"The only problem and the only thing we fear are the [Israeli military] checkpoints," says Elias Kahlil, G.ho.st's director of research and development. The company's Palestinian employees say that passing the checkpoints is like going through airport security - they are required to show ID and a permit, walk through a metal detector and get their bags screened in an X-ray machine. They also need to have their fingerprints taken and answer any questions the Israeli soldiers may have about their reasons for entering Israel. The process can take anywhere from 15 minutes to two hours.

These delays can lead to awkward situations. Earlier this year, representatives from the company were asked to meet in Jerusalem with Israeli President Shimon Peres, who runs a nonprofit dedicated to promoting peace and collaboration between Israelis and Palestinians. G.ho.st's Palestinian financial director, Khaled Ayyash, was scheduled to attend the event but missed it because he was stuck in line at the border crossing.

"Everyone was a little embarrassed," Schreiber says of the incident. "But they understood."

In wartime, all bets are off. During the conflict between Hamas and the Israeli army in the Gaza Strip last December, all borders between the Palestinian territories and Israel were closed.

"In times like that, a permit is just a piece of paper," Kahlil says. So as Israeli tanks traded fire with Hamas fighters wielding rocket-propelled grenade launchers, G.ho.st's employees traded instant messages and Google Docs. All meetings were held via Skype video.

"We got used to working this way," adds Kahlil.

No one at G.ho.st, not even the upbeat Schreiber, claims Palestinian and Israeli colleagues found it easy to work together during the fighting. "Of course there are tensions," Schreiber said in January, at the height of the conflict. "We're all worried about families and friends in the south of Israel and in Gaza."

One day Schreiber attended a funeral for a fallen Israeli soldier who happened to be his neighbor. At the same time, his marketing and communications manager, Montasser Abdellatif, was frantically trying to reach a college friend who lived near a school in Gaza that the Israeli Army had just hit. (Eventually he learned that the friend had taken shelter elsewhere.)

Both Schreiber and Abdellatif were badly shaken when they dialed in for their weekly conference call later that day. Still, after inquiring about family and friends, they got on with the agenda. "We want to know each other's points of view," Abdellatif says. "But not during meetings."

G.ho.st's employees admit that discussions about the endless conflict can get heated - and are more common when they get together in person than when they talk online. (Score one for videoconferencing technology.) But they stress that these conversations have never degenerated into shouting matches. Burying themselves in their work is a welcome distraction from conflict.

"We are a high-tech company," Schreiber says. "We remain focused on our product."

Like any other tech startup, G.ho.st has plenty of nonpolitical hurdles to keep it occupied. It needs to grow its user base with a limited marketing budget in a down economy. And Schreiber knows that by offering an online operating system that could make Windows irrelevant, his team is suiting up for battle with an enemy far from the Middle East: Microsoft.

G.ho.st has already had a brush with the behemoth of Redmond. Last fall, after Microsoft introduced its $300 million Life Without Walls ad campaign, Schreiber sent a letter to Microsoft CEO Steve Ballmer complaining that its new slogan was in violation of G.ho.st's pending trademark for the phrase "no walls."

Schreiber claims G.ho.st started using the tagline to market its operating system before Microsoft began its campaign. But Microsoft disagrees, saying the startup has no rights to the phrase.

"We are very respectful of intellectual property claims," explains Microsoft spokesman Michael Marinello. "But in this instance we found their claims to be without merit and informed them of our position."

The U.S. Patent and Trademark Office says it received Microsoft's trademark application three days before G.ho.st's arrived. But because G.ho.st started using its slogan first, officials say the company might yet win the case. A ruling is expected in the next six months.

For now, G.ho.st is busy perfecting its product and building its user base. More than 100,000 have signed up since the service was unofficially launched in April 2007, and that number is growing by about 30% a month, according to G.ho.st. (The company is planning an official launch for the service later this year.) Many users are people who don't own a PC and want to access their files from any computer. The service is currently free to consumers, and G.ho.st doesn't plan to generate revenue until 2010, when it hopes to start charging other companies for providing embedded links to their online applications.

"The online app market is very nascent," says Thomas Bittman, an analyst with Gartner. "But it is moving fast, and we think 2009 will be all about experimentation."

It may also be the year more cross-border companies follow in G.ho.st's foot-steps.

"G.ho.st is the most visible [Israeli] company doing this, but there are a few others that are starting to work with Palestinians," says Yossi Vardi, a leading Israeli tech entrepreneur and investor. "In the high-tech world, everyone knows collaborating is important. There's already a culture of dialogue."

Tahboub, Schreiber's Palestinian partner, says Israeli companies such as pharmaceutical software firm Comply are starting to use his developers' services. An Israeli venture capital firm, Veritas Venture Partners, is setting up a fund dedicated to investing in Israeli-Palestinian businesses (to date, the firm has not invested in G.ho.st).

Of course, all that economic progress could vanish if the political conflict boils over again. But if a company like G.ho.st can launch its product in wartime, so can others.

"This is helping the Palestinian economy," says marketing manager Abdellatif. "It is the model for peace."

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