Waterloo Tech Digest - November 6, 2007
Compiled and written by
Gary Will
gary@garywill.com
In this issue:
A D V E R T I S E M E N T S
IT SEARCH AND PLACEMENT SERVICES
Procom is currently ranked as the 4th largest IT professional services firm in Canada. (Branham 300, Financial Post, April 2007). Recently awarded one of Canada's 50 Best Managed Companies, Procom is a proud, Canadian-owned, privately-held company. Our local KW office provides IT, development and technology personnel on either a contract or permanent basis. We are the largest provider of IT staffing and recruiting services in Canada. 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.
ARE YOU CONSISTENTLY MAKING YOUR NUMBERS?
The painful truth: Research proves that 50% of salespeople will always be underachievers. The costs inflicted by sub-par sales performers are huge and vastly underestimated by most companies. For information you can use to build winning sales teams, download our free whitepaper. Peak Sales Recruiting focuses on finding top performing salespeople for technology companies.
ACCELERATE YOUR TIME-TO-MARKET
Advanced Research Technology (ART) saw a market opportunity in the pharmaceutical market but needed to accelerate product development. By partnering with INO, ART realized a new imaging system product less than six months later (see the complete story). Contact Glenn Smith in Waterloo at 519-502-1305 to explore how you can accelerate your time-to-market by partnering with INO.
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 us at 519-783-3210, Tim Sinnott (tsinnott@bereskinparr.com), Neil Henderson (nhenderson@bereskinparr.com), for more information.
////////////////////////////////////////////////////////////
[1]---------------------------------------------------------------
Navtech's major shareholders offer to take company private
October 9, 2007
Navtech's largest shareholders are offering to buy all of the shares in the company that it does not already hold.
Cambridge Information Group, Externalis, and ABRY became significant shareholders (or at least holders of debt convertible into shares) in Navtech when the company financed its acquisition of Sweden's European Aeronautical Group two years ago. Collectively, they hold 67% of the voting power of the company and are offering Navtech shareholders US$2.50 a share to buy the remaining shares in the company. The offer was made by NV Holdings, jointly owned and controlled by the three Navtech shareholding groups.
As a condition of the offer, a majority of shareholders (excluding the ones making the offer) would have to agree to tender their shares for the offer to be completed. If more then 90% of the outstanding shares are tendered, the
Navtech's board of directors consists of four representatives of the offer's sponsoring firms, as well as CEO Dave Strucke and Tom Beynon. The board voted to be formally neutral on the offer, with Beynon abstaining.
Navtech shares inexplicably took a nosedive in August and September, losing 41% of their value. Until that time, Navtech shares had not finished a month at a price below the US$2.50 offering price in about two years. But, thanks to that drop in August and September, the board could point out that the offer was made at a 37% premium to Navtech's share price just before the offer was made public.
The offering group says that Navtech would save US$259,000 a year by going private, "taking into account audit fees, legal fees, director and officer insurance, transfer agent fees, press release distribution costs, AGM costs and director and officer compensation."
[2]---------------------------------------------------------------
Sandvine sets sales record while margins drop
October 3, 2007
Another strong quarter for Sandvine, which reported earnings of $2.7 million on sales of $21.2 million in the period ended August 31 (Q3 07). Sales were up 162% from last year and 6% from an outstanding Q2.
Margins dropped sharply from the previous quarter to a level that the company says is more in line with what we should expect to see in future quarters. That led to a 4% sequential decline in gross profits. Operating expenses were up 24% from Q2, partly due to the two acquisitions made by the company in the quarter. The acquisitions added 30 people to Sandvine's R&D team and a net increase of eight people to its sales and marketing group. Sandvine paid $4.9 million in cash for CableMatrix Technologies and $3.8 million, mostly in shares, for Simplicita Software (see June digest).
Operations provided $6.3 million in cash and Sandvine closed a $50 million share offering in the quarter, giving the company cash and marketable securities of $114.7 million at the end of Q3, up $49.3 million from the beginning of the quarter.
A single customer accounted for more than half of all revenue -- $11.5 million. A second customer, which was not the same as Sandvine's second-largest customer in the previous quarter -- accounted for an additional $4.9 million in sales, or 23% of revenue. Three customers have combined to provide 77% of Sandvine's revenue this year.
Sandvine is now forecasting sales of $70-75 million in the current fiscal year, which would only require revenue of $13.5-18.5 million in Q4.
The company has erased its accumulated deficit -- which stood at $18.6 million a year ago -- and now has retained earnings of $331,000.
Comcast's use of Sandvine technology to block BitTorrent seeding (see August digest) drew significant mainstream coverage in October after a high profile story by The Associated Press. There was even a call from two senators (one from each party) to investigate the practices of phone and cable companies. So far, Comcast has not even acknowledged being a Sandvine customer, although an internal memo telling Comcast call centre staff how to answer questions about Sandvine was leaked to the public through the Consumerist website.
[3]---------------------------------------------------------------
Dalsa reports first operational loss in years
October 31, 2007
A rough quarter for Dalsa, which had already been battling sluggish markets and the effects of a falling U.S. dollar. In the period ended September 30 (Q3 07) it added restructuring charges and a $2 million equipment failure to the mix.
The company reported a loss of $780,000 on sales of $39.8 million. That loss -- Dalsa's first in years -- actually makes the quarter look much better than it was, since it includes a $7.5 million reported gain from the sale of land to RIM (see previous digests). Dalsa's operational loss in the quarter was $9.6 million. While Dalsa reported quarterly losses seven years ago, those were related to acquisition-related amortization charges. Over the first three quarters of the year, Dalsa has now lost $521,000.
Sales were down 16% from both the previous quarter and last year. The drop was split pretty evenly between Dalsa's digital imaging business and its semiconductor business. A sharp drop in margins led to a 40% sequential decline in gross profits. Dalsa's semiconductor fab in Quebec experienced an equipment failure that shut down a production line for 39 days. It says the failure cost the company $2 million in recorded sales in the quarter. The semiconductor business also removed a large order from its backlog after a customer defaulted on contract terms.
With the $11.6 million from the land sale to RIM, Dalsa ended the quarter with $11.3 million in cash and marketable securities, up $8.6 million from the end of Q2.
While Dalsa avoided any mention of its digital cinema business when it announced its restructuring initiatives in September, the company's financial statements reported a reduction in staffing levels in digital cinema with termination costs of $166,000. Also noted were some job cuts in its digital imaging business outside of the Colorado Springs site that is being shut down.
About the only positive news was the completion of shooting for the first feature-length film using Dalsa's digital movie camera. The film, "Tempting Hyenas," was directed by LeVar Burton. The camera was also used in a commercial for Motorola featuring David Beckham.
[4]---------------------------------------------------------------
Open Text continues to rake in cash
November 1, 2007
Open Text reported earnings of US$7.8 million on sales of US$164.0 million in the quarter ended September 30 (Q1 08). Sales were down 6% from a strong Q4 but up from a year ago, which was the final quarter before Open Text closed its Hummingbird acquisition.
Operations provided US$32.2 million in cash, and the company again plans to accelerate the repayment of its Hummingbird-related debt with an additional US$30 million payment. Open Text ended the quarter with US$150.3 million in cash, essentially unchanged from the end of Q4. Following the latest US$30 million payment, Open Text will have US$296.3 million remaining on the debt it incurred to acquire Hummingbird.
Open Text also announced that it is opening an office in Microsoft's Partner Solution Center in Redmond, Washington.
[5]---------------------------------------------------------------
RIM sets sales records, settles suit
October 4 & 5, 2007
RIM earned US$287.7 million on sales of US$1.4 billion in the quarter ended September 1 (Q2 08). Sales were up 27% from the previous quarter and 108% from last year. The company shipped three million devices and added 1.45 million new Blackberry subscribers, bringing the total number of BlackBerry users past the 10 million mark. It ended the quarter with US$1.7 billion in cash.
The company also announced that it has settled the suit brought against it by the Ironworkers Ontario Pension Fund over RIM's backdating of stock options. The settlement has been approved by the court. As part of the settlement, co-CEOs Jim Balsillie and Mike Lazaridis have agreed as part of the settlement to pay RIM an additional $2.5 million each, on top of the $5 million they each had previously agreed to pay to offset some of RIM's costs.
[6]---------------------------------------------------------------
STOCK REPORT: ARISE tops Descartes and Dalsa in market value
October 2007
ARISE is still in a pre-revenue stage with no significant sales, but it has already grown to a market capitalization of nearly $300 million -- making it worth more than Descartes and Dalsa and almost as much as Com Dev. Those companies all have quarterly gross profits in the $9-12 million range.
ARISE shares went above $2 for the first time and are up 380% over the first 10 months of 2007.
Navtech shares have all but erased their 41% drop from August and September after the announcement was made of an offer to purchase all outstanding shares in the company. The shares jumped from US$1.50 to US$2.45 in October, a 63% gain. Of the local companies followed year, only ARISE has seen its shares have a larger monthly gain this year.
For the month of October:
Navtech [OTCBB: NAVH] +63%
ARISE [TSXV: APV] +43%
RIM [TSX: RIM] +20%
Open Text [TSX: OTC] +14%
RDM [TSX: RC] +11%
--S&P TSX VENTURE INDEX +9%
Biorem [TSXV: BRM] +6%
ATS [TSX: ATA] +4%
--S&P TSX COMPOSITE INDEX +4%
Dalsa [TSX: DSA] 0%
===============================
MKS [TSX: MKX] -2%
Virtek [TSX: VRK] -3%
Sandvine [TSX: SVC] -3%
Descartes [TSX: DSG] -5%
Com Dev [TSX: CDV] -7%
TurboSonic [OTCBB: TSTA] -21%
RIM now accounts for 93.5% of the combined market value of all of the companies listed above (average market capitalization of the 14 companies: $5 billion; median: $194 million).
Open Text stock went above $30 for the first time in three years. No news from RDM, but the company's shares had their best month since April. RDM retook its spot above MKS in market capitalization after dipping below it in September.
Dalsa's shares made it through October unscathed, but have dropped sharply following the announcement of quarterly results at the end of the day on October 31. Com Dev shares have had an up-and-down year: from January to April they were down 33%, from May to July they went up 33%, and they've dropped 17% over the last three months.
Companies with core operations outside the area:
Google [Nasdaq: GOOG] +25%
Sybase [NYSE: SY] +24%
McAfee [NYSE: MFE] +19%
Ansys [Nasdaq: ANSS] +14%
Adobe [Nasdaq: ADBE] +10%
NCR [NYSE: NCR] +8%
Blue Coat [Nasdaq: BCSI] +3%
Oracle [Nasdaq: ORCL] +2%
===================================
AMIS [Nasdaq: AMIS] -21%
Agfa-Gevaert [Brussels: AGFA] -29%
[7]---------------------------------------------------------------
Miscellaneous Tidbits
Gary Will
gary@garywill.com
In this issue:
- Navtech's major shareholders offer to take company private
- Sandvine sets sales record while margins drop
- Dalsa reports first operational loss in years
- Open Text continues to rake in cash
- RIM sets sales records, settles suit
- STOCK REPORT: ARISE tops Descartes and Dalsa in market value
- Miscellaneous tidbits from Terapath, Accelerator Centre, Atria, ARISE, LiveHive, MedShare, Virtek, Com Dev.
A D V E R T I S E M E N T S
IT SEARCH AND PLACEMENT SERVICES
Procom is currently ranked as the 4th largest IT professional services firm in Canada. (Branham 300, Financial Post, April 2007). Recently awarded one of Canada's 50 Best Managed Companies, Procom is a proud, Canadian-owned, privately-held company. Our local KW office provides IT, development and technology personnel on either a contract or permanent basis. We are the largest provider of IT staffing and recruiting services in Canada. 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.
ARE YOU CONSISTENTLY MAKING YOUR NUMBERS?
The painful truth: Research proves that 50% of salespeople will always be underachievers. The costs inflicted by sub-par sales performers are huge and vastly underestimated by most companies. For information you can use to build winning sales teams, download our free whitepaper. Peak Sales Recruiting focuses on finding top performing salespeople for technology companies.
ACCELERATE YOUR TIME-TO-MARKET
Advanced Research Technology (ART) saw a market opportunity in the pharmaceutical market but needed to accelerate product development. By partnering with INO, ART realized a new imaging system product less than six months later (see the complete story). Contact Glenn Smith in Waterloo at 519-502-1305 to explore how you can accelerate your time-to-market by partnering with INO.
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 us at 519-783-3210, Tim Sinnott (tsinnott@bereskinparr.com), Neil Henderson (nhenderson@bereskinparr.com), for more information.
////////////////////////////////////////////////////////////
[1]---------------------------------------------------------------
Navtech's major shareholders offer to take company private
October 9, 2007
Navtech's largest shareholders are offering to buy all of the shares in the company that it does not already hold.
Cambridge Information Group, Externalis, and ABRY became significant shareholders (or at least holders of debt convertible into shares) in Navtech when the company financed its acquisition of Sweden's European Aeronautical Group two years ago. Collectively, they hold 67% of the voting power of the company and are offering Navtech shareholders US$2.50 a share to buy the remaining shares in the company. The offer was made by NV Holdings, jointly owned and controlled by the three Navtech shareholding groups.
As a condition of the offer, a majority of shareholders (excluding the ones making the offer) would have to agree to tender their shares for the offer to be completed. If more then 90% of the outstanding shares are tendered, the
Navtech's board of directors consists of four representatives of the offer's sponsoring firms, as well as CEO Dave Strucke and Tom Beynon. The board voted to be formally neutral on the offer, with Beynon abstaining.
Navtech shares inexplicably took a nosedive in August and September, losing 41% of their value. Until that time, Navtech shares had not finished a month at a price below the US$2.50 offering price in about two years. But, thanks to that drop in August and September, the board could point out that the offer was made at a 37% premium to Navtech's share price just before the offer was made public.
The offering group says that Navtech would save US$259,000 a year by going private, "taking into account audit fees, legal fees, director and officer insurance, transfer agent fees, press release distribution costs, AGM costs and director and officer compensation."
[2]---------------------------------------------------------------
Sandvine sets sales record while margins drop
October 3, 2007
Another strong quarter for Sandvine, which reported earnings of $2.7 million on sales of $21.2 million in the period ended August 31 (Q3 07). Sales were up 162% from last year and 6% from an outstanding Q2.
Margins dropped sharply from the previous quarter to a level that the company says is more in line with what we should expect to see in future quarters. That led to a 4% sequential decline in gross profits. Operating expenses were up 24% from Q2, partly due to the two acquisitions made by the company in the quarter. The acquisitions added 30 people to Sandvine's R&D team and a net increase of eight people to its sales and marketing group. Sandvine paid $4.9 million in cash for CableMatrix Technologies and $3.8 million, mostly in shares, for Simplicita Software (see June digest).
Operations provided $6.3 million in cash and Sandvine closed a $50 million share offering in the quarter, giving the company cash and marketable securities of $114.7 million at the end of Q3, up $49.3 million from the beginning of the quarter.
A single customer accounted for more than half of all revenue -- $11.5 million. A second customer, which was not the same as Sandvine's second-largest customer in the previous quarter -- accounted for an additional $4.9 million in sales, or 23% of revenue. Three customers have combined to provide 77% of Sandvine's revenue this year.
Sandvine is now forecasting sales of $70-75 million in the current fiscal year, which would only require revenue of $13.5-18.5 million in Q4.
The company has erased its accumulated deficit -- which stood at $18.6 million a year ago -- and now has retained earnings of $331,000.
Comcast's use of Sandvine technology to block BitTorrent seeding (see August digest) drew significant mainstream coverage in October after a high profile story by The Associated Press. There was even a call from two senators (one from each party) to investigate the practices of phone and cable companies. So far, Comcast has not even acknowledged being a Sandvine customer, although an internal memo telling Comcast call centre staff how to answer questions about Sandvine was leaked to the public through the Consumerist website.
[3]---------------------------------------------------------------
Dalsa reports first operational loss in years
October 31, 2007
A rough quarter for Dalsa, which had already been battling sluggish markets and the effects of a falling U.S. dollar. In the period ended September 30 (Q3 07) it added restructuring charges and a $2 million equipment failure to the mix.
The company reported a loss of $780,000 on sales of $39.8 million. That loss -- Dalsa's first in years -- actually makes the quarter look much better than it was, since it includes a $7.5 million reported gain from the sale of land to RIM (see previous digests). Dalsa's operational loss in the quarter was $9.6 million. While Dalsa reported quarterly losses seven years ago, those were related to acquisition-related amortization charges. Over the first three quarters of the year, Dalsa has now lost $521,000.
Sales were down 16% from both the previous quarter and last year. The drop was split pretty evenly between Dalsa's digital imaging business and its semiconductor business. A sharp drop in margins led to a 40% sequential decline in gross profits. Dalsa's semiconductor fab in Quebec experienced an equipment failure that shut down a production line for 39 days. It says the failure cost the company $2 million in recorded sales in the quarter. The semiconductor business also removed a large order from its backlog after a customer defaulted on contract terms.
With the $11.6 million from the land sale to RIM, Dalsa ended the quarter with $11.3 million in cash and marketable securities, up $8.6 million from the end of Q2.
While Dalsa avoided any mention of its digital cinema business when it announced its restructuring initiatives in September, the company's financial statements reported a reduction in staffing levels in digital cinema with termination costs of $166,000. Also noted were some job cuts in its digital imaging business outside of the Colorado Springs site that is being shut down.
About the only positive news was the completion of shooting for the first feature-length film using Dalsa's digital movie camera. The film, "Tempting Hyenas," was directed by LeVar Burton. The camera was also used in a commercial for Motorola featuring David Beckham.
[4]---------------------------------------------------------------
Open Text continues to rake in cash
November 1, 2007
Open Text reported earnings of US$7.8 million on sales of US$164.0 million in the quarter ended September 30 (Q1 08). Sales were down 6% from a strong Q4 but up from a year ago, which was the final quarter before Open Text closed its Hummingbird acquisition.
Operations provided US$32.2 million in cash, and the company again plans to accelerate the repayment of its Hummingbird-related debt with an additional US$30 million payment. Open Text ended the quarter with US$150.3 million in cash, essentially unchanged from the end of Q4. Following the latest US$30 million payment, Open Text will have US$296.3 million remaining on the debt it incurred to acquire Hummingbird.
Open Text also announced that it is opening an office in Microsoft's Partner Solution Center in Redmond, Washington.
[5]---------------------------------------------------------------
RIM sets sales records, settles suit
October 4 & 5, 2007
RIM earned US$287.7 million on sales of US$1.4 billion in the quarter ended September 1 (Q2 08). Sales were up 27% from the previous quarter and 108% from last year. The company shipped three million devices and added 1.45 million new Blackberry subscribers, bringing the total number of BlackBerry users past the 10 million mark. It ended the quarter with US$1.7 billion in cash.
The company also announced that it has settled the suit brought against it by the Ironworkers Ontario Pension Fund over RIM's backdating of stock options. The settlement has been approved by the court. As part of the settlement, co-CEOs Jim Balsillie and Mike Lazaridis have agreed as part of the settlement to pay RIM an additional $2.5 million each, on top of the $5 million they each had previously agreed to pay to offset some of RIM's costs.
[6]---------------------------------------------------------------
STOCK REPORT: ARISE tops Descartes and Dalsa in market value
October 2007
ARISE is still in a pre-revenue stage with no significant sales, but it has already grown to a market capitalization of nearly $300 million -- making it worth more than Descartes and Dalsa and almost as much as Com Dev. Those companies all have quarterly gross profits in the $9-12 million range.
ARISE shares went above $2 for the first time and are up 380% over the first 10 months of 2007.
Navtech shares have all but erased their 41% drop from August and September after the announcement was made of an offer to purchase all outstanding shares in the company. The shares jumped from US$1.50 to US$2.45 in October, a 63% gain. Of the local companies followed year, only ARISE has seen its shares have a larger monthly gain this year.
For the month of October:
Navtech [OTCBB: NAVH] +63%
ARISE [TSXV: APV] +43%
RIM [TSX: RIM] +20%
Open Text [TSX: OTC] +14%
RDM [TSX: RC] +11%
--S&P TSX VENTURE INDEX +9%
Biorem [TSXV: BRM] +6%
ATS [TSX: ATA] +4%
--S&P TSX COMPOSITE INDEX +4%
Dalsa [TSX: DSA] 0%
===============================
MKS [TSX: MKX] -2%
Virtek [TSX: VRK] -3%
Sandvine [TSX: SVC] -3%
Descartes [TSX: DSG] -5%
Com Dev [TSX: CDV] -7%
TurboSonic [OTCBB: TSTA] -21%
RIM now accounts for 93.5% of the combined market value of all of the companies listed above (average market capitalization of the 14 companies: $5 billion; median: $194 million).
Open Text stock went above $30 for the first time in three years. No news from RDM, but the company's shares had their best month since April. RDM retook its spot above MKS in market capitalization after dipping below it in September.
Dalsa's shares made it through October unscathed, but have dropped sharply following the announcement of quarterly results at the end of the day on October 31. Com Dev shares have had an up-and-down year: from January to April they were down 33%, from May to July they went up 33%, and they've dropped 17% over the last three months.
Companies with core operations outside the area:
Google [Nasdaq: GOOG] +25%
Sybase [NYSE: SY] +24%
McAfee [NYSE: MFE] +19%
Ansys [Nasdaq: ANSS] +14%
Adobe [Nasdaq: ADBE] +10%
NCR [NYSE: NCR] +8%
Blue Coat [Nasdaq: BCSI] +3%
Oracle [Nasdaq: ORCL] +2%
===================================
AMIS [Nasdaq: AMIS] -21%
Agfa-Gevaert [Brussels: AGFA] -29%
[7]---------------------------------------------------------------
Miscellaneous Tidbits
- Terapath became the first company to "graduate" from the Accelerator Centre, moving into larger office space on King Street in Waterloo. Jeff Fedor, who had been vice-president of the company, has left to join AideRSS.
- Tim Ellis is the new client programs director at the Accelerator Centre, succeeding Bobbi Holte, who joined LiveHive. Ellis had been co-founder and operations VP at Handshake VR.
- Atria Networks is expanding into Vaughan and Markham after acquiring the fibre-optic assets of PowerStream, the municipally-owned electricity distribution company serving those areas.
- ARISE closed its bought deal share offering (see previous digest), raising gross proceeds of $34.5 million, including the full exercise of the underwriters' overallotment option.
- LiveHive technology was used by Turner Sports for a trivia feature on the Major League Baseball website during the playoffs.
- MedShare's eMotion software will be used by Toronto's Saint Elizabeth Health Care, starting with a small group of home care nurses and scheduled for a full rollout by spring. MedShare announced that it has signed two contracts worth $1.1 million that will be implemented over the next year.
- Karl Holteroff, who had been the Germany-based GM of Virtek's FOBA business since 2003 and VP of Virtek's marking & engraving business since 2004, has left the company. His responsibilities have been split among Virtek's CEO, CFO, and Jim McFarlane, Waterloo-based GM of Virtek's marking & engraving business.
- Former NASA Space Shuttle astronaut James Adamson has joined Com Dev's board of directors. Adamson has also held senior executive roles at AlliedSignal/Honeywell and Lockheed.
- The market capitalization table in the last issue had an incorrect label. The number in parentheses was the change from the end of the previous quarter (not year-to-date).
posted by Gary Will at 11:41 PM
