Gary Will

Tuesday, June 09, 2009

Waterloo Tech Digest - June 9, 2009

Compiled and written by
Gary Will
gary@garywill.com

In this issue:

Covarity closes $3M round
Open Text reports solid profits and cash flow
Open Text to acquire Vignette
MKS ends profitable year
Dalsa sued by ex-digital cinema GM
Descartes sales up 7%
STOCK REPORT: Another big month for TurboSonic, Sandvine shares
Miscellaneous tidbits from Aeryon Labs, Bayalink, Bioinformatics Solutions, Unitron, Biorem, RIM, TurboSonic, Desire2Learn, Atria

////////////////////////////////////////////////////////////
A D V E R T I S E M E N T S

BERESKIN & PARR LLP - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.

AERO CORPORATE BENEFITS - Your Employee Benefits Solutions Provider
Located in Waterloo, we've served the KW technology community for over 20 years, providing employee benefits solutions to companies large and small. Our mission is simple. Help our clients succeed by doing what we do best: -- Design and monitor programs that attract & retain the most qualified employees -- Contain costs of employee benefits, retirement plans, and HR support -- Provide employee-level support & advice to help you manage risk & compliance. Please contact Herb Goedecke at 519.489.2376 x11 or herbg@aero-corp.com for details.

EVERYBODY WANTS TO BE HEARD - and we want to listen.
Hagon Design is #1 at creating marketing communications that get heard. Our technology industry experience includes everything from start-ups to global brands. Let¹s get together for a coffee and chat. You tell us where you want to go, we listen, and we¹ll help pave the way to successful marketing. Give creative director, Ben Hagon a call at 519.500.7985 or email ben@hagondesign.com

GO BEYOND STAFFING
For over 30 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. Phone: 519.885.4331.

RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.

////////////////////////////////////////////////////////////

[1]---------------------------------------------------------------
Covarity closes $3M round
May 6, 2009

Covarity has raised another round of financing, receiving $3 million from Tech Capital Partners, BDC, GrowthWorks and VentureLink -- all of which were existing investors in the company.

Covarity raised $2.5 million in 2007 and $3.2 million in 2006, on top of other rounds since it was founded in 2001.

[2]---------------------------------------------------------------
Open Text reports solid profits and cash flow
May 6, 2009

Open Text had earnings of US$22.0 million on sales of US$192.0 million in the quarter ended March 31 (Q3 09). Sales were down 8% from the previous quarter but up 7% from a year ago. This was the first quarterly report to include a full three months of results from Captaris, which was acquired at the end of October. Operating income of US$21.0 million was within the range of the previous two quarters.

Operations provided US$72.9 million in cash and the company ended the quarter with US$237.0 million in cash, up US$64.2 million from the end of Q2.

Open Text also announced that it received a 10-year contract with the Government of Ontario to be the exclusive vendor of record of enterprise information management solutions. Along with managing information across all ministries, Open Text says its products will help the government to deploy wikis, blogs, forums and other social media applications.

[3]---------------------------------------------------------------
Open Text to acquire Vignette
May 6, 2009

Open Text will acquire Austin, Texas-based Vignette in a cash and stock deal valued at about US$310 million. Vignette will operate as a wholly-owned subsidiary of Open Text. The deal must still be approved by Vignette shareholders, and is expected to close later this year.

Vignette shareholders will receive US$8 in cash and 0.1447 Open Text common shares for each Vignette share. As of Friday's close, that would be a total of just under US$13 a share. At the time the announcement was made, Vignette shares were trading for US$9 and had been below US$6 as recently as March. Vignette shares last traded at a price above the Open Text offer last summer.

Vignette develops web content management software and has 700 employees worldwide. It reported a loss of US$1.8 million on sales of US$33.9 million in the quarter ended March 31 and has been reporting declining sales in recent quarters. Vignette was a high-flyer in the dot-com boom, with its shares peaking at a price around US$800, adjusting for a split and a reverse split along the way.

[4]---------------------------------------------------------------
MKS ends profitable year
June 2, 2009

MKS closed its 2009 fiscal year with earnings of US$2.0 million on sales of US$13.6 million in the quarter ended April 30 (Q4 09). Sales were up 3% from the previous quarter but down 36% from a very strong Q4 last year. MKS said its ALM licensing revenue fell below expectations, but that it had won several promising customers it hopes will lead to strong follow-on sales down the road.

Most of the Q4 earnings came from an income tax recovery of US$1.4 million. Operating income of US$627,000 was an improvement on Q3, but three-quarters of the company's operating income for the year came in the first two quarters.

For the year, MKS reported earnings of US$4.3 million on sales of US$58.4 million. Sales were down 4.5% from 2008 but operating income was up 19% year-over-year. ALM sales accounted for 87% of total revenue, just slightly less than a year ago, as the mature IO business -- projected to show a sales decline -- managed to maintain its 2008 sales levels.

Year-end cash balance was US$17.1 million, up from US$12.9 million at the start of the year. MKS is raising its quarterly dividend by 25%, or about an extra US$1 million over the year, assuming the higher dividend is maintained in future quarters.

MKS ended the year with 309 employees worldwide.

[5]---------------------------------------------------------------
Dalsa sued by ex-digital cinema GM
June 5, 2009

Dalsa is being sued by the founder of the California company it acquired in 2004 as part of its failed digital cinema initiative. Bob DaSilva has filed a statement of claim in Ontario seeking more than $22 million.

In October 2004, Dalsa announced that it was buying the assets of DaSilva's Broadcast Plus business in Woodland Hills, Calif. for US$250,000 in cash plus up to 7.5% of the voting shares of a new subsidiary called Dalsa Digital Cinema Inc. DaSilva then became GM of the Dalsa Digital Cinema Center. At the time, DaSilva looked like an odd choice, since his business and background seemed to be focused on the television industry, while Dalsa was targetting filmmakers for its digital movie camera. Two years later, Dalsa hired someone else to run its California digital cinema office.

According to Dalsa, DaSilva had the option to have his stake in Dalsa Digital Cinema Inc. repurchased upon the termination of his employment. Dalsa says it had applied to the court to appoint a valuator for the business, but there was apparently a disagreement with DaSilva around the process to set a valuation. Dalsa says it will defend the claim and file a counterclaim.

[6]---------------------------------------------------------------
Descartes sales up 7%
May 28, 2009

Descartes reported earnings of US$2.2 million on sales of US$17.4 million in the quarter ended April 30 (Q1 10). Sales were up 7% from a year ago and 11% from the previous quarter, aided by two more acquisitions in Q1.

The bottom line was boosted by an income tax recovery of US$0.7 million. Expenses were also up across the board, with R&D spending jumping 24% from the previous quarter to US$3.4 million, or 19% of revenue. Operating income was US$1.7 million, down from US$2.4 million in the last two quarters, but up from a year ago.

Descartes spent US$14.8 million on acquisitions in the quarter, but still ended Q1 with US$46.9 million in cash. Operations generated US$4.4 million in cash.

[7]---------------------------------------------------------------
STOCK REPORT: Another big month for TurboSonic, Sandvine shares
May 2009

TurboSonic shares had another strong month after the company reported impressive top- and bottom-lines in its latest quarterly results. The shares are up 149% in the last two months and finished the month above US$1 for the first time since October 2007.

And it was the same story with Sandvine shares, which have jumped 117% in the last two months. They closed May at their highest month-end price since March of last year.

For the month of May:

TurboSonic [OTCBB: TSTA] +70%
Sandvine [TSX: SVC] +24%
Biorem [TSXV: BRM] +22%
MKS [TSX: MKX] +16%
RDM [TSX: RC] +15%
--S&P TSX VENTURE INDEX +11%
--S&P TSX COMPOSITE INDEX +11%
Descartes [TSX: DSG] +11%
ATS [TSX: ATA] +8%
RIM [TSX: RIM] +4%
===============================
Open Text [TSX: OTC] -2%
Dalsa [TSX: DSA] -5%
Arise [TSX: APV] -7%
Com Dev [TSX: CDV] -9%

Descartes shares had their highest month-end price since September 2007, while RDM shares finished the month above a dollar for the first time since September.

There hasn't been any bad news from Com Dev, but along with having the biggest decline in May, the company's shares were down another 10% in June as of yesterday's close. The stock had some big gains in March and April and is now back to about where it was at the beginning of the year.

Companies with core operations outside the area:

ON Semiconductor [Nasdaq: ONNN] +26%
Agfa-Gevaert [Brussels: AGFA] +26%
Ansys [Nasdaq: ANSS] +8%
Blue Coat [Nasdaq: BCSI] +7%
Acorn Energy [Nasdaq: ACFN] +6%
NCR [NYSE: NCR] +6%
Google [Nasdaq: GOOG] +5%
McAfee [NYSE: MFE] +5%
Oracle [Nasdaq: ORCL] +1%
===================================
Sybase [NYSE: SY] -4%

[8]---------------------------------------------------------------
Miscellaneous Tidbits

Aeryon Labs and Bayalink were two of the companies selected to receive the Canadian Angel Capital Top Five Award at the 2009 Canadian Co-Investment Summit in Toronto. Recipients were selected through an investor vote from the 15 companies that made presentations. Aeryon and Bayalink were the only two Waterloo area companies to present at the conference.
Lots of Waterloo-area winners at the 2009 Premier's Innovation Awards. Ming Li, co-founder of Bioinformatics Solutions (BSI) and UW professor, won the $250,000 Discovery Award for Innovation Leadership. At the same time, his BSI and UW colleague, Bin Ma, won the $200,000 Catalyst Award for Best Young Innovator. Two-thirds of this year's Premier's Catalyst Awards went to Waterloo Region recipients, with Navid Zargari named Innovator of the Year for a technology he developed for Rockwell Automation, Unitron Hearing named Company with the Best Innovation, and UW professor and Certicom co-founder Scott Vanstone presented the Lifetime Leadership in Innovation award. Each of those prizes also came with a $200,000 award.
Biorem announced a $700,000 sale of a biotrickling filtration system to a buyer in Florida and two other biofiltration orders in the "midwest and western coast of the United States" for a combined $1.3 million. The company lost $425,000 on sales of $4.0 million in the quarter ended March 31 (Q1 09). Sales were up 27% from a year ago. Order backlog at the end of the quarter stood at $12.8 million.
Jim Estill's new corporate home is Nu Horizons Electronics, a components distributor based in Melville, New York on Long Island. He became president and CEO of the company on June 1 and has also been appointed to the board of directors. Nu Horizons is listed on Nasdaq with a market value just under US$70 million.
RIM has acquired Sunnyvale, Calif.-based Dash Networks for an undisclosed amount. In fact, the entire acquisition was more discovered than disclosed. Dash developed a GPS-based device that provided drivers with traffic information. At one point, it was thought to be a promising startup, attracting investments from Kleiner Perkins and Sequoia, among others. But the company had fallen on hard times and laid off most of its staff in the fall. It then shifted from being a device company to a software provider, selling applications that could run on various devices.
TurboSonic earned US$604,000 on sales of US$7.0 million in the quarter ended March 31 (Q3 09). Sales were up 216% from the same quarter last year, and sales over the first three quarters of the fiscal year are double what they were a year ago.
According to Bloomberg News, the U.S. International Trade Commission has agreed to review Blackboard's request to block the sale of Desire2Learn software in the U.S. Blackboard acquired another major competitor in May, and Desire2Learn has said that the U.S. Department of Justice is investigating the deal (this was subsequently confirmed by Blackboard). Desire2Learn is also preparing for another patent infringement suit from Backboard -- this time in Canada. In April, the U.S. Patent and Trademark Office issued a preliminary ruling rejecting all 57 claims in the original Blackboard patent. Unfortunately for Desire2Learn, even if that were to be the ultimate ruling, it would probably take years to get to that point.
Michael Stephens is the new marketing and product development VP at Atria Networks. Stephens -- a UW engineering grad -- will work out of the company's Markham office.

Tuesday, May 05, 2009

The book Howard Burton believes contributed to his removal from Perimeter Institute

I'd been looking forward to reading Howard Burton's book for over two years -- ever since people who knew him told me he had written it ... and that it wasn't going over well with Perimeter Institute bigwigs. Burton was the institute's first executive director -- the man picked by PI founder and principal benefactor Mike Lazaridis to turn his vision of a physics institute into reality.

It wasn't long after I heard about the book -- maybe a couple of months, I don't really remember -- that PI announced that Burton, to borrow an expression from another field, had been future endeavored* and was "seeking new challenges."

Now the book has been published and we can read the words that apparently caused so much agitation. First Principles: The Crazy Business of Doing Serious Science was released by Key Porter Books a few weeks ago. Although it's only discussed briefly in a six-page epilogue, Burton always felt the book was a significant factor in his departure from PI, an outcome he makes clear was the institute's idea and not his, and which he still finds "mystifying."

On the one hand, there's not much here that could reasonably become any kind of cause célèbre, but I know firsthand how irrationally hyper-reactive some folks can become -- particularly control freaks or people used to being big fish (often in tiny ponds) -- when something is written that doesn't match what they think should be said. So, it's possible that this book really did create an uproar in some circles, even if it mostly consists of reasonable observations about the importance of basic research, the role of universities, and the pressure for "commercialization," along with the central story of how Burton went about putting the institute together.

There are some anecdotes that show the eccentric side of Lazaridis, but not many and nothing mean. The funniest is probably the tale of a meeting at Lazaridis's house with UW president David Johnston. Burton says the three of them went to look at the home theatre in the basement and Lazaridis played the DVD of Armageddon, the Bruce Willis movie. "I glanced at my watch and wondered how much more of this I would have to endure," Burton writes. "After half an hour or so, it began to dawn on me that, much to my horror, we were going to watch the entire movie. To this day, I'm not entirely sure why we did this." Funny lines -- and Armageddon was a silly movie (I loved The Island, though, which only got slightly better reviews) -- but I have some doubts that Burton would have included the story if Lazaridis had screened La Dolce Vita.

Burton cleans up the story of his one public rift with Lazaridis: the incident in the waning days of the 2006 federal election campaign when then-Prime Minister Paul Martin -- looking like he was imminently to become ex-Prime Minister -- announced funding for Perimeter Institute and UW's Institute for Quantum Computing, along with two other research centres. Burton saw it as a cynical election ploy and, even worse, one that would be hitching PI's horses to the losing wagon -- something that would probably be remembered by the new government when forming its first budget.

"I was amazed to discover that surrounding university officials and representatives were ecstatic to make the lemming-like drive off the cliff to wed their fortunes with those of the desperate Martinites," Burton writes ... not mentioning that one of those university officials was UW chancellor Lazaridis, who, along with Johnston, happily drove to Markham to be photographed with Martin and praise the announcement. "I couldn't even stomach the thought of showing up," Burton wrote at the time -- a sentiment he echoes in the book.

Burton says he always realized that if PI got off the ground that he "would be its Achilles heel" -- the guy with no reputation in the physics world, or in any world, really, who got hired because he wrote a letter to the right person at the right time and made a good impression. He says he was initially treated with suspicion by some members of Lazaridis's inner circle who were concerned that he was some leech intent on sucking away on the Lazaridis fortune.

In the end, he says that it's "hard to feel that there isn't at least some grain of truth" to stories that he and Lazaridis both wanted to take credit for creating PI, leading to a "clash of egos." Two years after Burton's departure, the PI website still mentions Burton in the first paragraph of its "About PI" section, and says he was "instrumental" in shaping the institute, so whatever clash there may have been didn't extend to erasing Burton from the history books or understating his contribution.

Burton's views on basic research and commercialization are similar to mine, and when he writes that "university presidents will flexibly adopt whatever raison d'etre for their institutions they feel maximizes the momentary liklihood of procuring additional government resources for their cause," I can add that it's not just university presidents who behave that way.

According to the book, he now lives in France. He didn't think much of Waterloo. Like Burton, I also came to Waterloo from Toronto and had a big-city chip on my shoulder, but my nose never reached the altitute that his did. He thought Toronto was beneath his worldly tastes, but coming to Waterloo made it seem exciting in comparison. He makes a point of discussing the 2004 Lisa Rochon Globe & Mail story where she called Waterloo "a city of surpassing ugliness" and a "dystopia," making it clear that it was all he could do to restrain himself from shouting "hear, hear" when asked to comment on the article. The forword to the book even has Roger Penrose calling Waterloo "a seemingly unremarkable town."

For those of us who have become accustomed to histories of UW published by UW and the history of the City of Waterloo published by the City of Waterloo, Burton's book is a welcome alternative. While it's hardly a tell-all, the book at least gives the reader something outside the party line. And, in a small community like Waterloo, that can be enough to create controversy.

----
* When companies announce that someone has left the organization, the last line is often "we wish him well in his future endeavors" or something similar. That phrasing was so popular with WWE that now, when someone gets released or their contract isn't renewed, it's become an in-joke within wrestling to say the person was "future endeavored." The actual line in the PI announcement was "I wish Howard well in his future activities," which could have been written by WWE. On top of being a useful expression, I just enjoy making a pro wrestling reference in a post about someone with highbrow pretentions.

Waterloo Tech Digest - May 5, 2009

Compiled and written by
Gary Will
gary@garywill.com

In this issue:

Sandvine shows it doesn't need Comcast for strong top line
Dalsa starts 2009 with slow sales and weak profits
Open Text acquires Toronto's Vizible
Arise hopes for rebound later in the year; delays CEO search
RDM reduces losses on weaker sales
STOCK REPORT: Sandvine bounces back; great month for RIM stock
Miscellaneous tidbits from LoyaltyMatch, Aeryon Labs, AideRSS, Tungle, ParkVu, RIM, Com Dev, Virtek, TurboSonic, Desire2Learn, Maplesoft

////////////////////////////////////////////////////////////
A D V E R T I S E M E N T S

EVERYBODY WANTS TO BE HEARD - and we want to listen.
Hagon Design is #1 at creating marketing communications that get heard. Our technology industry experience includes everything from start-ups to global brands. Let¹s get together for a coffee and chat. You tell us where you want to go, we listen, and we¹ll help pave the way to successful marketing. Give creative director, Ben Hagon a call at 519.500.7985 or email ben@hagondesign.com

BERESKIN & PARR LLP - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.

AERO CORPORATE BENEFITS - Your Employee Benefits Solutions Provider
Located in Waterloo, we've served the KW technology community for over 20 years, providing employee benefits solutions to companies large and small. Our mission is simple. Help our clients succeed by doing what we do best:
* Design and monitor programs that attract & retain the most qualified employees
* Contain costs of employee benefits, retirement plans, and HR support
* Provide employee-level support & advice to help you manage risk & compliance
Please contact Herb Goedecke at 519.489.2376 x11 or herbg@aero-corp.com for details.

GO BEYOND STAFFING
For over 30 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. Phone: 519.885.4331.

RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.

////////////////////////////////////////////////////////////

[1]---------------------------------------------------------------
Sandvine shows it doesn't need Comcast for strong top line
April 9, 2009

Sandvine proved it could have an impressive top line even without significant revenue from Comcast in the quarter ended February 28 (Q1 09). It reported sales of $18.6 million in the period -- the same as the previous quarter and up 124% from a rough period last year when Comcast sales went south and nothing else stepped in to make up the difference.

Net loss was $4.8 million, which included a $2.4 million non-cash goodwill impairment charge. Excluding that charge, the operating loss of $2.6 million was just slightly more than the $2.5 million reported in the previous quarter.

The biggest difference between the two quarters was that Sandvine wasn't dependent on just a couple of customers for the bulk of its revenue, as had been the case in Q4 and in many of the company's previous periods. In this quarter, the largest three customers provided 45% of revenue, compared to Q4 when two customers -- including Comcast -- accounted for about three-quarters of sales. Q1 revenue from Comcast was down to $1.2 million, or 6.5% of sales.

There were other significant differences between this quarter and Q4, despite the similar top and not-quite-bottom lines. This time, DSL customers accounted for just 24% of sales ($4.4 million), down sharply from 41% ($7.7 million) in Q4. Direct sales were back up to nearly two-thirds of all revenue, after dropping to 54% in Q4.

Sandvine had $92.6 million in cash at the end of the quarter, essentially unchanged over the period. Operations provided $2.8 million in cash.

[2]---------------------------------------------------------------
Dalsa starts 2009 with slow sales and weak profits
April 30, 2009

Even without digital cinema to drag down its earnings, Dalsa had a disappointing quarter in the period ended March 31 (Q1 09). The company reported earnings of $1.3 million on sales of $37.9 million, but nearly all of the profits came from a gain on a sale of land. Operating income was just $698,000, down from $5.5 million in the previous quarter and $8.7 million a year ago.

Sales were down 18% from Q4 and 30% from last year. Weaker margins pushed the sequential decline in gross profit to 24%. The digital imaging and semiconductor businesses both reported significant year-over-year and quarter-over-quarter sales declines. One bright spot in the quarter was the $12.9 million increase in the order backlog for the semiconductor business.

Operations used $7.7 million in cash -- after contributing $6.5 million in Q4 and $6.7 million a year ago. Dalsa spent $301,000 in cash to repurchase shares in the company and distributed $921,000 in dividends. It ended the quarter with $11.5 million in cash. Dalsa added $8.5 million in long-term debt in the quarter.

[3]---------------------------------------------------------------
Open Text acquires Toronto's Vizible
April 8, 2009

Open Text has acquired Toronto's Vizible Corp., a developer of interactive, 3-D web interface technology. Financial details were not announced, but all indications are that the price tag was very low. Vizible had been working with AT&T on a Mozilla-based 3-D browser called Pogo, but the project never moved beyond a private beta stage and the company had a round of layoffs and cutbacks in the fall.

Vizible was founded by Anthony Gallo -- a UW architecture grad -- who is now VP of digital media experiences at Open Text. About 15 Vizible employees -- including some that had been laid off -- will join Open Text and work out of the company's Richmond Hill office. Vizible was privately held, but reported revenue of US$10 million in fiscal 2007.

The announcement from Open Text emphasized Vizible's strengths in rich-media widgets, multi-platform syndication, 3-D navigation, and user-customizable presentation of Web content. The company said it was unveiling a "breakthrough 3D interface" at the annual conference of the National Association of Broadcasters' NAB Show in Las Vegas.

[4]---------------------------------------------------------------
Arise hopes for solar rebound later in the year; delays CEO search
April 29, 2009

Arise has put off the search for a new CEO at least until later in the year, and will continue under hitherto-interim CEO Vern Heinrichs.

With the solar industry going through hard times, it was another rough quarter for Arise in the period ended March 31 (Q1 09). The company lost $14.8 million on sales of $7.2 million. Sales were down 62% from the previous quarter, which was itself a disappointment at the time.

The loss included a $2.9 million writedown of its inventory and a $6.0 million writedown of silicon wafer prepayments. Those were on top of the $9.0 million in writedowns in the previous quarter. Even without those charges, gross margins would still have been -19%, which was a step in the wrong direction from the -15% margins (also excluding the writedowns) in Q4. Arise's PV cell business, which accounted for 95% of sales in the quarter, recorded a $14.2 million operational loss, while the pre-revenue PV silicon business lost $1.5 million and the solar systems business lost $116,000.

Accumulated deficit now stands at $80.3 million.

Arise says the feedback it's receiving from customers is that demand for PV cells will pick up in the current quarter and even more so through the rest of the year.

The company ended the quarter with a working capital deficiency, but it believes it has enough cash on hand to fund operations until late this year. It says it is "in discussions on several options" to raise funds. It ended the period with $7.2 million in cash, down $15.4 million over the quarter. At April 28, it had $6.3 million in cash.

[5]---------------------------------------------------------------
RDM reduces losses on weaker sales
May 1, 2009

RDM lost $865,000 on sales of $5.8 million in the quarter ended March 31 (Q2 09). Sales were down 15% from a year ago and 18% from the previous quarter, although stronger margins reduced the sequential decline in gross profit to 13%. The net loss was an improvement from Q1, thanks to a smaller foreign exchange loss.

Average transaction volumes on RDM's ITMS system were up 9% from the previous quarter to 3.6 million items a week. End user locations for ITMS grew to 17,000 from 15,900 at the end of Q1. Overall, revenue from RDM's payment processing business declined 16% from Q1.

Scanner sales were weak in the quarter, with 4,200 units shipped -- down from 10,300 a year ago and 7,700 in the previous quarter. RDM's legacy quality assurance business was down to just $229,000 in sales in Q2, accounting for only 4% of revenue.

RDM had $16.9 million in cash at the end of the quarter. Operations provided $252,000 in cash and the company spent $173,000 repurchasing 254,000 RDM shares and an additional $458,000 on furniture and equipment.

[6]---------------------------------------------------------------
STOCK REPORT: Sandvine bounces back; great month for RIM stock
April 2009

Although Sandvine's quarterly results were nearly identical to what the company reported three months ago, there was a night-and-day difference in the reaction from investors. Where the results in April were met with indifference on the stock market, this time Sandvine shares had their best month ever, climbing 75% to their highest month-end price since June.

And RIM shares had their biggest month in eight years, adding more than $15 billion to the company's market value, while Com Dev shares finished April at their highest month-end price since October 2007.

For the month of April:

Sandvine [TSX: SVC] +75%
RIM [TSX: RIM] +51%
TurboSonic [OTCBB: TSTA] +46%
RDM [TSX: RC] +34%
Com Dev [TSX: CDV] +21%
ATS [TSX: ATA] +14%
Arise [TSX: APV] +14%
Dalsa [TSX: DSA] +9%
Descartes [TSX: DSG] +8%
--S&P TSX COMPOSITE INDEX +7%
--S&P TSX VENTURE INDEX +5%
MKS [TSX: MKX] +4%
Biorem [TSXV: BRM] 0%
===============================
Open Text [TSX: OTC] -10%

The gains in RDM shares all happened before the quarterly results were announced on May 1, and the stock hit $1 during the month for the first time since October. The company's market value has now climbed back above its cash holdings -- about $3 million above.

Dalsa shares gave back all their April gains in the first day of trading in May, after the company's quarterly results were announced.

Companies with core operations outside the area:

ON Semiconductor [Nasdaq: ONNN] +39%
Agfa-Gevaert [Brussels: AGFA] +35%
NCR [NYSE: NCR] +28%
Google [Nasdaq: GOOG] +14%
Sybase [NYSE: SY] +12%
McAfee [NYSE: MFE] +12%
Blue Coat [Nasdaq: BCSI] +10%
Ansys [Nasdaq: ANSS] +10%
Oracle [Nasdaq: ORCL] +7%
===================================
Acorn Energy [Nasdaq: ACFN] -2%

[7]---------------------------------------------------------------
Miscellaneous Tidbits

LoyaltyMatch has launched its OnDemand software-as-a-service platform that lets users develop web-based customer loyalty programs. The news release included a quote from Sherry Colbourne, CEO of Ladybug Teknologies, sponsor of the not-for-profit SipSmart, which has a program that rewards designated drivers.
Aeryon Labs -- developers of a flying vehicle that takes video and photographs for security and surveillance applications -- won the 2009 TiEQuest Business Venture Competition in Toronto on April 17. The prize money over the last couple of years has been $50,000 to the winner. KR Golf, which also has Waterloo connections, was another of the four finalists.
AideRSS' PostRank statistics are now being used by AdAge as the largest component of its Power150 ranking of top marketing blogs. PostRank account for 50 points of the 150 that each blog can earn -- as much as Yahoo, Google, and Technorati combined.
Tungle has formally launched what it calls the first calendar accelerator. The free software -- which has been in beta for several months -- makes it easy for users to share calendars and schedule meetings and works with a variety of calendar applications, including Outlook, Google Calendar, and iCal.
ParkVu's i2b BlackBerry-iTunes software (see previous digest) has been accepted by RIM for the BlackBerry App World online store, and is now available there.
RIM announced that its push API is out of beta and now available to developers of consumer apps who want to push content to BlackBerrys. Toronto's Polar Mobile (which has Waterloo ties) has been using the API in its software -- including apps it has written for The Hockey News and UW.
Keith Ainsworth has stepped down as chairman of Com Dev, a position he held for six years. He will remain on the board. Terry Reidel, who's been on Com Dev's board for the last year and a half, has been named the company's new chairman.
Virtek CFO Peter Monsberger is leaving the company this month. He's been with Virtek for the last seven years. Since its acquisition last year, Virtek continues to operate as a subsidiary of Gerber Technology. Hal Osthus -- a 25-year employee at Gerber -- is Virtek's president, while Waterloo-based Peter Richter oversees Virtek's imaging and templating business as VP. The company recently announced a five-year agreement to provide laser templating systems to Stork Fokker of The Netherlands and follow-on sales to Finland's Patria Aerostructures.
TurboSonic received a US$2.3 million order from a European oil refinery, which will use TurboSonic technology to manage its particulate emissions.
Desire2Learn was among the companies honored by the United States Distance Learning Association (USDLA) at that organization's annual conference in St. Louis.
Maplesoft has released the newest version of Maple -- the mathematics software that led to the creation of the company in the 1980s. Along with Maple 13, the company also released a new version of its MapleSim modelling and simulation software.

Tuesday, April 07, 2009

Waterloo Tech Digest - April 7, 2009

Compiled and written by
Gary Will
gary@garywill.com

In this issue:

RIM sales jump 84% in fiscal 2009
RIM launches BlackBerry App World
Jim Estill leaves Synnex ... likely U.S.-bound
Arise looks to cut costs in the face of lower demand, prices
Descartes annual sales up 12%
Descartes acquires Toronto's Scancode
STOCK REPORT: A March bounce ... and a 43% jump for RIM in April
Miscellaneous tidbits from Primal Fusion, ParkVu, Unsynced, Giftah, Dejero Labs, Metranome, LiveHive, Navtech, MedShare, IMS, RIM, Desire2Learn, Miovision, Tilted Pixel, ATS, Biorem, Igloo, Dalsa, Covarity, LoyaltyMatch, Mespere

////////////////////////////////////////////////////////////
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* Provide employee-level support & advice to help you manage risk & compliance
Please contact Herb Goedecke at 519.489.2376 x11 or herbg@aero-corp.com for details.

GO BEYOND STAFFING
For over 30 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. Phone: 519.885.4331.

RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.

BERESKIN & PARR LLP - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.

////////////////////////////////////////////////////////////

[1]---------------------------------------------------------------
RIM sales jump 84% in fiscal 2009
April 2, 2009

RIM ended its fiscal year with a strong quarter, reporting earnings of US$518.3 million on sales of US$3.5 billion in the quarter ended February 28 (Q4 09). Sales were up 84% from last year and 24% from a tepid Q3 -- and on the high end of RIM's forecasts.

There were 3.9 million new BlackBerry subscribers on the quarter, well above RIM's forecast of 2.9 million. The company shipped 7.8 million units in the quarter, up from 6.7 million in Q3.

For the year, RIM earned US$1.9 billion on sales of US$11.1 billion -- up 84% from fiscal 2008. RIM ended the year with US$2.2 billion in cash.

The company is forecasting that Q1 will look a lot like Q4, with 3.7-3.9 million new BlackBerry subscribers and sales of US$3.3-3.5 billion.

RIM also announced that it completed its acquisition of Certicom (see previous three digests).

[2]---------------------------------------------------------------
RIM launches BlackBerry App World
April 1, 2009

RIM has launched the much awaited online store BlackBerry App World. App World is itself a BlackBerry, and is open to users in Canada, the U.S. and the UK. RIM expects that there will be about 1,000 applications in the store by the end of its first week.

Software on App World can be free, or at prices starting at $2.99. Developers receive 80% of the revenue. RIM established a partnership with PayPal to process payments.

Mike Lazaridis helped kick off the launch with his keynote speech on Wednesday morning at the CTIA 2009 conference in Las Vegas.

[2]---------------------------------------------------------------
Jim Estill leaves Synnex ... likely U.S.-bound
March 25, 2009

Jim Estill has stepped down as CEO of Synnex Canada, a position he has held since selling EMJ -- the company he founded -- to California's Synnex in 2004. It hasn't been announced where he's headed, but it's expected that he'll be going to the U.S. to lead a public company there.

Estill's departure will be a loss for the local startup community. Estill has been one of the most active angel investors in the area, having made dozens of investments. Most have not been publicly disclosed, but those that have include his investments in Primal Fusion and Well.ca. He was also an investor in SlipStream Data, which was acquired by RIM.

Estill invested in RIM when it was a private company and has been on RIM's board of directors since 1997. At the time of RIM's IPO that year, he was one of three outside directors, along with Doug Wright and Val O'Donovan. He's been on the board ever since -- only Mike Lazaridis has served longer, among RIM's current directors.

Between EMJ and Synnex, Estill had remained with the same company for 30 years. He founded EMJ Data Systems in 1979 while finishing his systems design engineering degree at UW and grew it to include a U.S. subsidiary about 10 years later and then an IPO and TSX listing in 1994. By that year, EMJ had $68 million in annual sales and 100 employees. By the time the company was sold to Synnex for $56 million in 2004, it had grown to over $350 million in sales and 300 employees.

[3]---------------------------------------------------------------
Com Dev continues to win business; backlog climbs to new high
March 9, 2009

Com Dev came out of the gate quickly to start its 2009 fiscal year, reporting sales of $56.5 million in the period ended January 31 (Q1 09) -- a 26% jump from last year and down 6% from a record-setting Q4. Net income was $4.4 million, which is in line with the previous two quarters.

The company booked $88 million in new orders in Q1 -- including $33 million in military orders -- taking its order backlog at quarter-end to a new record high of $189 million.

Com Dev ended the quarter with $9.2 million in cash, down $6.9 million from the end of Q3 with operations consuming $3.8 million in cash. Since then, the company has raised gross proceeds of $23 million through a share offering (see February digest).

[4]---------------------------------------------------------------
Arise looks to cut costs in the face of lower demand, prices
March 9, 2009

Sales for Arise in the quarter ended December 31 (Q4 08) were up 19% sequentially to $18.9 million, but still fell below the company's forecasts. Arise had been looking for sales of $21-24 million in the period -- a forecast lowered from its original projection of $30 million. The company had warned investors that Q4 sales would fall about $3 million below expectations.

Arise lost $22.2 million in the quarter, including a $3.9 million writedown of its inventory and a $5.1 million writedown of silicon wafer prepayments. Excluding the writedowns, gross margins were -15.2%, a small improvement from -16.7% in Q3.

For the year, Arise lost $42.3 million on sales of $35.7 million. Most of the revenue came from PV cell shipments over the last half of the year. The company shipped 6.1MW of PV cells in Q4 and 5MW in Q3. Accumulated deficit at year-end stood at $65.5 million.

Completion of a second, more advanced, production line at its facility in Germany is back on schedule after Arise had warned that there could be a four-to-eight week delay. Arise announced that some initial PV cells came off the new line during test runs in March. Those cells had an efficiency of 15.1-15.9%, and Arise is hoping to achieve 18% efficiency in the future.

Arise ended the year with $22.6 million in cash -- an amount equal to its current bank loans. By March 6, Arise was down to $7.6 million in cash. It's now reviewing its planned capital expenditures, growth plans, and staffing requirements and believes that by cutting costs and slowing its growth plans that it has sufficient money to fund operations for several more months. Arise is looking for additional capital, either through a financing or partnerships.

[5]---------------------------------------------------------------
Descartes annual sales up 12%
March 11, 2009

Descartes ended its fiscal year with sales of US$15.7 million in the quarter ended January 31 (Q4 09). Sales were down 8% from Q3 and 2% from last year. Income from operations was US$2.4 million -- unchanged from Q3 -- but a non-cash deferred income tax recovery of US$13.1 million pushed Descartes reported quarterly earnings to US$15.7 million.

For fiscal year 2009, Descartes had revenue of US$66.0 million, up 12% from last year. Operating income was US$8.0 million and net income, including the tax recovery, was US$20.5 million. The company ended the year with US$57.6 million in cash, up US$4.1 million from the end of Q3.

[6]---------------------------------------------------------------
Descartes acquires Toronto's Scancode
March 11, 2009

Descartes also announced that it has made another acquisition, this time picking up Toronto-based logistics software developer Scancode Systems for approximately $8.5 million.

Scancode has about 50 employees and announced that it had signed its 1,000th customer last fall.

[7]---------------------------------------------------------------
STOCK REPORT: A March bounce ... and a 43% jump for RIM in April
March 2009

March saw local tech firms having their best month on the stock market in a long time, which admittedly 1) isn't saying much and 2) is much easier to achieve after the prices have been hammered down.

For the month of March:

Arise [TSX: APV] +40%
Dalsa [TSX: DSA] +26%
Descartes [TSX: DSG] +22%
Com Dev [TSX: CDV] +16%
ATS [TSX: ATA] +14%
MKS [TSX: MKX] +14%
--S&P TSX VENTURE INDEX +11%
Open Text [TSX: OTC] +8%
--S&P TSX COMPOSITE INDEX +7%
RIM [TSX: RIM] +7%
Sandvine [TSX: SVC] +3%
RDM [TSX: RC] 0%
TurboSonic [OTCBB: TSTA] 0%
===============================
Biorem [TSXV: BRM] -28%

Arise shares -- at the bottom of the list last month -- made back all of their February losses and finished the month back where they were at the end of January.

Com Dev shares are back to their pre-market collapse levels. Descartes shares are back to where they were at the end of August, while MKS shares are where they were at the end of July. Open Text stock continues to soar. Sandvine stock didn't do much in March, but is up 15% over the first four days of trading in April. Still, the only companies whose shares are trading above the levels they were at three years ago are RIM and Open Text.

And it's RIM shares that are looking like they might top the charts in our next issue -- they're currently up 43% in April and are trading at their highest point since the September collapse. According to globeinvestor.com data, RIM is once again the second most valuable company in Canada, trailing only RBC.

Companies with core operations outside the area:

Ansys [Nasdaq: ANSS] +24%
McAfee [NYSE: MFE] +20%
Acorn Energy [Nasdaq: ACFN] +19%
Oracle [Nasdaq: ORCL] +16%
Sybase [NYSE: SY] +11%
Blue Coat [Nasdaq: BCSI] +9%
ON Semiconductor [Nasdaq: ONNN] +7%
Google [Nasdaq: GOOG] +3%
NCR [NYSE: NCR] +0%
===================================
Agfa-Gevaert [Brussels: AGFA] -30%

With the first quarter of the year now complete, here's an updated list of the area's public companies, ranked by market capitalization.

Market capitalization at April 3
in millions, using outstanding shares
(change since Dec. 31 in parentheses):

1. RIM ----- $41,220 (+$13,203)
2. Open Text ----- 2,150 (+232)
3. ATS ----- 359 (-27)
4. Com Dev ----- 265 (+50)
5. Descartes ----- 204 (+15)
6. Sandvine ----- 122 (+12)
7. Dalsa ----- 105 (-24)
8. MKS ----- 68 (+12)
9. Arise ----- 57 (-10)
10. RDM ----- 15 (-3)
11. TurboSonic ----- 6.5 (-1)
12. Biorem ----- 4.2 (-1)

Since the beginning of the year, Sandvine has moved ahead of Dalsa while MKS has gone ahead of Arise.

[8]---------------------------------------------------------------
Miscellaneous Tidbits

Primal Fusion unveiled its "thought networking" platform at the DEMO conference in California at the beginning of March. It's currently in a private alpha stage, but -- for this week only -- the company is making its alpha open to anyone who goes to its site and requests an account. Video of Primal Fusion's DEMO presentation (which is useful in understanding the alpha) is here.
ParkVu, founded a year ago by Jeff Fedor and Terry Goertz, has launched its first product: i2b, a BlackBerry app that gives users mobile access to the iTunes libraries on their home computers (running Windows Vista or XP). It's available from the ParkVu website.
Also in the mobile music space was one of the winners in the latest VeloCity project exhibition. Unsynced says it will let BlackBerry users access to their music from anywhere. It is currently in a prototype stage. Team members are Ted Livingston, Vassili Skarine, Karan Bhangui, Chris Best, and Tina Randall. Giftah, an online marketplace for gift cards, was another winner in the VeloCity competition. It was founded by Rezart Bajraktari, Nick Belyaev, and Henry Finn.
Former SlipStream president Ron Neumann is now chairman of Dejero Labs, a company founded last year by Bodgan Frusina that has developed compression software to make broadcast-quality video available over cellular networks in real time.
Metranome announced the launch of its Poptiq Powered mobile video application platform, which lets companies create self-branded mobile applications for the iPhone and iPod Touch. Initial customers are DadLabs of Austin, Texas and 60Frames of Los Angeles.
According to a story in Media in Canada, Rogers Sportsnet says that between 3,000 and 6,000 people played LiveHive's NanoGaming trivia and prediction games each week during the NHL season. NanoGaming has now moved to baseball, where it will be played during 100 Blue Jay games this season -- starting with last night's game.
Forgot to mention last month that Mike Hulley is the new CEO of Navtech. He spent over four years with EDS as president of its global transportation group and five years with IBM as travel and transportation VP. Most recently, Hulley was with Tata Consultancy Services and, before that, was briefly CEO of Florida-based startup LeisureLogix.
MedShare has received $284,500 in funding and other assistance from IRAP. Gary Goodyear, federal minister of state for science and technology, made the announcement from MedShare's Cambridge office.
IMS's iLane and RIM's BlackBerry Bold were two of the three nominees for "Most Innovative Mobile Device" at the 2009 Andrew Seybold Choice Awards. But it was the third nominee, a GPS device from California-based TeleNav, that took home the prize at the CTIA conference last Wednesday. RIM had received the 2008 award for the BlackBerry Pearl.
Washington, DC-based Blackboard has filed another patent infringement suit against Desire2Learn, this time claiming that the Kitchener company is infringing on a new U.S. patent Blackboard received in February (a continuation of the patent that it successfully sued Desire2Learn for infringing). The claims of the original patent were given a preliminary rejection in a re-examination by the U.S. patent office, and the new patent gives Blackboard the opportunity to rewrite its claims. Desire2Learn says it has implemented a workaround that avoids infringing on the Blackboard patent.
Michelin Development says it has provided nearly $3 million in loans to local businesses in the last two years, and announced that it had provided funding to Miovision and website developer Tilted Pixel. The $3 million figure is up $750,000 from the announcement Michelin Development made six months ago.
In addition to its Michelin funding, Tilted Pixel and its founder, Matt Inglot, was Laurier's representative at the finals of the national Nicol Entrepreneurial Award competition in Ottawa in March.
ATS announced that it cutting 80 full-time jobs in Cambridge and another 160 at its Photowatt business in France.
Biorem earned $191,000 on sales of $4.6 million in the quarter ended December 31 (Q4 08). For the year, the company had sales of $14.4 million, up 52% from 2007. It booked $17.4 million in new orders, raising its order backlog at year-end to $14.8 million. Net loss in 2008 was $432,000, an improvement from a loss of $3.0 million the previous year. Biorem ended the year with $2.2 million in cash. The company also announced that it had opened an office in China in December. Biorem is currently working on five projects in China.
There have been a lot of new BlackBerry apps this month -- including one from Waterloo's Igloo Software that will allow members of Igloo online communities to access their sites and contribute content through a BlackBerry.
Dalsa founder, chairman and CTO Savvas Chamberlain was one of 20 engineers to be made a Fellow of the Engineering Institute of Canada in recognition of his contributions to engineering and society.
Covarity has added Boston-based risk management consultant and author James Lam to its board of directors.
LoyaltyMatch announced a partnership with Toronto-based travel planning site PlanetEye. The two will refer users to each other through direct links on both sites.
Waterloo medical device startup AcMed Technology has been renamed Mespere Lifesciences.

Tuesday, March 03, 2009

Waterloo Tech Digest - March 3, 2009

Compiled and written by
Gary Will
gary@garywill.com

In this issue:

RIM set to acquire Certicom for $132M
RIM settles with OSC & SEC
MKS remains profitable despite weak economy
Com Dev raises $23M
RDM reports loss on higher payment processing revenue
STOCK REPORT: Big drops for Arise, RIM, Dalsa, and ATS shares
Miscellaneous tidbits from Primal Fusion, Tangam, RapidMind, Desire2Learn, LoyaltyMatch, RIM, Arise, Descartes, Arius, MedManager

////////////////////////////////////////////////////////////
A D V E R T I S E M E N T S

BERESKIN & PARR - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.

ENHANCE YOUR COMPETITIVE ADVANTAGE
INO can deliver competitive advantage to fuel company growth. As described in this video, INO's optical recognition technology helped Optosecurity raise $20 million in financing and create a world-class team. Further information on INO's optical recognition technology can be found here. Please contact Glenn Smith in Waterloo at 519-502-1305 to explore how INO might deliver competitive advantage to your organization.

GO BEYOND STAFFING
For over 30 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. Phone: 519.885.4331.

RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.

////////////////////////////////////////////////////////////

[1]---------------------------------------------------------------
RIM set to acquire Certicom for $132M
February 11, 2009

RIM has won the battle for Mississauga-based UW spinoff Certicom, topping a rival bid by California's VeriSign. RIM will pay $3 a share -- about $132 million in total -- for the company. That's double RIM's initial hostile offer of $1.50 a share announced in December, and 43% more than VeriSign's $2.10 a share offer in January (see previous two digests).

The deal -- which has the backing of Certicom's board -- still needs to be approved by Certicom shareholders at a meeting later this month.

[2]---------------------------------------------------------------
RIM settles with OSC & SEC
February 5 & 17, 2009

RIM should now be able to put its stock option backdating history behind it, after the company and some of its executives and current and former directors reached settlement agreements with securities regulators in both Ontario and the U.S.

With the Ontario Securities Commission, the biggest numbers were what three RIM executives agreed to pay RIM itself. CEOs Jim Balsillie and Mike Lazaridis and former CFO Dennis Kavelman will pay RIM $38.3 million to cover benefits not otherwise repaid or forfeited that had been received by RIM employees through improper stock option pricing. They also agreed to pay the company $44.8 million to go towards RIM's costs in investigating and fixing its stock option granting practices. That amount includes the $15 million that Balsillie and Lazaridis had already paid. The three executives can pay the $68.1 million still owed to RIM by agreeing not to exercise vested RIM stock options of equal value.

Balsillie, Lazaridis, and Kavelman will also pay "administrative penalties" of $5 million, $1.5 million, and $1.5 million, respectively. And the OSC will collect $700,000 from Balsillie, $150,000 a piece from Lazaridis and Kavelman, and $50,000 from former finance VP (now corporate operations VP) Angelo Loberto to go toward the cost of its investigation.

So there was a combined $77.1 million in new payments in the OSC settlement agreement, with 88% of that going to RIM.

In addition, Kavelman will be prohibited from being a director or officer of any reporting issuer (which would include every public company in Ontario) for five years. Lazaridis has agreed to take a course in the next year on the duties of directors and officers of public companies, while Kavelman and Loberto will have to do so before they can serve as directors or officers of a public company. Jim Estill, Doug Wright, Doug Fregin, and Kendall Cork -- who all served on RIM's board in the years the stock option repricings took place -- will also have to take a similar course over the next year or be prohibited from serving as directors or officers of public companies until they do. Everybody but Fregin also received a reprimand.

In the U.S., the Securities and Exchange Commission filed a 35-page complaint against RIM, Kavelman, Loberto, Balsillie and Lazaridis outlining its allegations. The complaint included several quotes from internal RIM e-mail. Under the settlement agreement with the SEC, Kavelman will pay a penalty of US$500,000, Loberto US$425,000, Balsillie US$350,000, and Lazaridis US$150,000. Kavelman and Loberto will be barred for five years from serving as officers or directors of any SEC-reporting company.

[3]---------------------------------------------------------------
MKS remains profitable despite weak economy
February 24, 2009

It will probably go down as MKS' weakest quarter in fiscal 2009, but the company was still able to deliver solid, profitable results in the period ended January 31 (Q3 09). MKS earned US$325,000 on sales of US$13.2 million. Revenue was up 3% from last year and down 19% from Q2.

The one number that might cause some concern was licensing revenue -- which was down 10% from a year ago and 42% sequentially -- but the company is forecasting that licensing revenue, total revenue and earnings will all be higher in Q4.

Operations generated US$6.2 million in cash, driven by a net US$3.9 million increase in deferred revenue and a US$2.8 million reduction in receivables. MKS ended the quarter with US$16.3 million in cash, up US$5.6 million from the end of Q2.

With one quarter left in the fiscal year, MKS sales are running 12% ahead of last year's pace, although it will be hard for the company to match the record-setting results it achieved in Q4 last year.

[4]---------------------------------------------------------------
Com Dev raises $23M
February 26, 2009

Com Dev has raised gross proceeds of $23 million through a share offering at $2.95 a share.

Including the underwriters' over-allotment options, which were taken in full, Com Dev sold 7.8 million shares. Genuity Capital Markets acted as the lead underwriter.

[5]---------------------------------------------------------------
RDM reports loss on higher payment processing revenue
February 5, 2009

RDM lost $1.6 million on sales of $7.1 million in the quarter ended December 31 (Q1 09). Most of the loss came from a foreign exchange hit on the forward contracts the company uses for hedging. But the stronger U.S. dollar helped the top line (nearly all of RDM sales are in U.S. dollars, but it reports in Canadian dollars), where RDM says exchange rate changes added $1.4 million compared to a year ago.

Sales were flat from a year ago, with RDM's ITMS payment processing business showing a big jump in revenue over that period, while scanner sales and custom payments solutions work both showed declines. The payment processing business remained RDM's only money-losing segment, reporting a $651,000 operating loss. Average ITMS weekly transaction volumes increased slightly to 3.3 million from 3.1 million in the previous quarter. RDM added another 1,000 end user locations for the ITMS service in the quarter, bringing the total to 15,900. The ITMS business accounted for nearly a third of all revenue in the quarter, up from an average of 23% in fiscal 2008.

Operations provided $316,000 in cash and the company spent $160,000 to repurchase shares in the quarter. RDM still has plenty of cash -- $17.3 million, which is about what it had at the beginning of the quarter and a year ago.

[6]---------------------------------------------------------------
STOCK REPORT: Big drops for Arise, RIM, Dalsa, and ATS shares
February 2009

The TSX composite was only down 7% in February, but four of the companies followed here lost about a quarter of their value. It was the second consecutive month of big declines for Arise and Dalsa, which -- including the carnage on the markets yesterday -- have lost 47% and 39%, respectively, of their value so far in 2009.

For the month of February:

MKS [TSX: MKX] +14%
Sandvine [TSX: SVC] +7%
TurboSonic [OTCBB: TSTA] 0%
===============================
--S&P TSX VENTURE INDEX -2%
RDM [TSX: RC] -3%
--S&P TSX COMPOSITE INDEX -7%
Open Text [TSX: OTC] -7%
Biorem [TSXV: BRM] -11%
Com Dev [TSX: CDV] -11%
Descartes [TSX: DSG] -11%
ATS [TSX: ATA] -23%
Dalsa [TSX: DSA] -24%
RIM [TSX: RIM] -25%
Arise [TSX: APV] -29%

Companies with core operations outside the area:

Blue Coat [Nasdaq: BCSI] +14%
===================================
Google [Nasdaq: GOOG] -0%
Sybase [NYSE: SY] -0%
Oracle [Nasdaq: ORCL] -8%
McAfee [NYSE: MFE] -8%
ON Semiconductor [Nasdaq: ONNN] -12%
Acorn Energy [Nasdaq: ACFN] -14%
Ansys [Nasdaq: ANSS] -19%
Agfa-Gevaert [Brussels: AGFA] -34%
NCR [NYSE: NCR] -37%

[7]---------------------------------------------------------------
Miscellaneous Tidbits

Primal Fusion announced the launch of its "thought networking" platform technology at the DEMO conference in California. The company will be offering a free online service, which is currently in an private alpha testing stage.
Tech company founders Peter Sweeney (Primal Fusion), Prem Gururajan (Tangam), Stefanus Du Toit (RapidMind) and John Baker (Desire2Learn) were among those recognized in the Waterloo Region Record's "40 Under 40."
Ross Goodwin is the new business development VP at LoyaltyMatch. He is based in Santa Rosa, Calif., where he runs the Bennett Valley Group sales and marketing consultancy. LoyaltyMatch CEO Brad Ball is also affiliated with Goodwin's consulting business and the two used to work together at Hewlett-Packard. Goodwin was with H-P for more than 20 years.
NTT DoCoMo, Japan's largest mobile network operator, has temporarily stopped selling the BlackBerry Bold after receiving complaints from about 30 customers that the devices were overheating while recharging. RIM is looking into the problem and has ruled out a flaw in the battery.
But it was a merry Christmas for RIM, as the number of new BlackBerry subscribers in the quarter ended February 28 were at least 20% higher than the 2.9 million it forecast. Even with the extra sales, RIM says its revenue numbers for the quarter will be near the mid-point of its forecasted range. Final results for the quarter will be announced in April.
Things weren't as rosy at Arise, which warned investors that its sales in the quarter ended December 31 will fall about $3 million below forecasts. The company will also be taking a $2.8 million asset writedown in the quarter. It is reviewing all planned expenditures and says that some projects may be put on hold or cancelled. Full results will be announced next week.
Descartes has acquired the logistics business of Montreal's Oceanwide in an all-cash deal for $10.4 million. The business employs 45 people in Montreal and Miami. Oceanwide's COO has become SVP of compliance solutions at Descartes.
Arius Software announced the launch of its DocumentAdvantage document imaging and management software for the financial services industry.
The Sioux Lookout Diabetes Program launched a new website using technology from Kitchener's MedManager.

Tuesday, February 03, 2009

Waterloo Tech Digest - February 3, 2009

Compiled and written by
Gary Will
gary@garywill.com

In this issue:

ARISE looks for new CEO
Sandvine reports big jump in sales, R&D spending
RIM's hostile bid for Certicom gets judicial thumbs down
Dalsa's digital cinema sale falls through; sales up 16% in 2008
Open Text stays profitable, despite restructuring charges
STOCK REPORT: Open Text shares reach all-time high
Miscellaneous tidbits from RIM, Open Text, ATS, ON Semiconductor

////////////////////////////////////////////////////////////
A D V E R T I S E M E N T S

RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.

BERESKIN & PARR - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.

DELOITTE - SHAPING CANADIAN BUSINESS FOR 150 YEARS
Deloitte's technology, media and telecommunications practice delivers a suite of services including audit, tax, financial advisory, enterprise risk and consulting. We work with all types of technology companies, including early stage and high-growth companies, to help them succeed. We'll help you grow through contacts, M&A, raising capital and most of all through great business advice. We want to be your trusted advisor and look forward to working with you. Contact Jamie Barron 289-259-3385, jabarron@deloitte.ca or Jane Jantzi at 519-650-7788, jjantzi@deloitte.ca.

ENHANCE YOUR COMPETITIVE ADVANTAGE
INO can deliver competitive advantage to fuel company growth. As described in this video, INO's optical recognition technology helped Optosecurity raise $20 million in financing and create a world-class team. Further information on INO's optical recognition technology can be found here. Please contact Glenn Smith in Waterloo at 519-502-1305 to explore how INO might deliver competitive advantage to your organization.

GO BEYOND STAFFING
For over 30 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. Phone: 519.885.4331.

////////////////////////////////////////////////////////////

[1]---------------------------------------------------------------
ARISE looks for new CEO
January 28, 2009

Bart Tichelman is out as CEO of Arise, slightly less than one year after taking the job. He had served on the company's board of directors for more than seven years when he became CEO, and has resigned from that role as well.

Arise is searching for a new CEO, with chairman Vern Heinrichs filling in on an interim basis.

CFO Dave Chornaby told the Record that there had been "a difference of opinion" between Tichelman and the board over the direction of the company.

[2]---------------------------------------------------------------
Sandvine reports big jump in sales, R&D spending
January 15, 2009

Sandvine sales bounced back to their highest level in over a year in the period ended November 30, 2008 (Q4 08). It wasn't enough to make the company profitable, but sales of $18.6 million were up 9% from a year ago and 42% from the previous quarter. Net loss was $1.8 million, down from $6.3 million in Q3.

One of the reasons for the loss was the company's increased R&D spending, which jumped to $7.6 million or 41% of sales during the quarter. Sandvine says it will continue to increase R&D spending to support product development.

Comcast was back as a major customer, accounting for 41% of sales or $7.6 million in revenue -- not quite up to the $10-11 million it was providing Sandvine at its peak, but a huge jump from $1.2 million in Q3. A second customer -- a reseller -- accounted for 34% of sales, so two customers were responsible for nearly three-quarters of revenue.

Indirect sales through resellers and equipment vendors provided 45% of revenue, up from 26% in the previous quarter. Of the 14 new customers Sandvine won in the quarter, only two were from North America, although -- thanks to Comcast -- North American revenue was up sharply from Q3.

Sandvine ended the quarter, and the year, with $92.5 million in cash and securities, down $3.5 million from the end of Q3. Operations used $230,000 in cash in Q4 and the company spent $3.0 million on capital expenses.

For the year, Sandvine lost $19.6 million on sales of $51.1 million, a 31% drop in revenue from the previous year.

[3]---------------------------------------------------------------
RIM's hostile bid for Certicom gets judicial thumbs down
January 19, 2009

An Ontario judge ruled in favour of Certicom's board of directors in their attempt to block RIM from making a hostile $1.50 a share bid for the company (see last digest). Certicom's board has since endorsed a $2.10 a share offer from California-based VeriSign.

Certicom argued that RIM's bid made use of confidential information received under NDAs -- one signed in July 2007, five months after RIM and Certicom began having discussions about a possible acquisition, and a second signed last June when, according to Certicom, the companies were discussing "possible technology partnering arrangements." Certicom said this gave RIM an unfair advantage over other potential acquirers and that RIM hadn't sufficiently told Certicom shareholders the extent of the confidential information it had when it made its bid.

Certicom's version of events, as laid out in a board circular, is that RIM co-CEO Jim Balsillie told the company near the end of October that RIM was ready to proceed with a friendly acquisition. By that point Certicom was in discussions with "a large multinational technology company" about a possible acquisition. Certicom rejected RIM's request for an exclusivity period and asked for a standstill agreement from RIM, which was also rejected. Certicom says it received a non-binding $1.50 a share proposal from RIM on Friday, November 28 requesting a response by the end of the business day on Monday. On Wednesday morning, RIM sent out a news release announcing the offer and saying that it had been "unable to engage Certicom management in a meaningful dialogue."

Following the ruling, RIM withdrew its bid. The VeriSign offer was announced three days later.

[4]---------------------------------------------------------------
Dalsa's digital cinema sale falls through; sales up 16% in 2008
January 29, 2009

Dalsa couldn't come to terms with ARRI, so the German company won't be buying Dalsa's digital movie camera business after all. Dalsa had signed a letter of intent with ARRI (see October digest) and had hoped to continue to supply image sensors for the camera, but the two companies couldn't reach an agreement. Dalsa says it will "pursue other alternatives."

In the quarter ended December 31 (Q4 08), Dalsa reported a $10.1 million loss from its discontinued digital cinema business. That included a $6.2 million asset writedown along with severance and lease termination costs of $2.6 million. Dalsa announced that it sold its inventory of movie camera equipment -- other than its digital camera and related equipment -- to a California-based equipment rental company.

With the digital cinema losses, Dalsa reported a net Q4 loss of $5.8 million on sales of $46.2 million. Sales were down 12% from the previous quarter and 1.5% from last year. Net income from continuing operations was $4.3 million, down from $6.0 million in Q3. Semiconductor sales were flat from Q3 while digital imaging sales fell 21%.

For the year, Dalsa had revenue of $206.0 million, up 16% from 2007, and a net loss of $18.6 million. Excluding the digital cinema business, Dalsa had earnings of $21.9 million.

The company cautioned that the current economic environment created a "less positive outlook for 2009" and said that it would be looking to expand in new markets and to target markets that were less sensitive to the downturn. It will also be looking for revenue from contract work to offset declines in standard product sales.

Dalsa ended the year with $12.4 million in cash. In Q4, it spent $914,000 to repurchase shares in the company. It also paid $916,000 in dividends, and will spend about the same in the current quarter.

[5]---------------------------------------------------------------
Open Text stays profitable, despite restructuring charges
January 28, 2009

Open Text reported earnings of US$741,000 on sales of US$207.7 million in the quarter ended December 31 (Q2 09). Earnings were down sharply from recent quarters because of severance and other restructuring charges related to its international job cuts in the quarter (see October digest). Open Text reported US$11.4 million in special charges in the quarter.

The quarter included about two months of results from newly-acquired Captaris, and that probably accounted for most of Open Text's 14% sequential gains in revenue (Captaris had sales of US$34.5 million in its last-reported quarter.)

Operations generated US$39.8 million in cash, and Open Text spent US$101.5 million in cash on Captaris and ended Q2 with US$172.9 million in cash, down US$77.3 million from the end of Q1.

[6]---------------------------------------------------------------
STOCK REPORT: Open Text shares reach all-time high
January 2009

After four months of declines, RIM shares turned in their best month in nearly five years, and finished January just below where they were at the end of September.

But even more impressive was the performance of Open Text shares, which hit their all-time high in January (and then topped that mark yesterday in the first day of trading in February).

For the month of January:

RIM [TSX: RIM] +37%
Open Text [TSX: OTC] +17%
Biorem [TSXV: BRM] +11%
--S&P TSX VENTURE INDEX +11%
===============================
Com Dev [TSX: CDV] -1%
MKS [TSX: MKX] -3%
--S&P TSX COMPOSITE INDEX -3%
TurboSonic [OTCBB: TSTA] -7%
Descartes [TSX: DSG] -7%
ATS [TSX: ATA] -10%
RDM [TSX: RC] -11%
Sandvine [TSX: SVC] -16%
Dalsa [TSX: DSA] -16%
Arise [TSX: APV] -25%

Investors apparently weren't impressed by Sandvine's big jump in sales. Its shares went as high as $1.25 in the early days of January, but slipped before the quarterly results came out and fell even further after, closing the month at $0.68 -- its lowest month-end price ever.

Dalsa has chopped its only money-losing business, but that didn't stop its shares from falling to their lowest month-end price in over seven years. Its shares fell another 13% yesterday.

Companies with core operations outside the area:

Acorn Energy [Nasdaq: ACFN] +79%
Agfa-Gevaert [Brussels: AGFA] +48%
ON Semiconductor [Nasdaq: ONNN] +23%
Blue Coat [Nasdaq: BCSI] +14%
Sybase [NYSE: SY] +10%
Google [Nasdaq: GOOG] +10%
===================================
Oracle [Nasdaq: ORCL] -5%
Ansys [Nasdaq: ANSS] -11%
NCR [NYSE: NCR] -11%
McAfee [NYSE: MFE] -12%

Adobe is off the list after shutting its Waterloo office. The small Waterloo site was Adobe's first Canadian R&D office when it opened eight years ago. The company came to town when it acquired a video titling technology from Waterloo's Inscriber (and was initially based within Inscriber's office). The site survived the Adobe layoffs during the tech bust but didn't make it through the company's latest round of cutbacks.

[7]---------------------------------------------------------------
Miscellaneous Tidbits

The Globe & Mail reported that the Ontario Securities Commission will seek a penalty of up to $100 million from Jim Balsillie and Mike Lazaridis over RIM's past stock option mispricings (see February and May 2007 digests). When I think of all the shenanigans I've seen over the last 12 years, THIS is what the OSC wants to use to grab a headline-grabbing fine? Stock option "backdating" is illegal, should be illegal, and if you get caught, you should expect to pay a penalty. But it wouldn't make the top 10 list of issues that the OSC needs to be addressing.
The Record had a story about a former employee of Spicer who is accused of setting up a company in the Czech Republic that sold a knockoff version of Spicer's core product based on stolen source code. According to the story, Open Text (which subsequently acquired Spicer) is seeking $1.5 million in damages.
ATS closed the $50 million share offering announced last month.
I'm told that the ON Semiconductor layoffs had no impact on the Waterloo office. Employees will be temporarily laid off without pay for a couple of weeks in each of the next two quarters.

Tuesday, January 13, 2009

Waterloo Tech Digest - January 13, 2009

Compiled and written by
Gary Will
gary@garywill.com

In this issue:

2008: Stormy end to an otherwise encouraging year
More funding for Metranome, AideRSS
Icera shuts Waterloo office; ON Semiconductor announces layoffs
RIM makes hostile $66M bid for Certicom
RIM misses targets, but reports 66% growth
Com Dev sales continue to climb
STOCK REPORT: Best month in two years for Com Dev shares
Miscellaneous tidbits from Open Text, Navtech, Coreworx, ATS, Arise, Covarity

////////////////////////////////////////////////////////////
A D V E R T I S E M E N T S

GO BEYOND STAFFING
For almost 40 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. Phone: 519.885.4331.

RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.

BERESKIN & PARR - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.

DELOITTE - SHAPING CANADIAN BUSINESS FOR 150 YEARS
Deloitte's technology, media and telecommunications practice delivers a suite of services including audit, tax, financial advisory, enterprise risk and consulting. We work with all types of technology companies, including early stage and high-growth companies, to help them succeed. We'll help you grow through contacts, M&A, raising capital and most of all through great business advice. We want to be your trusted advisor and look forward to working with you. Contact Jamie Barron 289-259-3385, jabarron@deloitte.ca or Jane Jantzi at 519-650-7788, jjantzi@deloitte.ca.

ENHANCE YOUR COMPETITIVE ADVANTAGE
INO can deliver competitive advantage to fuel company growth. As described in this video, INO's optical recognition technology helped Optosecurity raise $20 million in financing and create a world-class team. Further information on INO's optical recognition technology can be found here. Please contact Glenn Smith in Waterloo at 519-502-1305 to explore how INO might deliver competitive advantage to your organization.

////////////////////////////////////////////////////////////

[1]---------------------------------------------------------------
2008: Stormy end to an otherwise encouraging year

The financial crisis was the big story of 2008, but -- nearly four months in -- it's still difficult to see what the impact will be on local tech companies. Stock prices and valuations have gone down since September, and a lot of wealth has been erased, but so far companies seem to be pulling through.

Looking at our public companies, while RIM had a rare miss in its September-to-November quarter, it's forecasting strong revenue growth in the current quarter. Open Text is hiring 200 people in Waterloo and is coming off another strong year. Com Dev is working on a near-record level order backlog. Sandvine is selling its next-generation product to Comcast, the customer that put it on the high-growth map. Dalsa has cut its one money-losing business. Arise is announcing big deals ... and just needs to show that it can make money on them. MKS and Descartes seem to be doing fine, but have only reported one month's worth of results since the meltdown.

Several local startups are coming off strong months at the end of the year, although there is some concern that startups may find angel funding harder to come by over the next year.

But in 2008, the investment money continued to flow, following a record year in 2007. Companies that closed new rounds of funding included Primal Fusion, AideRSS, Avvasi, Metranome, Well.ca, Igloo, J2Play, and Medicalis.

During the year, Arise opened a manufacturing plant in Germany while Com Dev opened a U.S. facility and Dalsa got rid of one, after pulling the plug on its digital movie camera business.

Patent infringement suits were back in the news, as Desire2Learn was successfully sued for infringement by its main U.S. competitor. As in the RIM-NTP suit, Desire2Learn was ordered to pay millions of dollars by the court, even though the U.S. patent office doubted that the disputed patent should ever have been issued. The dispute has now gone to the court of appeals.

RIM launched a hostile takeover while Virtek fended one off and avoided another before being acquired by a board-approved suitor. Coreworx and Spicer were acquired, with Spicer becoming part of Open Text. Sirific was acquired and later shut down (see below).

While the stock market had its worst year in the past decade, for public tech companies in the area, the drop in 2008 wasn't nearly as bad as what we saw in 2001 -- or even 2002 -- as measured by median performance. It was worse than any year since then.

Stock performance for 2008:

Open Text [TSX: OTC] +18%
===============================
ATS [TSX: ATA] -4%
MKS [TSX: MKX] -11%
Com Dev [TSX: CDV] -13%
Descartes [TSX: DSG] -14%
Dalsa [TSX: DSA] -16%
--S&P TSX COMPOSITE INDEX -35%
TurboSonic [OTCBB: TSTA] -47%
Biorem [TSXV: BRM] -55%
RIM [TSX: RIM] -56%
RDM [TSX: RC] -68%
--S&P TSX VENTURE INDEX -72%
Sandvine [TSX: SVC] -79% (78.8)
Arise [TSX: APV] -79% (79.1)

Arise and Sandvine had become two of the area's most valuable tech companies in 2007 -- and they still are, just not at the levels of a year ago. The 79% drops for Arise and Sandvine shares were the biggest calendar year loss of any company followed here since 2001, when Com Dev shares lost 80% of their value and the shares of a couple of other companies that few people will remember did even worse.

Mathematically, Arise gets the bottom spot for 2008 only because Sandvine's shares went up by a penny in December while Arise's had no change. It was last year's top performer, and becomes the first "first-to-worst" performer in the years we've been following local tech stocks. And Virtek, which was at the bottom of last year's list, would have gone from worst-to-first if it had still been listed at year-end. It was acquired at a per-share price that was 150% above its 2007 close.

But the top performer of 2008 was Open Text stock, which showed impressive gains for the third year in a row and was the only company to get out of the year with its shares showing a gain. At 18%, it was easily the lowest annual gain to top the year-end list in the last decade. In fact, this was the first year that at least one company didn't double its stock price.

Year-end market capitalization
in millions, using outstanding shares
(year-over-year change in parentheses):

1. RIM ----- $28,017 (-$35,129)
2. Open Text ----- 1,918 (+323)
3. ATS ----- 386 (-13)
4. Com Dev ----- 215 (-32)
5. Descartes ----- 189 (-31)
6. Dalsa ----- 129 (-30)
7. Sandvine ----- 110 (-413)
8. Arise ----- 67 (-185)
9. MKS ----- 56 (-13)
10. RDM ----- 18 (-38)
11. TurboSonic ----- 8 (-4)
12. Biorem ----- 5 (-7)

RIM's $35 billion drop in market capitalization in 2008 was almost exactly the same as its gains in 2007.

[2]---------------------------------------------------------------
More funding for Metranome, AideRSS
December 12 & 23, 2008

Two more investment deals were announced in December, both involving Tech Capital Partners.

Metranome, co-founded by former Tech Capital entrepreneur-in-residence Dave Kruis, closed a $1.5 million round, bringing the total invested in the company in the last year to over $2 million. The first version of Metranome's Poptiq mobile video software for iPod Touch and the iPhone was released in the summer.

AideRSS closed a second round of funding from Tech Capital. No financial details were disclosed. The deal came almost exactly one year after Tech Capital and some local angel investors provided a seed round of funding to the company.

And since I never mentioned it here, Tech Capital also invested in Avvasi a few months back, but the deal was never announced. Celtic House added Avvasi to their portfolio list in June without making an announcement and Tech Capital -- which invested with Celtic House -- did the same a few months later. According to the Ottawa-based lawyer who acted for the investors, it was a preferred share deal.

[3]---------------------------------------------------------------
Icera shuts Waterloo office; ON Semiconductor announces layoffs
December 2008

Waterloo's semiconductor industry is looking weaker following two announcements of job cuts in December.

First, UK-based Icera announced that it is closing its Waterloo office, acquired in May when it bought Sirific Wireless. Icera announced in December that it has raised US$70 million in funding ($60 million equity and $10 million debt, including money from Toronto's MMV Financial), but that was much less than it originally said it wanted to raise -- before the stock market collapse. At the same time, it announced job cuts, which included the Waterloo site.

Sirific was founded in 2000 by Taj Manku, who was then associate professor of electrical engineering at UW. The company raised more than $50 million in venture capital (see March digest for historical notes).

And Arizona's ON Semiconductor, the company that last year acquired the company that had acquired Waterloo's Dspfactory in 2004 (see December 2007 digest) announced that it is cutting staff. The number of employees being let go in Waterloo hasn't been announced. It wouldn't be surprising if ON decided to sell off its DSP business -- it certainly doesn't give it a prominent placement on its website, and the business doesn't fit very well with the other markets that ON is targetting. But that's what I thought a year ago and nothing happened.

[4]---------------------------------------------------------------
RIM makes hostile $66M bid for Certicom
December 3, 2008

RIM has made a $66 million -- $1.50 a share -- hostile bid for Mississauga-based Certicom, a company formed in 1985 to commercialize research from the University of Waterloo.

According to RIM, discussions about an acquisition began nearly two years ago when Certicom shares were trading in the $5-6 range. By the time RIM gave up on discussions with Certicom's board and publicly announced its intention to make an offer, Certicom shares had fallen to just 85 cents -- only about 10 cents above its cash per share.

In the quarter ended October 31, Certicom lost US$2.6 million on sales of US$6.6 million. But it had US$33.2 million in cash and securities on its balance sheet and not much debt, so it wouldn't be a very expensive acquisition for RIM.

Investors clearly don't expect that this will be the final offer for the company, as Certicom's shares jumped to more than $1.80 by the end of December.

As with many hostile takeover targets, Certicom's board went racing to the courts and the Ontario Securities Commission to try to block their shareholders from doing what they want with their stock, accusing RIM of violating confidentiality agreements in putting its bid together and of failing to disclose that it had confidential information in the circular it sent to Certicom shareholders.

The board rejected the bid as significantly undervaluing the company, although it was 76% above the price Certicom shares had been trading just before the offer was made. SEDI records show only one Certicom insider making any purchases of Certicom shares on the open market in the last six months. Before RIM's offer, Certicom shares hadn't closed above $1.50 a share since September 17. So far, there have been no other offers for the company.

Certicom was founded in 1985 as Cryptech Systems and later changed its name to Mobius Encryption before becoming Certicom in 1995. Its core product was based on research from UW's Data Encryption Group (now the Centre for Applied Cryptographic Research), and co-founder and UW professor Scott Vanstone remains a director of Certicom, as well as the company's EVP of strategic technology. It was created during the Bob Nally era at UW and Nally's investment company later said it had invested $2.5 million in Certicom and sold its shares for $34.0 million between 1996 and 1998. Certicom went public with a TSX listing in 1995 and followed that with a Nasdaq listing in 2000.

Certicom became of Canada's great bubble-propelled moonshots in 2000, when its shares peaked at what would today be $125 (adjusted for a stock split) in March of that year. When the bubble burst, it took Certicom with it. By June 2001 its stock was under $5 and a year after that, it was below $1 and the company lost its Nasdaq listing. There have been occasional signs of life since then, but Certicom shares fell 69% in 2007 and began 2008 at $1.58.

Less contentiously, RIM also announced that it is acquiring Vancouver's Chalk Media Corp. for $23 million in cash. The deal must still be approved by Chalk shareholders and is expected to close in February. Chalk is the developer of the Mobile Chalkboard platform used to push multimedia content to BlackBerrys.

[5]---------------------------------------------------------------
RIM misses targets, but reports 66% growth
December 18, 2008

A rare subpar quarter for RIM -- which, in its case, means sales were only up 66% from the previous year -- with sales and profits falling below the company's forecasts. Not a big surprise, since the forecasts were made before the start of the economic collapse in September. In the period ended November 29 (Q3 09), it reported earnings of US$396.3 million on sales of US$2.78 billion, falling short of its targets of US$510-550 million and US$2.95-3.10 billion, respectively. The company issued an earnings warning on December 2 and followed with full results a couple of weeks later.

According to RIM, about a third of the shortfall was caused by the higher U.S. dollar (RIM reports its results in U.S. dollars). The 2.6 million new BlackBerry subscribers in the quarter fell 300,000 below the company's expectations.

The current quarter will include results from the holiday buying season in December, and RIM says it had a strong start to the period. It is forecasting sales of US$3.3-3.5 billion in Q4 with earnings of US$475-520 million and 2.9 million new BlackBerry subscribers.

RIM ended the quarter with US$2.49 billion in cash, up US$249.0 million from the end of Q2.

RIM disclosed just one new patent infringement suit brought against it in the quarter, along with two complaints to the U.S. International Trade Commission alleging infringement. And RIM filed its own suit in November seeking judgment of non-infringement, invalidity or unenforceability of four Kodak patents.

[6]---------------------------------------------------------------
Com Dev sales continue to climb
December 11, 2008

Com Dev ended its fiscal year with another good quarter, earning $4.3 million on sales of $59.8 million in the period ended October 31 (Q4 08). Sales were up 16% from last quarter and 38% from a year ago, and margins were up significantly from Q3, but so were expenses. The bottom line was a $500,000 improvement from the previous quarter. For the year, sales climbed 28% to $210.3 million with earnings of $12.4 million.

Com Dev received $60 million in new orders in the quarter and ended the year with an order backlog of $158 million. Com Dev USA contributed $6.5 million in sales in Q4, up from $3.6 million in Q3. Operations generated $11.3 million in cash, leaving Com Dev with $16.1 million in cash at year-end.

Com Dev is forecasting revenue growth of at least 10% in fiscal 2009.

The company also announced that CEO John Keating has joined its board of directors. Late in the month it was reported that Com Dev is one of a few companies working on a Canadian-designed lunar rover. New Hamburg's Ontario Drive and Gear is also involved.

[7]---------------------------------------------------------------
STOCK REPORT: Best month in two years for Com Dev shares
December 2008

We saw some stability in the markets in December, with only three declining stocks -- and one of them was just down a penny. It was the first time since August that there were more gainers than losers. Only two stocks had more than a 10% shift in December, and even one of those gets an asterisk.

For the month of December:

TurboSonic [OTCBB: TSTA] +120%
Com Dev [TSX: CDV] +19%
Descartes [TSX: DSG] +8%
Dalsa [TSX: DSA] +8%
RDM [TSX: RC] +5%
--S&P TSX VENTURE INDEX +4%
Open Text [TSX: OTC] +4%
Sandvine [TSX: SVC] +1%
Arise [TSX: APV] 0%
ATS [TSX: ATA] 0%
===============================
Biorem [TSXV: BRM] -2%
--S&P TSX COMPOSITE INDEX -3%
MKS [TSX: MKX] -8%
RIM [TSX: RIM] -9%

Com Dev shares had a strong month, although the jump wasn't an immediate response to the company's financial results. It was about two weeks after the results were announced that the stock started to take off. After a big October and a terrible November, December ended up being the best month for Com Dev shares since a 23% gain in July 2006.

TurboSonic shares had the same trading range in December as in November, but in November it closed at the bottom of the range (and was on the bottom of last month's list) and in December it closed at the top, giving the appearance of a huge gain.

Shares of Biorem, RDM, RIM, Sandvine, and TurboSonic all hit their low mark for the year in intra-month trading in December -- with RDM and Sandvine bouncing back before the end of the month.

Companies with core operations outside the area:

ON Semiconductor [Nasdaq: ONNN] +16%
McAfee [NYSE: MFE] +14%
Oracle [Nasdaq: ORCL] +10%
Google [Nasdaq: GOOG] +5%
Sybase [NYSE: SY] +1%
===================================
Ansys [Nasdaq: ANSS] -3%
Blue Coat [Nasdaq: BCSI] -6%
NCR [NYSE: NCR] -7%
Adobe [Nasdaq: ADBE] -8%
Agfa-Gevaert [Brussels: AGFA] -21%
Acorn Energy [Nasdaq: ACFN] -30%

[8]---------------------------------------------------------------
Miscellaneous Tidbits

Open Text is looking to hire about 200 people in Waterloo over the next few months. It held a recruitment open house in December. Open Text has 3,500 employees worldwide, but only about 15% of them are in Waterloo. With this round of hiring, the Waterloo office will grow to around 700 people.
David Strucke has left Navtech, where he had been CEO for seven years. He joined the company in 1999, initially in financial roles, becoming CFO before being appointed CEO.
Coreworx announced that it recently signed three contracts with a total value of $3.1 million. Specific customers were not disclosed, but the company also issued a news release discussing its work with CITC Pacific Mining on a project in Australia -- a big contract that Coreworx won in 2007.
ATS is raising $50 million through a bought deal share offering that it expects will close this week. Under the terms of the deal, the company will sell 10 million shares at $5 each. If the underwriters exercise their full overallotment option, it would provide an additional $7.5 million in gross proceeds.
Arise has signed a four-year PV cell supply deal that it says will be worth about $200 million if all cells are taken by the buyer. The deal is with Germany's Asola Advanced and Automotive Solar Systems GmbH.
Covarity announced a multi-year deal to provide its commercial loan management software to BMO. The software will be used at more than 900 Bank of Montreal branches across Canada.

Wednesday, December 03, 2008

SR&ED changes don't seem as dramatic as feared

Lots of discussion lately about changes made by the Canada Revenue Agency to the federal scientific research and experimental development (SR&ED) tax credit. The Canadian Advanced Technology Alliance (CATA) is concerned about the impact of the changes on the high-tech industry, and I think all the national accounting firms have published reports on the modifications to the program.

I read the reports and the information released by CRA and reached two conclusions: 1) most of the changes just make it easier for companies applying for SR&ED to give CRA the information it always wanted (which I'll focus on in just a second), and 2) the SR&ED application process is -- and apparently always has been -- tied to chiched notions of science and discovery having little to do with how companies conduct R&D (particularly in the ICT world), making the application process both burdensome and artificial.

That's been an eye-onener. While I've worked with companies for the last 10 years that received SR&ED refunds, the process was always just some black box to me since I've never been the one filling out the forms. I've filled out applications for government funding that felt like I was playing a game of "let's pretend" but I never realized how much I had in common with the folks doing the SR&ED forms.

Having said that, I have a hard time seeing how CRA's changes to SR&ED make things any worse. In fact, at least provisionally, I'll have to agree with their claim that these changes could be considered an improvement. (The one exception would be for those few companies that submit more than 20 projects a year. Previously, they were given a break and were only required to detail their top 20 projects. Now they have to fill in applications for every project. That doesn't seem unreasonable to me, and it's not something that will have an effect on startups.)

Changes to the form, not to the law

The first thing to keep in mind is that there has been no change to the legislation underlying the SR&ED tax credit. Whatever money you were entitled to in the past, you're entitled to now.

What has changed is the form and, for the most part, the form has been changed so that 1) there are explicit sections for information CRA had already been asking for and 2) companies have to be as concise in their descriptions as CRA had already been asking them to be (CRA had already been saying that most projects could be described within four pages, so the new word limits just enforce direction that CRA had already been providing).

For example, you now have to specify on the form whether your project was scientific research or experimental development. But CRA had always distinguished between them, and even said right on the form in previous years that there were different eligibility requirements between the two. There's nothing new about projects being classified as either scientific research or experimental development, the only change is that there's now a box on the form.

One more example: now you're required to specify (from a long list) the area of science that your project involves. But CRA had already asked applicants "To what field of science or technology would the advance contribute?" so, again, it's hard to see this as a big change.

And there are a lot of examples like that.

Obstacles vs. uncertainties

The new form also refers to technical "obstacles" instead of "uncertainties." Somehow, CATA reached the conclusion that this is less precise. It's not. Obstacles is a better word, but I don't think that a bit of wordsmithing -- even to make an improvement -- was worth throwing people into a panic over what the change really means. The new guide even refers to "technological obstacles/uncertainties" and, from looking at the term in the context CRA uses it, I think it's really grasping at straws to stir up FUD around the change.

Too early to know effect on audits

I think the real concern, though, is about audits. Nobody likes to be audited, obviously, and the form is what CRA has in its hands when it decides which applicants to audit. It sounds like some companies are concerned that they won't be able to avoid audits without being able to submit 15-page project descriptions -- which CRA had already said it didn't want.

Right now, we don't know if the new form will lead to more or fewer questions from CRA examiners. We know that CRA is hiring more auditors, so you could interpret that as a effort to speed up the process or as an ominous sign that there will be more audits in the future. We'll see.

But, overall, I don't see the changes to the SR&ED program having any significant impact on startups. The process won't be any less of a pain, but to me, the new form looks like a very small improvement.

Tuesday, June 09, 2009

Waterloo Tech Digest - June 9, 2009

Tuesday, May 05, 2009

The book Howard Burton believes contributed to his removal from Perimeter Institute

Waterloo Tech Digest - May 5, 2009

Tuesday, April 07, 2009

Waterloo Tech Digest - April 7, 2009

Tuesday, March 03, 2009

Waterloo Tech Digest - March 3, 2009

Tuesday, February 03, 2009

Waterloo Tech Digest - February 3, 2009

Tuesday, January 13, 2009

Waterloo Tech Digest - January 13, 2009

Wednesday, December 03, 2008

SR&ED changes don't seem as dramatic as feared

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