Waterloo Tech Digest - September 9, 2008
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
RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.
BERESKIN & PARR - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.
DELOITTE - SHAPING CANADIAN BUSINESS FOR 150 YEARS
Deloitte's technology, media and telecommunications practice delivers a suite of services including audit, tax, financial advisory, enterprise risk and consulting. We work with all types of technology companies, including early stage and high-growth companies, to help them succeed. We'll help you grow through contacts, M&A, raising capital and most of all through great business advice. We want to be your trusted advisor and look forward to working with you. Contact Jamie Barron 289-259-3385, jabarron@deloitte.ca or Jane Jantzi at 519-650-7788, jjantzi@deloitte.ca.
ENHANCE YOUR COMPETITIVE ADVANTAGE
INO can deliver competitive advantage to fuel company growth. As described in this video, INO's optical recognition technology helped Optosecurity raise $20 million in financing and create a world-class team. Further information on INO's optical recognition technology can be found here. Please contact Glenn Smith in Waterloo at 519-502-1305 to explore how INO might deliver competitive advantage to your organization.
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
////////////////////////////////////////////////////////////
[1]---------------------------------------------------------------
Virtek board endorses $35M takeover offer
September 2, 2008
Another month, another acquisition offer for Virtek, but this one looks like it might actually happen. Connecticut-based Gerber Scientific has made an all-cash offer of $1.05 a share -- about $35 million in total -- for all of Virtek's outstanding shares. The offer has the support of Virtek's board. Gerber trades on the New York Stock Exchange with a market value of about $200 million.
Last month, MiTek offered $26.5 million just for Virtek's imaging and templating business and, as part of that plan, Virtek was going to raise $3 million at $0.85 a share and buy back $26 million in its own shares -- about 75% of its outstanding shares -- at a price between $0.85 and $1. So, while in theory the Gerber offer would only be superior to MiTek's if you put a value of $8.5 million or less on Virtek's marking and engraving business, under the Gerber offer most shareholders would get more than they would have received under the MiTek offer. MiTek had the right to match the Gerber offer but chose not to. It will receive $927,500 in termination fees plus an additional $250,000 as an "expense reimbursement fee."
StockerYale -- the company that got all this started with a $22 million bid in May -- essentially disappeared from the picture after the MiTek offer was announced. It didn't change its final bid of $27 million and its offer expired without the necessary number of shares being tendered. The Gerber offer is nearly 60% higher than StockerYale's initial bid -- the one that was immediately accepted by the Toronto investment firm that was then Virtek's largest shareholder.
Gerber -- like MiTek -- has a history of working with Virtek. In fact, if the deal goes through it won't be the first time that Gerber has made a Virtek-related acquisition: in 1999 it bought the rights to Virtek's leather nesting software.
Assuming that no other offers are received, it will now be up to Virtek shareholders to decide whether to accept the Gerber deal. If they do, Virtek will vanish as a public company. The circular for the takeover bid is expected to be sent to shareholders next week. Nothing has been said about what Gerber would do with Virtek's Waterloo office and its employees.
[2]---------------------------------------------------------------
Medicalis raises $7M
August 18, 2008
Medicalis has closed a $7 million round of funding. Leading the deal was Boston-based HLM Venture Partners, which specializes in medical/health care technologies.
This is Medicalis' Series B round of funding. It began as a spinoff from Waterloo's Mitra (now part of Agfa) in 1999.
[3]---------------------------------------------------------------
Arise reports first PV cell sales, forecasts $45M by year-end
August 11, 2008
In the quarter ended June 30 (Q2 08), Arise recoded the first sales of PV cells made at its new manufacturing plant in Germany. It was only $461,000 from a few weeks of shipments, but the company expects that to grow to about $15 million this quarter and $30 million in Q4 as it ramps up production and improves efficiencies.
With the plant just starting production, there were significant costs associated with cells breaking or failing to meet performance requirements and that led to negative gross profits of $1.3 million. Arise expects it will be able to sell some of its scrap material from the quarter and recover part of those expenses.
Net loss for the quarter was $6.5 million, bringing the company's accumulated deficit to $35.1 million.
At the end of the period, Arise had $46.1 million in cash, mostly raised through a share offering in May. In July, it made prepayments of $20.1 million for silicon wafers and had $21.7 million in cash as of August 8.
The company also announced that it will not be building a polysilicon pilot plant at the University of Waterloo Research & Technology Park. Arise had signed a letter of intent in 2006 to build at the R&T Park but said that requirements of the university and the city for "design, appearance, and size and use ratio" would have added too many unnecessary costs for a manufacturing plant. It now expects to place the plant in an existing building in Waterloo Region.
Arise held its first quarterly results conference call following the announcement of its Q2 results. Empathizing with investors, CEO Bart Tichelman said the company was disappointed with the price of Arise shares, which have fallen 41% over the last four months.
[4]---------------------------------------------------------------
Open Text continues to report solid profits, cash flow
August 19, 2008
Open Text earned US$27.3 million on sales of US$200.3 million in the quarter ended June 30 (Q4 08). Sales were up 12% from the previous quarter, when the company earned US$7.3 million, and 14% from last year.
Operations generated US$44.6 million in cash in the quarter and US$166.0 million over the full year. Open Text ended the period with US$255 million in cash. At year-end, it had US$308 million in long-term debt on the balance sheet -- mostly from the Hummingbird acquisition.
For the year, Open Text had sales of US$725.5 million, up 22% from 2007. Net income was US$53.0 million.
[5]---------------------------------------------------------------
Open Text to acquire document capture firm for US$131M
September 4, 2008
Open Text also announced that it will acquire Bellevue, Washington-based Captaris for US$131 million. Captaris is a Nasdaq-listed company that has developed software for the digital capture of paper documents. Earlier this year, it acquired Germany's Océ Document Technologies which specialized in document capture and text recognition software. Captaris has several other products, including fax servers, which may not have a long life as part of Open Text.
The company was founded in 1982 and was previously known as Applied Voice Technology. Its shares were trading at US$3.70 when the Open Text offer was announced. Open Text will pay US$4.80 a share, or 30% above what was the market price. The deal is expected to close before the end of the year.
[6]---------------------------------------------------------------
MKS starts fiscal 09 with profitable quarter
September 3, 2008
MKS earned US$619,000 on sales of US$15.4 million in the quarter ended July 31 (Q1 09). Sales were up 13% from last year and down 27% from the company's blow-away results in the previous quarter.
Operations provided US$702,000 in cash and MKS spent US$1.1 million to repurchase 707,000 shares in the quarter, along with its usual US$1.0 million in dividends. It ended the quarter with US$11.5 million in cash, down US$1.4 million from the end of Q4.
At the AGM on August 26, MKS shareholders narrowly approved the company's poison pill plan with 53% of the votes in favour and 47% opposed. The margin of victory was much smaller than the number of shares held by MKS directors and executives.
And nearly a quarter of voting shareholders opposed the extension of the expiry date of the stock options awarded to president Michael Harris when he was hired in 2002. At that time, Harris was granted 1.2 million options with an exercise price of $1.35 and a seven year expiry period. With shareholder approval, that has now been extended to 10 years.
The circular for MKS' AGM disclosed that Harris was paid a $531,514 bonus in fiscal 2008, bringing is total compensation (excluding options) to $881,514. But he wasn't the company's top-paid executive: Thomas Hornek, managing director for central and southern Europe, received $1.05 million. CEO Phil Deck was paid $763,403.
[7]---------------------------------------------------------------
Descartes sales up 20%
September 4, 2008
Descartes earned US$1.4 million on sales of US$17.1 million in the quarter ended July 31 (Q2 09). Revenue was up 5% from the previous quarter and 20% from a year ago.
Operations generated cash of US$4.6 million and Descartes ended with period with US$50.533 million in cash.
[8]---------------------------------------------------------------
STOCK REPORT: Dalsa falls to multi-year low; ATS soars
August 2008
It's not reflected on the list below, since it happened in the first few days of September, but Dalsa shares went on a nosedive last week -- losing almost a quarter of their value in one day, despite the fact that the company has put together two strong quarters back-to-back.
According to the Globe & Mail, the selloff was triggered by Corning's warning that there was a glut of LCD panels on the market. Part of Dalsa's business is supplying flat panel inspection systems for LCD monitor manufacturers and, as far as some investors were concerned, that was apparently enough of a connection to send the stock into freefall. The drop took Dalsa shares to their lowest point since December 2001, although they came back a bit before the end of last week. The company, which was overtaken in market capitalization by Com Dev last month, has now also been passed by Descartes with Arise and Sandvine just slightly behind.
At their peak in April, Dalsa shares had nearly doubled in value since the beginning of the year. They're now down about 6% in 2008.
For the month of August:
ATS [TSX: ATA] +63%
Virtek [TSX: VRK] +31%
RDM [TSX: RC] +24%
TurboSonic [OTCBB: TSTA] +23%
Sandvine [TSX: SVC] +20%
Open Text [TSX: OTC] +18%
MKS [TSX: MKX] +11%
RIM [TSX: RIM] +3%
Descartes [TSX: DSG] +2%
--S&P TSX COMPOSITE INDEX +1%
Com Dev [TSX: CDV] +1%
===============================
Dalsa [TSX: DSA] -3%
--S&P TSX VENTURE INDEX -11%
Arise [TSX: APV] -13%
Biorem [TSXV: BRM] -25%
Investors are regaining confidence in ATS, which reported quarterly results in August. Its shares had their best month-end price in a year-and-a-half. Shares of RDM and Sandvine bounced back after plummeting in July. Virtek shares are up 178% since the end of March.
Companies with core operations outside the area:
Blue Coat [Nasdaq: BCSI] +28%
McAfee [NYSE: MFE] +21%
Agfa-Gevaert [Brussels: AGFA] +14%
Adobe [Nasdaq: ADBE] +4%
Sybase [NYSE: SY] +2%
Oracle [Nasdaq: ORCL] +2%
ON Semiconductor [Nasdaq: ONNN] +1%
===================================
NCR [NYSE: NCR] -1%
Google [Nasdaq: GOOG] -2%
Ansys [Nasdaq: ANSS] -3%
[9]---------------------------------------------------------------
Miscellaneous Tidbits
Gary Will
gary@garywill.com
In this issue:
- Virtek board endorses $35M takeover offer
- Medicalis raises $7M
- Arise reports first PV cell sales, forecasts $45M by year-end
- Open Text continues to report solid profits, cash flow
- Open Text to acquire document capture firm for US$131M
- MKS starts fiscal 09 with profitable quarter
- Descartes sales up 20%
- STOCK REPORT: Dalsa falls to multi-year low; ATS soars
- Miscellaneous tidbits from Coreworx, Metranome, ATS, RIM, ANSYS, Desire2Learn
A D V E R T I S E M E N T S
RISK FREE LEAD GENERATION
From sales opportunity development to increasing attendance for events, Virtual Causeway accelerates your sales process! With a focus on selling and marketing complex services and technology, we guarantee a consistent and reliable flow of quality leads - assuring that your pipeline is constantly full. Contact us today to learn how we can help connect you with your next customer. Call 519-886-1600 ext. 405 or email marketing@v-causeway.com for details.
BERESKIN & PARR - INTELLECTUAL PROPERTY LAW
Bereskin & Parr is a leading Canadian intellectual property law firm on your doorstep. Our Waterloo region office brings a wealth of experience to serve the growing high technology and manufacturing communities in Canada's Technology Triangle and surrounding areas. Bereskin & Parr's practice encompasses all areas of intellectual property from patents to trade marks and related litigation. Please contact Tim Sinnott (tsinnott@bereskinparr.com) or Jason Hynes (jhynes@bereskinparr.com), at (519) 783-3210 for more information.
DELOITTE - SHAPING CANADIAN BUSINESS FOR 150 YEARS
Deloitte's technology, media and telecommunications practice delivers a suite of services including audit, tax, financial advisory, enterprise risk and consulting. We work with all types of technology companies, including early stage and high-growth companies, to help them succeed. We'll help you grow through contacts, M&A, raising capital and most of all through great business advice. We want to be your trusted advisor and look forward to working with you. Contact Jamie Barron 289-259-3385, jabarron@deloitte.ca or Jane Jantzi at 519-650-7788, jjantzi@deloitte.ca.
ENHANCE YOUR COMPETITIVE ADVANTAGE
INO can deliver competitive advantage to fuel company growth. As described in this video, INO's optical recognition technology helped Optosecurity raise $20 million in financing and create a world-class team. Further information on INO's optical recognition technology can be found here. Please contact Glenn Smith in Waterloo at 519-502-1305 to explore how INO might deliver competitive advantage to your organization.
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
////////////////////////////////////////////////////////////
[1]---------------------------------------------------------------
Virtek board endorses $35M takeover offer
September 2, 2008
Another month, another acquisition offer for Virtek, but this one looks like it might actually happen. Connecticut-based Gerber Scientific has made an all-cash offer of $1.05 a share -- about $35 million in total -- for all of Virtek's outstanding shares. The offer has the support of Virtek's board. Gerber trades on the New York Stock Exchange with a market value of about $200 million.
Last month, MiTek offered $26.5 million just for Virtek's imaging and templating business and, as part of that plan, Virtek was going to raise $3 million at $0.85 a share and buy back $26 million in its own shares -- about 75% of its outstanding shares -- at a price between $0.85 and $1. So, while in theory the Gerber offer would only be superior to MiTek's if you put a value of $8.5 million or less on Virtek's marking and engraving business, under the Gerber offer most shareholders would get more than they would have received under the MiTek offer. MiTek had the right to match the Gerber offer but chose not to. It will receive $927,500 in termination fees plus an additional $250,000 as an "expense reimbursement fee."
StockerYale -- the company that got all this started with a $22 million bid in May -- essentially disappeared from the picture after the MiTek offer was announced. It didn't change its final bid of $27 million and its offer expired without the necessary number of shares being tendered. The Gerber offer is nearly 60% higher than StockerYale's initial bid -- the one that was immediately accepted by the Toronto investment firm that was then Virtek's largest shareholder.
Gerber -- like MiTek -- has a history of working with Virtek. In fact, if the deal goes through it won't be the first time that Gerber has made a Virtek-related acquisition: in 1999 it bought the rights to Virtek's leather nesting software.
Assuming that no other offers are received, it will now be up to Virtek shareholders to decide whether to accept the Gerber deal. If they do, Virtek will vanish as a public company. The circular for the takeover bid is expected to be sent to shareholders next week. Nothing has been said about what Gerber would do with Virtek's Waterloo office and its employees.
[2]---------------------------------------------------------------
Medicalis raises $7M
August 18, 2008
Medicalis has closed a $7 million round of funding. Leading the deal was Boston-based HLM Venture Partners, which specializes in medical/health care technologies.
This is Medicalis' Series B round of funding. It began as a spinoff from Waterloo's Mitra (now part of Agfa) in 1999.
[3]---------------------------------------------------------------
Arise reports first PV cell sales, forecasts $45M by year-end
August 11, 2008
In the quarter ended June 30 (Q2 08), Arise recoded the first sales of PV cells made at its new manufacturing plant in Germany. It was only $461,000 from a few weeks of shipments, but the company expects that to grow to about $15 million this quarter and $30 million in Q4 as it ramps up production and improves efficiencies.
With the plant just starting production, there were significant costs associated with cells breaking or failing to meet performance requirements and that led to negative gross profits of $1.3 million. Arise expects it will be able to sell some of its scrap material from the quarter and recover part of those expenses.
Net loss for the quarter was $6.5 million, bringing the company's accumulated deficit to $35.1 million.
At the end of the period, Arise had $46.1 million in cash, mostly raised through a share offering in May. In July, it made prepayments of $20.1 million for silicon wafers and had $21.7 million in cash as of August 8.
The company also announced that it will not be building a polysilicon pilot plant at the University of Waterloo Research & Technology Park. Arise had signed a letter of intent in 2006 to build at the R&T Park but said that requirements of the university and the city for "design, appearance, and size and use ratio" would have added too many unnecessary costs for a manufacturing plant. It now expects to place the plant in an existing building in Waterloo Region.
Arise held its first quarterly results conference call following the announcement of its Q2 results. Empathizing with investors, CEO Bart Tichelman said the company was disappointed with the price of Arise shares, which have fallen 41% over the last four months.
[4]---------------------------------------------------------------
Open Text continues to report solid profits, cash flow
August 19, 2008
Open Text earned US$27.3 million on sales of US$200.3 million in the quarter ended June 30 (Q4 08). Sales were up 12% from the previous quarter, when the company earned US$7.3 million, and 14% from last year.
Operations generated US$44.6 million in cash in the quarter and US$166.0 million over the full year. Open Text ended the period with US$255 million in cash. At year-end, it had US$308 million in long-term debt on the balance sheet -- mostly from the Hummingbird acquisition.
For the year, Open Text had sales of US$725.5 million, up 22% from 2007. Net income was US$53.0 million.
[5]---------------------------------------------------------------
Open Text to acquire document capture firm for US$131M
September 4, 2008
Open Text also announced that it will acquire Bellevue, Washington-based Captaris for US$131 million. Captaris is a Nasdaq-listed company that has developed software for the digital capture of paper documents. Earlier this year, it acquired Germany's Océ Document Technologies which specialized in document capture and text recognition software. Captaris has several other products, including fax servers, which may not have a long life as part of Open Text.
The company was founded in 1982 and was previously known as Applied Voice Technology. Its shares were trading at US$3.70 when the Open Text offer was announced. Open Text will pay US$4.80 a share, or 30% above what was the market price. The deal is expected to close before the end of the year.
[6]---------------------------------------------------------------
MKS starts fiscal 09 with profitable quarter
September 3, 2008
MKS earned US$619,000 on sales of US$15.4 million in the quarter ended July 31 (Q1 09). Sales were up 13% from last year and down 27% from the company's blow-away results in the previous quarter.
Operations provided US$702,000 in cash and MKS spent US$1.1 million to repurchase 707,000 shares in the quarter, along with its usual US$1.0 million in dividends. It ended the quarter with US$11.5 million in cash, down US$1.4 million from the end of Q4.
At the AGM on August 26, MKS shareholders narrowly approved the company's poison pill plan with 53% of the votes in favour and 47% opposed. The margin of victory was much smaller than the number of shares held by MKS directors and executives.
And nearly a quarter of voting shareholders opposed the extension of the expiry date of the stock options awarded to president Michael Harris when he was hired in 2002. At that time, Harris was granted 1.2 million options with an exercise price of $1.35 and a seven year expiry period. With shareholder approval, that has now been extended to 10 years.
The circular for MKS' AGM disclosed that Harris was paid a $531,514 bonus in fiscal 2008, bringing is total compensation (excluding options) to $881,514. But he wasn't the company's top-paid executive: Thomas Hornek, managing director for central and southern Europe, received $1.05 million. CEO Phil Deck was paid $763,403.
[7]---------------------------------------------------------------
Descartes sales up 20%
September 4, 2008
Descartes earned US$1.4 million on sales of US$17.1 million in the quarter ended July 31 (Q2 09). Revenue was up 5% from the previous quarter and 20% from a year ago.
Operations generated cash of US$4.6 million and Descartes ended with period with US$50.533 million in cash.
[8]---------------------------------------------------------------
STOCK REPORT: Dalsa falls to multi-year low; ATS soars
August 2008
It's not reflected on the list below, since it happened in the first few days of September, but Dalsa shares went on a nosedive last week -- losing almost a quarter of their value in one day, despite the fact that the company has put together two strong quarters back-to-back.
According to the Globe & Mail, the selloff was triggered by Corning's warning that there was a glut of LCD panels on the market. Part of Dalsa's business is supplying flat panel inspection systems for LCD monitor manufacturers and, as far as some investors were concerned, that was apparently enough of a connection to send the stock into freefall. The drop took Dalsa shares to their lowest point since December 2001, although they came back a bit before the end of last week. The company, which was overtaken in market capitalization by Com Dev last month, has now also been passed by Descartes with Arise and Sandvine just slightly behind.
At their peak in April, Dalsa shares had nearly doubled in value since the beginning of the year. They're now down about 6% in 2008.
For the month of August:
ATS [TSX: ATA] +63%
Virtek [TSX: VRK] +31%
RDM [TSX: RC] +24%
TurboSonic [OTCBB: TSTA] +23%
Sandvine [TSX: SVC] +20%
Open Text [TSX: OTC] +18%
MKS [TSX: MKX] +11%
RIM [TSX: RIM] +3%
Descartes [TSX: DSG] +2%
--S&P TSX COMPOSITE INDEX +1%
Com Dev [TSX: CDV] +1%
===============================
Dalsa [TSX: DSA] -3%
--S&P TSX VENTURE INDEX -11%
Arise [TSX: APV] -13%
Biorem [TSXV: BRM] -25%
Investors are regaining confidence in ATS, which reported quarterly results in August. Its shares had their best month-end price in a year-and-a-half. Shares of RDM and Sandvine bounced back after plummeting in July. Virtek shares are up 178% since the end of March.
Companies with core operations outside the area:
Blue Coat [Nasdaq: BCSI] +28%
McAfee [NYSE: MFE] +21%
Agfa-Gevaert [Brussels: AGFA] +14%
Adobe [Nasdaq: ADBE] +4%
Sybase [NYSE: SY] +2%
Oracle [Nasdaq: ORCL] +2%
ON Semiconductor [Nasdaq: ONNN] +1%
===================================
NCR [NYSE: NCR] -1%
Google [Nasdaq: GOOG] -2%
Ansys [Nasdaq: ANSS] -3%
[9]---------------------------------------------------------------
Miscellaneous Tidbits
- Acorn Energy completed its acquisition of Coreworx -- the former Software Innovation (see March digest). Acorn says it issued 287,500 common shares -- worth about US$1.3 million at the time -- to pay for Coreworx. Part of that payment will be held in escrow for one year. It also "contributed to the capital of Coreworx" US$2.5 million in cash and US$3.4 million in 8% one-year promissory notes that were given to Coreworx's debenture holders in full payment of principal and outstanding accrued interest on their debentures.
- Metranome has launched its Poptiq service, delivering personalized, recommended videos to users' iPod Touch devices and iPhones.
- ATS reported strong results from both its Automated Systems Group -- sales up 32% from last year -- and from its Photowatt Technologies division -- sales up 45% from last year to $69.3 million. The company recorded a $3.2 million gain on the sale of the Spheral Solar building to RIM. ATS is completing a strategic review of its ASG divisions in the current quarter.
- According to research firm Strategy Analytics, 10% of all cellphones purchased on the U.S. in the second quarter of 2008 were BlackBerrys. It was the first time that RIM hit 10% market share.
- The Waterloo office of ANSYS was mentioned in some media reports about the high-tech Speedo swimsuits worn at the Beijing Olympics. Speedo hired ANSYS to develop software to simulate the flow of water around the suit and a swimmer.
- The U.S. Patent & Trademark Office rejected Blackboard's attempts to halt the reexamination of its patent that was at the centre of Blackboard's successful infringement lawsuit against Desire2Learn.
posted by Gary Will at 12:28 AM
