Waterloo Tech Digest - August 8, 2006
Compiled and written by
Gary Will
gary@garywill.com
In this issue:
RIM acquires SlipStream
July 10, 2006
SlipStream, the Internet acceleration company, has been acquired by RIM for an undisclosed amount.
The company, initially called 3C Infotech, was founded in 2000 by UW professors En-hui Yang and Ajit Singh. CEO Ron Neumann joined in 2001, and changed its name to SlipStream Data a few months later. SlipStream received early funding through the Ontario Centres of Excellence and raised $1.5 million from EdgeStone Capital in May 2002. It was the first of two investments EdgeStone made in Waterloo within the space of about a year (It has now exited from both with the sale of SlipStream and RSS Solutions. It had a better result with SlipStream than with RSS.)
There was certainly a lot of skepticism at the time about the wisdom of focusing a new company on improving something as dowdy as dialup Internet, but SlipSteam was quickly able to capture a big share of a market that turned out to be more durable than expected. It then expanded its compression technology into the wireless market -- another area where bandwidth is still at a premium.
SlipStream had grown to 49 employees when it was acquired by RIM. In the announcement, RIM said it plans to operate SlipStream as a wholly-owned subsidiary operating under the SlipStream name.
[2]---------------------------------------------------------------
Sandvine sales continue to skyrocket
July 6, 2006
Sandvine issued its first half-yearly results since becoming a public company, and also held its first conference call. In the six months ended May 31, the company lost $680,000 on revenue of $14.3 million. Sales were up 168% from last year, and were close to matching sales the $15.8 million in revenue the company reported for the entire 2005 fiscal year.
Operational loss was $1.1 million. Sandvine's R&D expenses for the six months were $5.2 million, or 36% of revenue.
Sandvine says it has seven of the world's largest 10 cable companies as customers, but it would not disclose which ones. Almost all of the company's sales -- 93% -- are to the U.S., with two unnamed U.S. cable companies accounting for 80% of total revenue. It is looking to expand international sales, where most potential customers are DSL providers. Sandvine CEO Dave Caputo said the company is currently focused on acquiring new customers, rather than on mining its installed base.
Sandvine ended the period with $50.3 million in cash and securities, including the net $37.4 million raised through the IPO.
Starting at the beginning of fiscal 2006, the company is paying a 1% royalty on sales to the Canadian government as repayment of the Technology Partnerships Canada funding it received. The royalty rate will rise to 2.5% starting in fiscal 2008 (or sooner, if Sandvine's annual sales exceed $85 million before then).
[3]---------------------------------------------------------------
Open Text makes $551M bid for Hummingbird
July 5 - August 4, 2006
It looks like Open Text will be acquiring Toronto's Hummingbird Ltd. for about $551 million. It made an unsolicited offer for the company after Hummingbird's board supported a takeover bid from Silicon Valley's Symphony Technology Group.
On May 25, Hummingbird entered into a "definitive agreement" to be acquired by Symphony for US$26.75 a share, or approximately US$465 million. A week before that agreement was made, Open Text had told Hummingbird that it was interested in discussing the possibility of acquiring the company. At the time, Hummingbird's board decided not to respond. Open Text offered US$27.25 a share on June 14, which it raised to US$27.75 a share on July, when it announced that it owned 4.3% of Hummingbird and had lockup agreements with holders of another 18% of Hummingbird's shares.
On July 25, Hummingbird's board recommended that shareholders reject the Open Text offer, but 10 days later it agreed to support Open Text's revised offer of US$27.85 a share, or approximately US$489 million. That's 4% higher than the Symphony offer and 20% above the level where Hummingbird shares had been trading before the company announced the Symphony deal.
The transaction must be approved by Hummingbird shareholders. Open Text expects the deal will close in October.
Hummingbird reported sales of US$126.3 million in the six months ended March 31 with earnings of US$5.5 million. At that time it had US$94.3 million in cash and another US$38.8 million in receivables net of payables. Operations provided US$10.6 million in cash in the most recently reported quarter. Hummingbird may be on the hook for a US$11.6 million breakup fee to Symphony.
Seven years ago, Hummingbird CEO Fred Sorkin accused Open Text of "unethical" behaviour when the two companies competed to acquire PC Docs. Open Text eventually withdrew from the bidding after Hummingbird raised its offer to $305 million in cash -- about $100 million more than Open Text's final offer.
[4]---------------------------------------------------------------
ARISE to receive $6.5M from government-created fund
July 5, 2006
ARISE will receive $6.5 million in non-repayable funding over three years from Sustainable Development Technology Canada (SDTC) for its project to develop a new approach for refining high purity solar grade silicon. Also backing the project are UW, University of Toronto, Ebner Gesellschaft M.B.H., Komag Inc., and Topsil Semiconductor Materials A/S.
SDTC was created by the federal government in 2001 and reports to Parliament through the Ministry of Natural Resources. In July, it announced $48 million in new funding for 22 "clean technology" research projects. ARISE was the only company in this area to receive funding.
ARISE also announced $450,000 in forthcoming funding from the Ontario Centres of Excellence through its Centre for Energy. It sounds like this is different from the $450,000 ARISE already received from OCE.
[5]---------------------------------------------------------------
RDM sales climb 50%
July 28, 2006
RDM reported earnings of $236,000 ($0.01/share) on sales of $6.2 million in the quarter ended June 30 (Q3 06). Sales were up 5% from the previous quarter and 50% from a year ago. A shift toward low margin sales led to a 8% decline in gross profits, but a reduction in expenses led to a bottom line that was a slight improvement from $208,000 in Q2.
Digital imaging and electronic payments accounted for 91% of revenue, while the quality assurance segment contributed the remaining 9% but provided 45% of earnings.
RDM signed two more banks to its ITMS system, for a total of 15, and was processing an average of 689,000 transactions per week during the quarter, up 11% from Q2. It says its breakeven point is at about 2 million transactions per week, and it hopes to be processing in the hundreds of millions of transactions a year in the future. RDM is launching the Web version of its ITMS service this month.
Operations consumed $1.9 million in cash, and RDM ended the quarter with a $4.3 million cash position. DSO jumped to 102 from 70 and the end of the previous quarter, which was attributed to timing of collections.
[6]---------------------------------------------------------------
Dalsa's semiconductors boost quarterly performance
July 27, 2006
Dalsa made $4.0 million ($0.21/share) on sales of $49.0 million in the quarter ended June 30 (Q2 06). Sales were up 11% from a year ago and 5% sequentially, but a big improvement in margins led to a 22% sequential increase in gross profits.
All of the sales gains from Q1 came from Dalsa's semiconductor business, which saw revenues jump 17% from the previous quarter and 21% from last year. During the quarter, Dalsa rebalanced its two main business segments -- semiconductors and digital imaging -- transferring professional imaging and CMOS IC operations to the semiconductor business. Those units had previously accounted for about 15-20% of digital imaging sales.
Dalsa is still very excited about the potential of its digital cinema business, which has been slow off the blocks. Digital cinema lost $1.4 million on sales of $355,000 in the quarter, with sales down slightly from $398,000 in the previous quarter. Dalsa says it expects similar losses in the next two quarters,
Operations provided $2.9 million in cash, which is low for Dalsa. The company spent $3.6 million on capital assets, taking on some additional debt. Net cash at the end of the quarter was $1.5 million, up $0.5 million from the end of Q1.
During the quarter, Dalsa sold the site of its former facility in Colorado in return for a promissory note for US$612,000.
[7]---------------------------------------------------------------
STOCK REPORT: Com Dev shares up 144% in 2006
July 2006
Com Dev shares continue on their roll, topping their 20% gain from June with a 23% jump in July. The stock is up 144% over the first seven months of 2006, making it the best performer among all stock followed here. In second place are Virtek shares, which had a good month in July and are now up 98% this calendar year.
MKS shares bounced back from their collapse in June to post an 18% gain in July -- their best month of the year.
For the month of July:
Com Dev [TSX: CDV] +23%
MKS [TSX: MKX] +18%
Sandvine [AIM: SAND] +14%
Virtek [TSX: VRK] +7%
Descartes [TSX: DSG] +7%
TurboSonic [OTCBB: TSTA] +6%
ATS [TSX: ATA] +3%
--S&P TSX COMPOSITE INDEX +2%
===============================
--S&P TSX VENTURE INDEX -1%
Dalsa [TSX: DSA] -2%
Open Text [TSX: OTC] -4%
ARISE [TSXV: APV] -4%
RIM [TSX: RIM] -5%
Navtech [OTCBB: NAVH] -6%
RDM [TSX: RC] -7%
Biorem [TSXV: BRM] -14%
Over the first few days of trading in August, RDM shares have already gained back their July losses. Sandvine stock, on the other hand, has given back all of its gains from July. Biorem shares have now lost half of their value over the last six months.
Companies with core operations outside the area:
Automated Benefits [TSXV: AUT] +9%
Sybase [NYSE: SY] +9%
Oracle [Nasdaq: ORCL] +3%
===================================
Ansys [Nasdaq: ANSS] -4%
Agfa-Gevaert [Brussels: AGFA] -4%
Adobe [Nasdaq: ADBE] -6%
AMIS [Nasdaq: AMIS] -6%
Google [Nasdaq: GOOG] -8%
LSI Logic [NYSE: LSI] -8%
McAfee [NYSE: MFE] -11%
Senesco [Amex: SNT] -12%
NCR [NYSE: NCR] -12%
Blue Coat [Nasdaq: BCSI] -15%
[8]--------------------------------------------------------------
Miscellaneous Tidbits
Gary Will
gary@garywill.com
In this issue:
- RIM acquires SlipStream
- Sandvine sales continue to skyrocket
- Open Text makes $551M bid for Hummingbird
- ARISE to receive $6.5M from government-created fund
- RDM sales climb 50%
- Dalsa's semiconductors boost quarterly performance
- STOCK REPORT: Com Dev shares up 144% in 2006
- Miscellaneous tidbits from Com Dev, AMI, Symbility, IMS, LiveHive, Biorem, CGI, Sirific, TurboSonic, Agile, Photowatt
RIM acquires SlipStream
July 10, 2006
SlipStream, the Internet acceleration company, has been acquired by RIM for an undisclosed amount.
The company, initially called 3C Infotech, was founded in 2000 by UW professors En-hui Yang and Ajit Singh. CEO Ron Neumann joined in 2001, and changed its name to SlipStream Data a few months later. SlipStream received early funding through the Ontario Centres of Excellence and raised $1.5 million from EdgeStone Capital in May 2002. It was the first of two investments EdgeStone made in Waterloo within the space of about a year (It has now exited from both with the sale of SlipStream and RSS Solutions. It had a better result with SlipStream than with RSS.)
There was certainly a lot of skepticism at the time about the wisdom of focusing a new company on improving something as dowdy as dialup Internet, but SlipSteam was quickly able to capture a big share of a market that turned out to be more durable than expected. It then expanded its compression technology into the wireless market -- another area where bandwidth is still at a premium.
SlipStream had grown to 49 employees when it was acquired by RIM. In the announcement, RIM said it plans to operate SlipStream as a wholly-owned subsidiary operating under the SlipStream name.
[2]---------------------------------------------------------------
Sandvine sales continue to skyrocket
July 6, 2006
Sandvine issued its first half-yearly results since becoming a public company, and also held its first conference call. In the six months ended May 31, the company lost $680,000 on revenue of $14.3 million. Sales were up 168% from last year, and were close to matching sales the $15.8 million in revenue the company reported for the entire 2005 fiscal year.
Operational loss was $1.1 million. Sandvine's R&D expenses for the six months were $5.2 million, or 36% of revenue.
Sandvine says it has seven of the world's largest 10 cable companies as customers, but it would not disclose which ones. Almost all of the company's sales -- 93% -- are to the U.S., with two unnamed U.S. cable companies accounting for 80% of total revenue. It is looking to expand international sales, where most potential customers are DSL providers. Sandvine CEO Dave Caputo said the company is currently focused on acquiring new customers, rather than on mining its installed base.
Sandvine ended the period with $50.3 million in cash and securities, including the net $37.4 million raised through the IPO.
Starting at the beginning of fiscal 2006, the company is paying a 1% royalty on sales to the Canadian government as repayment of the Technology Partnerships Canada funding it received. The royalty rate will rise to 2.5% starting in fiscal 2008 (or sooner, if Sandvine's annual sales exceed $85 million before then).
[3]---------------------------------------------------------------
Open Text makes $551M bid for Hummingbird
July 5 - August 4, 2006
It looks like Open Text will be acquiring Toronto's Hummingbird Ltd. for about $551 million. It made an unsolicited offer for the company after Hummingbird's board supported a takeover bid from Silicon Valley's Symphony Technology Group.
On May 25, Hummingbird entered into a "definitive agreement" to be acquired by Symphony for US$26.75 a share, or approximately US$465 million. A week before that agreement was made, Open Text had told Hummingbird that it was interested in discussing the possibility of acquiring the company. At the time, Hummingbird's board decided not to respond. Open Text offered US$27.25 a share on June 14, which it raised to US$27.75 a share on July, when it announced that it owned 4.3% of Hummingbird and had lockup agreements with holders of another 18% of Hummingbird's shares.
On July 25, Hummingbird's board recommended that shareholders reject the Open Text offer, but 10 days later it agreed to support Open Text's revised offer of US$27.85 a share, or approximately US$489 million. That's 4% higher than the Symphony offer and 20% above the level where Hummingbird shares had been trading before the company announced the Symphony deal.
The transaction must be approved by Hummingbird shareholders. Open Text expects the deal will close in October.
Hummingbird reported sales of US$126.3 million in the six months ended March 31 with earnings of US$5.5 million. At that time it had US$94.3 million in cash and another US$38.8 million in receivables net of payables. Operations provided US$10.6 million in cash in the most recently reported quarter. Hummingbird may be on the hook for a US$11.6 million breakup fee to Symphony.
Seven years ago, Hummingbird CEO Fred Sorkin accused Open Text of "unethical" behaviour when the two companies competed to acquire PC Docs. Open Text eventually withdrew from the bidding after Hummingbird raised its offer to $305 million in cash -- about $100 million more than Open Text's final offer.
[4]---------------------------------------------------------------
ARISE to receive $6.5M from government-created fund
July 5, 2006
ARISE will receive $6.5 million in non-repayable funding over three years from Sustainable Development Technology Canada (SDTC) for its project to develop a new approach for refining high purity solar grade silicon. Also backing the project are UW, University of Toronto, Ebner Gesellschaft M.B.H., Komag Inc., and Topsil Semiconductor Materials A/S.
SDTC was created by the federal government in 2001 and reports to Parliament through the Ministry of Natural Resources. In July, it announced $48 million in new funding for 22 "clean technology" research projects. ARISE was the only company in this area to receive funding.
ARISE also announced $450,000 in forthcoming funding from the Ontario Centres of Excellence through its Centre for Energy. It sounds like this is different from the $450,000 ARISE already received from OCE.
[5]---------------------------------------------------------------
RDM sales climb 50%
July 28, 2006
RDM reported earnings of $236,000 ($0.01/share) on sales of $6.2 million in the quarter ended June 30 (Q3 06). Sales were up 5% from the previous quarter and 50% from a year ago. A shift toward low margin sales led to a 8% decline in gross profits, but a reduction in expenses led to a bottom line that was a slight improvement from $208,000 in Q2.
Digital imaging and electronic payments accounted for 91% of revenue, while the quality assurance segment contributed the remaining 9% but provided 45% of earnings.
RDM signed two more banks to its ITMS system, for a total of 15, and was processing an average of 689,000 transactions per week during the quarter, up 11% from Q2. It says its breakeven point is at about 2 million transactions per week, and it hopes to be processing in the hundreds of millions of transactions a year in the future. RDM is launching the Web version of its ITMS service this month.
Operations consumed $1.9 million in cash, and RDM ended the quarter with a $4.3 million cash position. DSO jumped to 102 from 70 and the end of the previous quarter, which was attributed to timing of collections.
[6]---------------------------------------------------------------
Dalsa's semiconductors boost quarterly performance
July 27, 2006
Dalsa made $4.0 million ($0.21/share) on sales of $49.0 million in the quarter ended June 30 (Q2 06). Sales were up 11% from a year ago and 5% sequentially, but a big improvement in margins led to a 22% sequential increase in gross profits.
All of the sales gains from Q1 came from Dalsa's semiconductor business, which saw revenues jump 17% from the previous quarter and 21% from last year. During the quarter, Dalsa rebalanced its two main business segments -- semiconductors and digital imaging -- transferring professional imaging and CMOS IC operations to the semiconductor business. Those units had previously accounted for about 15-20% of digital imaging sales.
Dalsa is still very excited about the potential of its digital cinema business, which has been slow off the blocks. Digital cinema lost $1.4 million on sales of $355,000 in the quarter, with sales down slightly from $398,000 in the previous quarter. Dalsa says it expects similar losses in the next two quarters,
Operations provided $2.9 million in cash, which is low for Dalsa. The company spent $3.6 million on capital assets, taking on some additional debt. Net cash at the end of the quarter was $1.5 million, up $0.5 million from the end of Q1.
During the quarter, Dalsa sold the site of its former facility in Colorado in return for a promissory note for US$612,000.
[7]---------------------------------------------------------------
STOCK REPORT: Com Dev shares up 144% in 2006
July 2006
Com Dev shares continue on their roll, topping their 20% gain from June with a 23% jump in July. The stock is up 144% over the first seven months of 2006, making it the best performer among all stock followed here. In second place are Virtek shares, which had a good month in July and are now up 98% this calendar year.
MKS shares bounced back from their collapse in June to post an 18% gain in July -- their best month of the year.
For the month of July:
Com Dev [TSX: CDV] +23%
MKS [TSX: MKX] +18%
Sandvine [AIM: SAND] +14%
Virtek [TSX: VRK] +7%
Descartes [TSX: DSG] +7%
TurboSonic [OTCBB: TSTA] +6%
ATS [TSX: ATA] +3%
--S&P TSX COMPOSITE INDEX +2%
===============================
--S&P TSX VENTURE INDEX -1%
Dalsa [TSX: DSA] -2%
Open Text [TSX: OTC] -4%
ARISE [TSXV: APV] -4%
RIM [TSX: RIM] -5%
Navtech [OTCBB: NAVH] -6%
RDM [TSX: RC] -7%
Biorem [TSXV: BRM] -14%
Over the first few days of trading in August, RDM shares have already gained back their July losses. Sandvine stock, on the other hand, has given back all of its gains from July. Biorem shares have now lost half of their value over the last six months.
Companies with core operations outside the area:
Automated Benefits [TSXV: AUT] +9%
Sybase [NYSE: SY] +9%
Oracle [Nasdaq: ORCL] +3%
===================================
Ansys [Nasdaq: ANSS] -4%
Agfa-Gevaert [Brussels: AGFA] -4%
Adobe [Nasdaq: ADBE] -6%
AMIS [Nasdaq: AMIS] -6%
Google [Nasdaq: GOOG] -8%
LSI Logic [NYSE: LSI] -8%
McAfee [NYSE: MFE] -11%
Senesco [Amex: SNT] -12%
NCR [NYSE: NCR] -12%
Blue Coat [Nasdaq: BCSI] -15%
[8]--------------------------------------------------------------
Miscellaneous Tidbits
- Conestoga College, Communitech, UW, and Laurier were all announced as recipients of provincial funding to improve links between the research and business communities and to help entrepreneurs bring innovations to market.
- Com Dev announced what it expects will be its largest military contract in three years, a $20.5 million, 17-month contract to provide equipment for an undisclosed European military communications satellite program. The company has been told to proceed on the first $5.9 million of the contract.
- AMI Semiconductor disclosed that in April it paid former Dspfactory shareholders the maximum US$8.5 million that was payable upon the achievement of certain milestones after AMI's acquisition of Dspfactory in 2004. The US$8.5 million was paid in AMI stock and boosts the total acquisition price to about $65 million. In July, AMI acquired assets of Starkey Laboratories' IC design centre in Colorado for approximately $6.0 million in cash. Starkey and AMI entered into a long-term supply agreement under which AMI will be the principal supplier of products for Starkey's hearing aids.
- Symbility Solutions and Utah-based Xactware settled their claims against each other. Xactware had accused Symbility of patent infringement last year, Symbility countered with its own suit, and the matter was before the courts in Michigan. Details of the settlement weren't disclosed.
- IMS received a lot of publicity during the month for its new iLane automotive product that will let drivers retrieve e-mail messages from Bluetooth-enabled devices such as a BlackBerry or Treo without taking their eyes off the road or their hands off the steering wheel. iLane automatically reads e-mails aloud over the car's audio system or through a headset.
- LiveHive has created a wholly-owned subsidiary called HivePoint that will launch a website at speedofsport.com where visitors can place non-monetary bets on events during NFL games. LiveHive technology will also be used by Skybook, another Costa Rican-based Internet wagering business.
- Biorem reported a loss of $596,000 ($0.06/share) on sales of $2.8 million in the quarter ended June 30 (Q2 06). Sales were down 15% from the previous quarter and up 10% from last year -- all of that gain came through the acquisition of Biocube LLC last year. A sharp decline in margins pushed gross profits down 23% from Q1 and 36% from 2005. The company says it expects margins to return to previous levels through the rest of the year. Biorem ended the quarter with $1.0 million in cash.
- Montreal-based IT services giant CGI was officially announced as a new tenant of the Accelerator Building on the UW Research & Technology Park. I mentioned this in passing in the last digest -- it had been known around town for months. CGI has a market value over $2 billion and will primarily use the Waterloo site to serve its insurance company clients in the area.
- Sirific Wireless opened a sales and support office in Korea.
- Egbert van Everdingen is the new president of TurboSonic Technologies, succeeding Pat Forde, who has retired. Van Everdingen has been with TurboSonic for 10 years. Ed Spink remains CEO.
- The new engineering VP at Agile Systems is Chris Butlin, formerly with MacDonald-Dettwiler. The company also announced that its former chairman, Richard Black, has stepped down from the board. New directors are Matt Miller, Sab Ravalli, and William Spurr, who are all from outside this area.
- Robert Franklin, the former chairman of Placer Dome, is now executive chairman of Photowatt Technologies, the ATS subsidiary that is planning to go public.
posted by Gary Will at 12:00 AM
