Going gold at 65

Bob Lefsetz suggests that Paul McCartney should have given away his recent album, Memory Almost Full, because it's only going to sell about 550,000 copies in the U.S. There could be some good arguments to support that view, but Lefsetz constructs a bizarre case for giving songs away. He says McCartney fans found the price of the album too high and that "everybody" would listen to it if it was free. The knowledge that "all [his] fans" would be listening would have motivated McCartney to put out a great record.

Okay, even if it was free, there's no reason to think people would be tripping over themselves to download the new album. Neil Young gave away all of Living With War. What percentage of people who consider themselves to be Neil Young fans downloaded those songs? (And Living With War turned out to be a pretty good album.) Memory Almost Full is available from eMusic for $3.50-$4.30, depending on your subscription level. That's less than $1 in 1973 dollars -- to use a frame of reference that most McCartney fans can identify with. You could buy the album for about what it cost to buy "My Love" as a single. Whatever McCartney's challenges are in selling his album, cost seems to be a minuscule factor.

And McCartney was perfectly capable of phoning it in even back in the days when "everybody" was listening. Remember Red Rose Speedway? Wild Life? Memory Almost Full was stronger than many of McCartney's albums from his commercial peak (post-Beatles), so -- for once -- we can't accuse him of being unmotivated.

And 550,000 units in the U.S. alone sounds pretty good for a 65-year-old pop musician. That probably translates to over a million albums sold, worldwide. The last.fm numbers for "Dance Tonight" -- the lead track on the album -- are very impressive, leading all other McCartney or Wings songs in number of listeners over the last six months.

Maybe it really is Web 2.0

Apparently, it was more than 14 months since I posted anything on my blog. Between writing a bunch of proposals, position papers, and funding pitches last year, as well as having the Waterloo Tech Digest and my column in Rex Magazine, the last thing I wanted to do in my spare time was write anything. Okay, not really the last thing, but it never came close to the top of the list (although I did seem to find time for a few thousand Wikipedia edits before moving on).

I didn't even read any blogs in that time, at least not any personal ones. I kept track of updates to a few websites through their RSS feeds, but that was about it. I can see that RSS has come a long way over the last year. Not the technology, but its use. When I posted through my blog a backlog of 10 Waterloo Tech Digest issues from the past year, the traffic to my website jumped nearly 500% that day. Two days later, it was still up about 300%. The extra traffic was all generated because the content of the Tech Digest issues had been distributed and discovered through various RSS-based tools (and, in some cases, shared through sites designed for that purpose). For people who worry that using RSS feeds will cannibalize your web traffic, my experience so far has been just the opposite. After seeing those numbers, "Web 2.0" feels like much less of a silly cliché than it did a year ago.

A lot of cool tools have sprung up that I'll have to look into. And some of the ones that were a big deal 14 months ago are museum pieces now. Does anyone still use Technorati? One of the big names 14 months ago, it looks like a search engine for spam these days.

Now comes the challenge of making use of these tools in my website, and in the watstart.ca site that I also oversee. Simon Woodside has been working to integrate Web 2.0 technology into the WatStart site -- look for a relaunch early in the fall -- and I've started getting back up to speed after a 14-month hiatus. (I never even thoroughly rewrote my site for CSS, let alone RSS. It still has some HTML code going back to 1996!) Should be fun, and make for some much better sites.

Nostalgia trip's over

That's the last of the old issues of the Waterloo Tech Digest that I needed to post. Back to the present.

Catching up on Waterloo Tech Digest

Apologies for the flood of old issues of the Waterloo Tech Digest. I just noticed a couple of weeks ago that I'd only put three issues on the Web in the last year. It's always primarily been an e-mail newsletter for subscribers, but I never intended to fall that far behind. All the 2007 issues are now up. I suppose I should do July to December from last year as well.

What city is tops on Facebook?

At the end of June, the Toronto Star ran a story saying that Toronto had more Facebook members than any other city in the world. That was imprecise, as apparently what the writer had noticed was that the Toronto, ON network was the largest on Facebook, and then that turned out to be wrong, since the London (England) network is larger (891,623 at this instant). But, since Toronto had more people in its Facebook network per capita than London, this somehow got spun into Toronto having the most Facebook users per capita of any city on Earth.

Well, that doesn't seem to be true either. The Toronto, ON network at this moment has 728,476 members, which would be equal to 13.1% of the population of the GTA, using 2006 Census numbers. The Kitchener, ON network has 90,644 members, which is 19.0% of the population of Waterloo Region, again using 2006 Census statistics. So, Waterloo Region seems to blow the GTA away for Facebook users per capita.

Now, before the U of T statistics department goes and disavows all knowledge of me being one of their graduates, I should point out that we'd need more data about Facebook users and networks to be able to make any bold statements about who has the most users. Not that that's stopped people in Toronto from claiming to be #1. And there's no denying that Toronto's Facebook numbers are very impressive -- but it's not the biggest network and doesn't seem to be the largest per capita either.

Waterloo Tech Digest - August 7, 2007

Compiled and written by
Gary Will
gary@garywill.com

In this issue:

1. Tech community mourns loss of Steve Spicer
2. Sandvine quarterly sales hit $20M
3. Dalsa looks to cut costs after another disappointing quarter
4. AideRSS unveils RSS filtering technology
5. LiveHive wins two high-profile customers for online contests
6. RDM reaps cash windfall in off quarter
7. STOCK REPORT: Dalsa shares fall to five-year low
8. Miscellaneous tidbits from Software Innovation, Suited Media, RIM, Sirific, Meikle

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[1]---------------------------------------------------------------
Tech community mourns loss of Steve Spicer
July 5, 2007

Steve Spicer, the founder and CEO of Spicer Corp. and PrinterOn, has died at the age of 46. According to the death notice, he died suddenly at his home in Kitchener. No other details were provided.

Spicer was one of the pioneers of the Waterloo technology community, part of the first wave of local software firms that emerged in the early 1980s. In 1983, while still a mechanical engineering student at UW, Spicer founded what was initially called Spicer Computer Developments. He had just spent a work term developing software used to convert vector CAD data into raster images and, believing in its commercial potential, acquired the rights to the software. Spicer's early mentor and partner was UW professor Roy Pick, who would later become chair of mechanical engineering at the university.

Initial products focused on the digital storage and manipulation of engineering diagrams, and that would expand into a suite of products for editing, viewing, and printing a wide range of electronic documents. Spicer hired his first employee in 1985 and two years later renamed the company Spicer Corporation. By 1988, it had 21 employees and had grown sales to $1.5 million. At that time Spicer was talking about growing to 200 employees and going public in two years. That never happened, but the company had grown to more than 40 employees by the beginning of 1990 and more than 50 by 1995.

Spicer served as director of Descartes from 1996 to 2000, but kept a low public profile for much of the 1990s. He was back in the spotlight in 2000 when he founded PrinterOn, launched with the announcement of a $27.5 million round of funding. Spicer Corp. became a subsidiary of the new company. The companies grew to 140 employees by mid-2000. At the time of Spicer's death, they had about 70 employees.

Jim Estill, a long-time friend, wrote in his blog that Spicer had a very serious personality. "His fastidious nature caused him a lot of stress in life. He so much wanted his business to succeed and was stressed when things were not perfect."

No children were mentioned in the death notice. Spicer had been married earlier in his life, but was single at the time of his death. The board and management of PrinterOn and Spicer Corp. quickly arranged a meeting to make a transitional plan following Spicer's death. So far, no successor has been announced.

[2]---------------------------------------------------------------
Sandvine quarterly sales hit $20M
July 5, 2007

Another strong quarter for Sandvine, which reported earnings of $10.3 million ($0.08/share) on sales of $20.0 million in the period ended May 31 (Q2 07). Sales were up 30% from the previous quarter and 171% from last year.

It was a pretty safe bet that this was going to be a good quarter, since the company reported a $16 million jump in deferred revenue in Q1. Deferred revenue fell by $7.9 million in Q2 to $8.7 million at the end of the quarter.

Sandvine recently picked up its second-biggest customer, and that customer -- never publicly identified -- accounted for $7.3 million in sales in the quarter. Sandvine's biggest customer, which it has had for some time, was responsible for $9.5 million in sales, about even with the previous quarter. With two big U.S.-based customers, sales to North America now comprise 97.3% of Sandvine's revenue. After a big spike two quarters ago, sales to Europe, Middle East and Africa now account for less than 2% of revenue.

Earnings for the quarter included $3.1 million for future tax assets, which now meet the "more likely than not" threshold. Operational income was $6.6 million, up from $5.3 million in Q1. R&D spending -- excluding government funding and repayment -- was up 33% from the previous quarter. Sandvine has started making repayments on its TPC funding, with a $200,000 payment recorded in the quarter.

Operations consumed $6.0 million in cash, but have provided $11.0 million over the first two quarters of the year. Sandvine ended the quarter with $65.4 million in cash and subsequently raised an additional $49.4 million (net) through a share offering that closed in July.

All of these results came before Sandvine's acquisition of two companies in June (see previous digest).

Over the first half of the year, Sandvine had $35.4 million in revenue, and it is sticking with its forecast of $62 to $67 million for the year. That would mean lower sales over the next two quarters than in the previous two, since the company is unlikely to add another customer this year as big as the one it just won.

[3]---------------------------------------------------------------
Dalsa looks to cut costs after another disappointing quarter
July 26, 2007

A weak quarter for Dalsa, partly attributed to the rise of the Canadian dollar, left the company looking for ways to "streamline" its operations, with further details to be announced before the end of next month.

In the period ended June 30 (Q2 07), Dalsa just broke even, with earnings of $20,000 ($0.00/share) on sales of $47.7 million. Sales were up 5% from Q1, but down 3% from last year, when the company earned $4.0 million.

Over the quarter, the Canadian dollar gained 8.4% in value against the U.S. dollar, rising from 86.7 cents at the end of March to 94.0 cents at the end of June. The jump erased $2 million in revenue, according to Dalsa, which receives most of its sales in U.S. dollars but reports results in Canadian currency. Dalsa is raising the prices on some of its products to counter the rise of the dollar.

Digital imaging sales rebounded from a weak Q1, rising 12% sequentially to $26.8 million with net income of $2.3 million. It was Dalsa's only profitable segment. Sales from Dalsa's semiconductor business were flat from the previous quarter, although the company says its newer MEMS business continues to grow.

Progress remains very slow in digital cinema, which recorded a loss of $1.9 million on sales of $582,000, most of it not coming from rentals of Dalsa's digital movie cameras. Two short films shot with Dalsa cameras were completed in the quarter, including a 15-minute film co-starring David Carradine. This would seem to be the obvious place to make cuts, especially since the company badly misread the market right from the beginning (Dalsa originally told shareholders the digital cinema business would break even in its first year of operations and would generate over $30 million in sales by 2006), but Dalsa is holding on to its Hollywood dreams and says it remains committed to the digital cinema business. You have to think that eventually films will go digital, and there still aren't many competitors (although more than there were two years ago) but at this point no one seems to have a clue what the timeline to "eventually" is.

Operations provided $1.8 million in cash, and Dalsa ended the quarter with a cash balance of $2.7 million. The company expects to complete its land sale to RIM (see May digest) in the current quarter. It is selling 37 acres of land to RIM for $11.6 million.

[4]---------------------------------------------------------------
AideRSS unveils RSS filtering technology
July 24, 2007

Waterloo's AideRSS has launched its free RSS filtering service at http://www.aiderss.com/ The company has developed technology to filter RSS feeds and let users "find the good stuff and read what matters." It uses a ranking algorithm, similar to Google's PageRank, which it calls PostRank. It says it was the subject of 200 Internet articles in the first week after launch.

The company was founded by UW computer science grad Ilya Grigorik with ex-Quarry-man Kevin Thomason and "chief bean counter" Francis Lau.

[5]---------------------------------------------------------------
LiveHive wins two high-profile customers for online contests
July 3 & 30, 2007

LiveHive's NanoGaming product is being used by NASCAR.com -- the official site of NASCAR, produced by Turner Sports Interactive -- as well as by GlobalTV on its website for the Big Brother TV series at Canada.com.

In both cases, NanoGaming is being used to run trivia contests tied to TV programming. NASCAR.com will be running "Live Race Trivia" games during the remaining NASCAR races this season, while Global is holding Big Brother trivia contests on its website.

[6]---------------------------------------------------------------
RDM reaps cash windfall in off quarter
July 27, 2007

The sale of its shares in Xign (see April digest) gave RDM $8.6 million in cash in the quarter ended June 30 (Q3 07). The company reported earnings of $3.5 million on sales of $6.8 million in the period.

Net income included a $2.7 million accounting gain from the sale of Xign and a $0.7 million foreign exchange gain, and those two combined to provide nearly all of the reported earnings. Sales were up 10% from a year ago and down 14% from the previous quarter. A drop in margins led to a 18% sequential decline in gross profit. Sales and marketing expenses were up 31% from Q2 to $1.2 million.

The company called Q3 "a building period" and all three of its business segments reported quarter-over-quarter declines. The biggest drop came from its core digital imaging segment, with sales down 16% from the previous quarter (but up 32% from last year). Scanner sales fell below expectations with 10,480 scanners shipped in the quarter, down from 11,990 in the previous quarter.

RDM's ITMS system -- part of its digital imaging business -- processed 1.5 million items per week, up from 1.3 million in Q2. The company said last year that it needs to get to about 2 million weekly transactions to break even.

Operations consumed $1.8 million in cash, but with the Xign funds, RDM ended the quarter with $16.8 million in cash, up $6.7 million from the end of Q2.

[7]---------------------------------------------------------------
STOCK REPORT: Dalsa shares fall to five-year low
July 2007

Dalsa's poor results sent the company's shares into a tailspin, falling to their lowest point in five years. The company's market value dipped below $200 million and has declined by nearly $50 million this year.

For the month of July:

Virtek [TSX: VRK] +8%
Com Dev [TSX: CDV] +7%
RIM [TSX: RIM] +7%
MKS [TSX: MKX] +4%
ARISE [TSXV: APV] +2%
Sandvine [TSX: SVC] +2%
Navtech [OTCBB: NAVH] +1%
--S&P TSX VENTURE INDEX +1%
TurboSonic [OTCBB: TSTA] 0%
===============================
--S&P TSX COMPOSITE INDEX -0%
Descartes [TSX: DSG] -1%
Biorem [TSXV: BRM] -4%
RDM [TSX: RC] -9%
Open Text [TSX: OTC] -14%
Dalsa [TSX: DSA] -18%
ATS [TSX: ATA] -19%

RIM shares are now up 57% over the last three months, giving the company a market value of $43 billion. Sandvine is now valued at about as much as Com Dev, Descartes, and Dalsa combined. Com Dev shares have fully rebounded from their April plunge.

February was great for Open Text shares, but it's been downhill since then. The stock is down 22% over the last five months with the biggest drop coming last month. The company's market capitalization fell below the $1 billion mark during July. ATS shares have dropped to their lowest point ever in more than a decade of public trading. After coming out of the gate quickly in January, RDM shares are now down slightly in 2007

Companies with core operations outside the area:

Automated Benefits [TSXV: AUT] +10%
McAfee [NYSE: MFE] +2%
Adobe [Nasdaq: ADBE] +0%
===================================
NCR [NYSE: NCR] -1%
Sybase [NYSE: SY] -1%
Blue Coat [Nasdaq: BCSI] -2%
Ansys [Nasdaq: ANSS] -2%
Google [Nasdaq: GOOG] -2%
Oracle [Nasdaq: ORCL] -3%
LSI Logic [NYSE: LSI] -4%
Senesco [Amex: SNT] -13%
AMIS [Nasdaq: AMIS] -18%
Agfa-Gevaert [Brussels: AGFA] -19%

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

• The OSC reports that Software Innovations [sic] raised $16.6 million in June through the sale of shares and debentures. I'm assuming that this is actually Software Innovation. It had received some additional investment a couple of months ago, so the timing fits. That would be the sixth Waterloo Region tech company to disclose a private round of funding of at least $1.5 million over the first half of the year (that excludes Guelph-based Geosign).

• Suited Media provided a sneak peak of its forthcoming Pokerspace.com site. A demo site was running for two weeks and a full launch is scheduled for next month. The site -- a social networking site for poker players -- has been receiving a lot of buzz around town with some high expectations that it could be a big hit. Suited Media CEO Steve Black is a former poker professional who funded his company through his winnings.

• RIM unveiled the BlackBerry 8820, billed as the first dual-mode BlackBerry handset with the addition of Wi-Fi connectivity.

• Russ Johnsen is the new CEO of Sirific, taking the reins from Mike Hogan who led the company for nearly five years. Johnsen has served on Sirific's board of directors for the last three years and has also been named chairman. Hogan is now the CEO of PulseCore Semiconductor, based in the San Jose area.

• Shawn Smith is the new sales & marketing VP at Meikle Automation. He's been with the company for 11 years, most recently as applications engineering manager.