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CEO of Magal Security Systems talks about exciting year for product launches Full article published: 03/29/2004     JACOB EVEN-EZRA is the Chairman and CEO of Magal Security Systems Ltd

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TWST: Can we begin with an overview and update on Magal Security Systems (NasdaqNM: MAGS)?

Mr. Even-Ezra: Magal was established twenty years ago as a company and its main activity is in the perimeter security systems all over the world. It is an international company that has three major operations: one in California, one in Canada, and one in Israel, where the headquarters are. It has another few companies fully-owned by Magal, which are in Mexico, United Kingdom, in Germany, in China and which are acting mainly as marketing and sales office and after sales services.

TWST: What is your market position?

Mr. Even-Ezra: We have been the leaders already for a few years now. We have about 40 percent of the market in this specific niche of perimeter security products. That is not including integration; there are much bigger integrators then we are like Lockheed Martin and Boeing. But, but as manufacturers of products for the systems, we are the biggest player in the market.

TWST: What are the market size estimates for this niche and how has the market changed in light of this environment of heightened security?

Mr. Even-Ezra: The potential market before September 11th was about 100 million this is for the products and perimeter security systems only. But since September 11th, its very hard to say what the potential market size is for 2004 and 2005. If, for example, the Homeland Security administration in the United States decides to protect airports with a perimeter security system then every airport in the United States will need about 2 million of products. Now, there are about 500 commercial airports in the United States, so the potential only from airports will increase the market by 1 billion. There will be a big change in this market during 2004 and 2005, but it is difficult to predict exactly when and to what extent.

TWST: We are obviously talking specifically about the US market; are you seeing similar opportunities on an international scale?

Mr. Even-Ezra: Yes, there is a much bigger demand today than it was few years ago. We are seeing this in actual orders as well as the number of inquiries we are receiving from different places. For example, in the last two years, we did two big airports: one in Romania and another airport in Azerbaijan. We are also negotiating on some other big projects . So there is some stimulation in the market that we believe will result in significant work in the future. One example is the oil pipes from Russia, Iraq, Azerbaijan, and so. There is nothing to protect those buried pipes against sabotage and we will soon announce a solution for this problem. We have been working very hard to make sure we can cope with these new market opportunities that are emerging.

TWST: Can you provide us with an insight into your strategy and headline objectives for the coming one to two years?

Mr. Even-Ezra: We are growing at over 18% per year on a compound basis. Our target, first of all, is to maintain and even increase this level. For the nine months just gone, we grew by about 40% over the year prior, and our operating profit grew by about 70%. We will publish our full year in a few weeks and I think it is safe to say 2003 will turn out to be a very good year, in fact a record year for us. We also believe that 2004 will be significantly better. Now, if look at our targets, first of all we are going to launch three new products this year. One of them is Fortis, which we announced a couple of weeks ago. It is a control and command system that is especially applicable for closed sites such as ports, airports, and colleges. We are very excited about this and think there is a lot of potential. We will be launching two other products shortly, one in a couple of weeks and the other in about three months. So, we see 2004 as the year when our plans will start to get off of the ground. I don't think the new products will do a lot of sales during this year because it will take a little while to get some traction, but it is an exciting year for product launches after these past few years of strong R&D focus.

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This interview is a small excerpt from a comprehensive interview published in The Wall Street Transcript on 03/29/04. For more information call (212) 952 7400. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.

Copyright 2004, Wall Street Transcript Corp.


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