Waterloo Tech Digest - September 12, 2006
Compiled and written by
Gary Will
gary@garywill.com
In this issue:
Desire2Learn sued for patent infringement by competitor
July 26, 2006
Desire2Learn has been served with a patent infringement suit by its largest competitor, Washington, DC-based Blackboard Inc. The suit has attracted a lot of attention from the online learning community, and there has been concern that the patent awarded to Blackboard is so broad that it would give the company a monopoly on Web-based learning management systems.
There has been a grassroots movement to catalog "prior art" in networked education software systems that could be used to invalidate the Blackboard patent.
Desire2Learn has said that it will challenge the validity of Blackboard's patent, and will take the position that it does not infringe on any claims that survive the challenge.
Blackboard is a Nasdaq-listed company with a market value of about US$700 million. It recently reported quarterly revenue of US$43.6 million. Last year, Blackboard acquired its largest for US$178 million and some industry analysts have estimated that the company has a 60 percent share of the learning management system market. Desire2Learn has said that it has the second-largest share of the market.
In January, Blackboard was issued patent 6,988,138, "Internet-based education support system and methods," by the U.S. patent office. Blackboard made a provisional patent filing in 1999 and a full application in 2000. It filed the suit against Desire2Learn on July 26.
The suit was filed in the U.S. District Court for the Eastern District of Texas, which has become known for patent disputes, thanks to judges that move rapidly through the process and a jury pool that has shown an inclination to favour patent-holding plaintiffs. The suit was filed in Lufkin, Tex., and not in Marshall, which has been the capital of the eastern Texas patent suits. Marshall is where Visto filed its patent infringement suit against RIM earlier this year.
[2]---------------------------------------------------------------
Open Text hits quarterly targets
August 31, 2006
Open Text ended fiscal 2006 with revenue of US$105.2 million in the quarter ended June 30 (Q4 06). Sales were up 4% from the previous quarter and down 4% from a terrible fourth quarter last year, and were in line with the company's forecast of US$100-110 million.
Net income in Q4 was US$7.8 million, up from US$7.3 million last quarter. Operations provided US$15.4 million in cash and Open Text spent $20.2 million buying a minority stake in Hummingbird. It expects to acquire the company outright in early October following a meeting of Hummingbird shareholders later this month (see previous digest).
For the year, sales of US409.6 million were down 1% from 2005. Net income for 2006, following US$25.2 million in restructuring charges over the first six months and a US$1.7 million asset write-down in Q2, was just US$5.0 million.
Open Text ended the year with US$107.4 million in cash.
The company is forecasting sales of US$93-101 million in the current quarter, which is traditionally Open Text's weakest each year.
[3]---------------------------------------------------------------
MKS reports strong sales, weak bottom line
September 7, 2006
It was a record first quarter for sales for MKS in the period ended July 31 (Q1 07), but a jump in expenses took the company to its first net loss in several quarters.
MKS lost US$488,000 (US$0.01/share) on sales of US$12.6 million. Sales were up 17% from last year, and up slightly from a weak Q4. But sales and marketing expenses grew 16% sequentially, which MKS attributed to growing its sales force with new reps that will take several months to ramp up to full productivity. Expansion in the Asia-Pacific market was another reason cited for the additional costs.
MKS' core application lifecycle management segment saw its sales climb 5% from Q4 and 19% from last year to US$10.5 million. The segment reported an operating loss of US$1.3 million. The shrinking interoperability segment remained profitable, contributing operating income of US$698.000.
RIM was among MKS' new customers in the quarter.
Operations provided US$786,000 in cash and MKS spent US$1.0 million to pay shareholders a US$0.02/share dividend, which it will do again this quarter. MKS ended the quarter with US$15.4 million in cash.
MKS did not revise its financial forecasts for the year, but expects that the second half of the year will be much more profitable than the first half. It had 329 employees worldwide at the end of Q1.
[4]---------------------------------------------------------------
Descartes continues profitable run, integrates acquisitions
September 7, 2006
Descartes reported income of US$1.1 million (US$0.02/share) on sales of US$13.3 million in the quarter ended July 31 (Q2 07). Income from operations of US$0.9 million was down from US$1.2 million in the previous quarter, but up notably from US$0.1 million in the same period last year.
This was the first quarter to include a full three months of results from ViaSafe, acquired in April. It also included one month of results from Flagship Customs Services, acquired at the end of June. That makes comparisons with prior periods difficult, but it looks like there was a some organic growth -- around 4% year-over-year -- with the bulk of the 16% annual sales growth coming through the two acquisitions.
FCS provided US$0.4 million in revenue in July, which works out to about US$5 million a year. It was just acquired by Descartes for US$30 million. FCS' quarterly contribution should triple in Q3 when a full period of results are included. Last quarter, ViaSafe provided US$0.27 million in revenue in 24 days, so that should have grown to about US$1 million in Q2, although Descartes says the number is hard to break out since ViaSafe has been integrated into the company's other operations.
Descartes used US$2.1 million in cash in operations and an additional US$20.1 million on acquisitions (primarily FCS). It ended the quarter with US$17.2 million in cash.
[5]---------------------------------------------------------------
ARISE has arisen after cash infusion
August 15, 2006
In two quarters, ARISE has gone from a working capital deficiency of $2.4 million to working capital of $0.9 million. With some money in the bank to pay for inventory and employees, it actually had some sales in the quarter ended June 30, although it's still primarily in R&D mode. ARISE reported $303,000 in sales -- not much, but a lot better than the $73,000 in revenue in the previous quarter. Net loss was $435,000, bringing the accumulated deficit to $9.9 million.
Operations consumed $2.0 million in cash, but the company raised $3.2 million in the quarter and had $1.3 million in cash on the balance sheet at the end of the period.
ARISE still hopes to produce a full-sized prototype photovoltaic cell by the end of this year, and to be shipping product by the end of 2007. It expects to raise additional capital before year-end.
Bruce West, who last year briefly served as president, COO, and interim CFO, has been re-hired. He is now CFO and EVP of business processes. The company also signed a letter of intent to purchase land in Bischofswerda, Germany as a potential location for its PV cell manufacturing facility. ARISE says there are significant refundable tax credits available in Germany to pay for plant and equipment capital costs, but it will need to raise more money to receive the maximum grant levels.
[6]---------------------------------------------------------------
STOCK REPORT: RIM investors love their Pearls
August 2006
After a few sluggish months, RIM shares were on the rise as investors reacted first to leaks and then to the announcement of a new, more consumer-friendly BlackBerry called Pearl. The new device includes a 1.3 megapixel digital camera, support for MP3 and AAC audio and MPEG4 and H.263 video, and an expandable memory slot, and took RIM shares to their highest level since April with a 23% bounce that matched that in March after the NTP settlement.
For the month of August:
RIM [TSX: RIM] +23%
Open Text [TSX: OTC] +17%
ATS [TSX: ATA] +14%
RDM [TSX: RC] +12%
TurboSonic [OTCBB: TSTA] +11%
Biorem [TSXV: BRM] +9%
--S&P TSX VENTURE INDEX +4%
Virtek [TSX: VRK] +2%
--S&P TSX COMPOSITE INDEX +2%
Com Dev [TSX: CDV] +2%
Navtech [OTCBB: NAVH] +2%
===============================
Dalsa [TSX: DSA] -2%
Descartes [TSX: DSG] -4%
MKS [TSX: MKX] -10%
Sandvine [AIM: SAND] -12%
ARISE [TSXV: APV] -13%
Open Text stock had its best month in nearly a year, finishing August at its highest monthly close since April.
Virtek shares haven't made a big move since April, but have now gone up for six consecutive months, gaining 82% over that period. They have doubled in value this year, running just a little behind Com Dev shares as the best performance of 2006.
The worst performer so far this year, shares of Biorem, had their first positive month following six months of declines. After dipping to an all-time low of $1.30 a share, the company announced that it closed a $3.4 million round of funding at $2 a share from San Francisco-based Expansion Capital Partners. Its Clean Technology Fund II will hold nearly 26% of Biorem's outstanding shares. It is also an investor in Agile Systems.
Companies with core operations outside the area:
Blue Coat [Nasdaq: BCSI] +18%
Adobe [Nasdaq: ADBE] +14%
Sybase [NYSE: SY] +10%
NCR [NYSE: NCR] +8%
McAfee [NYSE: MFE] +6%
Oracle [Nasdaq: ORCL] +5%
Ansys [Nasdaq: ANSS] +2%
Agfa-Gevaert [Brussels: AGFA] +1%
===================================
LSI Logic [NYSE: LSI] -2%
Google [Nasdaq: GOOG] -2%
AMIS [Nasdaq: AMIS] -3%
Senesco [Amex: SNT] -8%
Automated Benefits [TSXV: AUT] -14%
[8]--------------------------------------------------------------
Miscellaneous Tidbits
Gary Will
gary@garywill.com
In this issue:
- Desire2Learn sued for patent infringement by competitor
- Open Text hits quarterly targets
- MKS reports strong sales, weak bottom line
- Descartes continues profitable run, integrates acquisitions
- ARISE has arisen after cash infusion
- STOCK REPORT: RIM investors love their Pearls
- Miscellaneous tidbits from Google, Communitech, Photowatt, Woodhead, Symbility, Virtek, TrueLocal
Desire2Learn sued for patent infringement by competitor
July 26, 2006
Desire2Learn has been served with a patent infringement suit by its largest competitor, Washington, DC-based Blackboard Inc. The suit has attracted a lot of attention from the online learning community, and there has been concern that the patent awarded to Blackboard is so broad that it would give the company a monopoly on Web-based learning management systems.
There has been a grassroots movement to catalog "prior art" in networked education software systems that could be used to invalidate the Blackboard patent.
Desire2Learn has said that it will challenge the validity of Blackboard's patent, and will take the position that it does not infringe on any claims that survive the challenge.
Blackboard is a Nasdaq-listed company with a market value of about US$700 million. It recently reported quarterly revenue of US$43.6 million. Last year, Blackboard acquired its largest for US$178 million and some industry analysts have estimated that the company has a 60 percent share of the learning management system market. Desire2Learn has said that it has the second-largest share of the market.
In January, Blackboard was issued patent 6,988,138, "Internet-based education support system and methods," by the U.S. patent office. Blackboard made a provisional patent filing in 1999 and a full application in 2000. It filed the suit against Desire2Learn on July 26.
The suit was filed in the U.S. District Court for the Eastern District of Texas, which has become known for patent disputes, thanks to judges that move rapidly through the process and a jury pool that has shown an inclination to favour patent-holding plaintiffs. The suit was filed in Lufkin, Tex., and not in Marshall, which has been the capital of the eastern Texas patent suits. Marshall is where Visto filed its patent infringement suit against RIM earlier this year.
[2]---------------------------------------------------------------
Open Text hits quarterly targets
August 31, 2006
Open Text ended fiscal 2006 with revenue of US$105.2 million in the quarter ended June 30 (Q4 06). Sales were up 4% from the previous quarter and down 4% from a terrible fourth quarter last year, and were in line with the company's forecast of US$100-110 million.
Net income in Q4 was US$7.8 million, up from US$7.3 million last quarter. Operations provided US$15.4 million in cash and Open Text spent $20.2 million buying a minority stake in Hummingbird. It expects to acquire the company outright in early October following a meeting of Hummingbird shareholders later this month (see previous digest).
For the year, sales of US409.6 million were down 1% from 2005. Net income for 2006, following US$25.2 million in restructuring charges over the first six months and a US$1.7 million asset write-down in Q2, was just US$5.0 million.
Open Text ended the year with US$107.4 million in cash.
The company is forecasting sales of US$93-101 million in the current quarter, which is traditionally Open Text's weakest each year.
[3]---------------------------------------------------------------
MKS reports strong sales, weak bottom line
September 7, 2006
It was a record first quarter for sales for MKS in the period ended July 31 (Q1 07), but a jump in expenses took the company to its first net loss in several quarters.
MKS lost US$488,000 (US$0.01/share) on sales of US$12.6 million. Sales were up 17% from last year, and up slightly from a weak Q4. But sales and marketing expenses grew 16% sequentially, which MKS attributed to growing its sales force with new reps that will take several months to ramp up to full productivity. Expansion in the Asia-Pacific market was another reason cited for the additional costs.
MKS' core application lifecycle management segment saw its sales climb 5% from Q4 and 19% from last year to US$10.5 million. The segment reported an operating loss of US$1.3 million. The shrinking interoperability segment remained profitable, contributing operating income of US$698.000.
RIM was among MKS' new customers in the quarter.
Operations provided US$786,000 in cash and MKS spent US$1.0 million to pay shareholders a US$0.02/share dividend, which it will do again this quarter. MKS ended the quarter with US$15.4 million in cash.
MKS did not revise its financial forecasts for the year, but expects that the second half of the year will be much more profitable than the first half. It had 329 employees worldwide at the end of Q1.
[4]---------------------------------------------------------------
Descartes continues profitable run, integrates acquisitions
September 7, 2006
Descartes reported income of US$1.1 million (US$0.02/share) on sales of US$13.3 million in the quarter ended July 31 (Q2 07). Income from operations of US$0.9 million was down from US$1.2 million in the previous quarter, but up notably from US$0.1 million in the same period last year.
This was the first quarter to include a full three months of results from ViaSafe, acquired in April. It also included one month of results from Flagship Customs Services, acquired at the end of June. That makes comparisons with prior periods difficult, but it looks like there was a some organic growth -- around 4% year-over-year -- with the bulk of the 16% annual sales growth coming through the two acquisitions.
FCS provided US$0.4 million in revenue in July, which works out to about US$5 million a year. It was just acquired by Descartes for US$30 million. FCS' quarterly contribution should triple in Q3 when a full period of results are included. Last quarter, ViaSafe provided US$0.27 million in revenue in 24 days, so that should have grown to about US$1 million in Q2, although Descartes says the number is hard to break out since ViaSafe has been integrated into the company's other operations.
Descartes used US$2.1 million in cash in operations and an additional US$20.1 million on acquisitions (primarily FCS). It ended the quarter with US$17.2 million in cash.
[5]---------------------------------------------------------------
ARISE has arisen after cash infusion
August 15, 2006
In two quarters, ARISE has gone from a working capital deficiency of $2.4 million to working capital of $0.9 million. With some money in the bank to pay for inventory and employees, it actually had some sales in the quarter ended June 30, although it's still primarily in R&D mode. ARISE reported $303,000 in sales -- not much, but a lot better than the $73,000 in revenue in the previous quarter. Net loss was $435,000, bringing the accumulated deficit to $9.9 million.
Operations consumed $2.0 million in cash, but the company raised $3.2 million in the quarter and had $1.3 million in cash on the balance sheet at the end of the period.
ARISE still hopes to produce a full-sized prototype photovoltaic cell by the end of this year, and to be shipping product by the end of 2007. It expects to raise additional capital before year-end.
Bruce West, who last year briefly served as president, COO, and interim CFO, has been re-hired. He is now CFO and EVP of business processes. The company also signed a letter of intent to purchase land in Bischofswerda, Germany as a potential location for its PV cell manufacturing facility. ARISE says there are significant refundable tax credits available in Germany to pay for plant and equipment capital costs, but it will need to raise more money to receive the maximum grant levels.
[6]---------------------------------------------------------------
STOCK REPORT: RIM investors love their Pearls
August 2006
After a few sluggish months, RIM shares were on the rise as investors reacted first to leaks and then to the announcement of a new, more consumer-friendly BlackBerry called Pearl. The new device includes a 1.3 megapixel digital camera, support for MP3 and AAC audio and MPEG4 and H.263 video, and an expandable memory slot, and took RIM shares to their highest level since April with a 23% bounce that matched that in March after the NTP settlement.
For the month of August:
RIM [TSX: RIM] +23%
Open Text [TSX: OTC] +17%
ATS [TSX: ATA] +14%
RDM [TSX: RC] +12%
TurboSonic [OTCBB: TSTA] +11%
Biorem [TSXV: BRM] +9%
--S&P TSX VENTURE INDEX +4%
Virtek [TSX: VRK] +2%
--S&P TSX COMPOSITE INDEX +2%
Com Dev [TSX: CDV] +2%
Navtech [OTCBB: NAVH] +2%
===============================
Dalsa [TSX: DSA] -2%
Descartes [TSX: DSG] -4%
MKS [TSX: MKX] -10%
Sandvine [AIM: SAND] -12%
ARISE [TSXV: APV] -13%
Open Text stock had its best month in nearly a year, finishing August at its highest monthly close since April.
Virtek shares haven't made a big move since April, but have now gone up for six consecutive months, gaining 82% over that period. They have doubled in value this year, running just a little behind Com Dev shares as the best performance of 2006.
The worst performer so far this year, shares of Biorem, had their first positive month following six months of declines. After dipping to an all-time low of $1.30 a share, the company announced that it closed a $3.4 million round of funding at $2 a share from San Francisco-based Expansion Capital Partners. Its Clean Technology Fund II will hold nearly 26% of Biorem's outstanding shares. It is also an investor in Agile Systems.
Companies with core operations outside the area:
Blue Coat [Nasdaq: BCSI] +18%
Adobe [Nasdaq: ADBE] +14%
Sybase [NYSE: SY] +10%
NCR [NYSE: NCR] +8%
McAfee [NYSE: MFE] +6%
Oracle [Nasdaq: ORCL] +5%
Ansys [Nasdaq: ANSS] +2%
Agfa-Gevaert [Brussels: AGFA] +1%
===================================
LSI Logic [NYSE: LSI] -2%
Google [Nasdaq: GOOG] -2%
AMIS [Nasdaq: AMIS] -3%
Senesco [Amex: SNT] -8%
Automated Benefits [TSXV: AUT] -14%
[8]--------------------------------------------------------------
Miscellaneous Tidbits
- Google’s SVP of business operations told the Globe & Mail that the company would like to grow its Waterloo office into an R&D centre with 100-200 people. The company now has about 10 employees in Waterloo.
- Communitech will receive $1 million over three years to support commercialization and entrepreneurial support programs. It has also moved into the first floor of the Accelerator Building at the UW Research & Technology Park.
- Photowatt Technologies, the solar power company that ATS is spinning off and taking public, has filed a preliminary prospectus for its IPO. More details in the next Tech Digest.
- Molex completed its US$256 million acquisition of Woodhead Industries. Woodhead came to Waterloo in 1998 when it acquired SST from Rick Brock's S-S Technologies Holdings Ltd. for $51.4 million.
- Symbility Solutions reported a loss of $886,000 on sales of $184,000 in the quarter ended June 30. Sales were up 115% from $86,000 in the previous quarter.
- Virtek received a $1.9 million order from a Chinese manufacturer for its FOBA inline laser marking systems. All the systems are expected to be installed this quarter.
- Guelph's TrueLocal search engine, which evolved out of Geosign, announced the launch of its Canadian Website at TrueLocal.ca. The dot-com version was unveiled last year. It says it maintains a list of 1.3 million Canadian companies, filtering out online-only businesses.
posted by Gary Will at 12:00 AM
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