ltd., an Israeli online software distributor.

Industry Threatened

Offering free toolbar services, such as language translation, the software makers split advertising revenues with search engines. If Google and Yahoo question the benefits of these toolbars as customers complain, that jeopardizes the lifeblood of these companies, said Dekel.

Google’s decision threatens the whole industry, Babylon’s Chief Executive Officer Alon Carmeli said. “We are the first to experience these events,” he said in a statement to the exchange. The company is studying the implications and working to adapt to the new reality, Carmeli said.

“This could mean a change in the toolbar model and this is bad for the industry,” Dekel said.

To contact the reporters on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net; 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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