The Ministry of Defense recently broke off business relations with Computer Associates Inc. (NYSE:CA) because it did not meet the terms of US military aid for Israel. As a result, contracts for the delivery of products and software worth tens of millions of dollars have been frozen. These contracts account for the bulk of sales by CA Israel.
US military aid includes hundreds of millions of dollars for the procurement of equipment by the Ministry of Defense. In recent years, the ministry has used this aid to finance almost all of its IT procurements. CA’s Israelis representative handles the sales, with the payment intended for the procurement of equipment from CA in the US. US military aid is subject to two important conditions: procurements are made only from US companies, and no payments are made to Israeli third parties, such as distributors. Arrangements are possible to bypass these restrictions.
Nevertheless, it is extremely unusual for the Ministry of Defense to break off business relations with an international company because of problems relating to the terms of US military aid for procurements.
The Ministry of Defense might resume is business relations with CA if the company again complies with US military aid terms. Similar suspensions of business relations have occurred before with the Israeli representatives of high-tech companies.
The Ministry of Defense and CA Israel declined to comment on the report.
Published by Globes [online], Israel business news - www.globes.co.il - on March 14, 2007
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