Compiled and written by
Gary Will
gary@garywill.com
In this issue:
- Sandvine cuts revenue forecast, warns of low Q1 sales
- Sirific to be acquired by UK firm
- Software Innovation to become part of Nasdaq-listed company
- MKS expects profitable finish to fiscal year
- Arise reports $4M loss; new plant to open this month
- Com Dev sales climb 14%
- RIM ships 4M BlackBerrys in Q4, doubles sales
- Descartes finishes third consecutive profitable year
- STOCK REPORT: MKS shares jump on near-record volume
- Miscellaneous tidbits from MedShare, AideRSS, We-Create, LoyaltyMatch, LaunchPad, Desire2Learn, Dalsa
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[1]---------------------------------------------------------------
Sandvine cuts revenue forecast, warns of low Q1 salesMarch 6, 2008
Shares in Sandvine took a huge hit after the company warned that it would have sales of only about $8.2 million in the quarter ended February 29 and that it was cutting its annual sales forecast by $20-25 million.
That quarterly revenue would be just a little better than half of what Sandvine reported a year ago, and a little less than half of its sales in the previous quarter.
Sandvine did not discuss earnings in its warning, and the full financial results are scheduled to be released tomorrow.
Shares in Sandvine had already lost 56% of their value over the previous five months and were down another 65% following this announcement -- falling to $1.03 at their lowest, before bouncing back a little to finish March at $1.75. Sandvine shares have now lost 74% of their value since the beginning of October.
[2]---------------------------------------------------------------
Sirific to be acquired by UK firmApril 7, 2008
Sirific Wireless is being acquired by UK-based Icera in an all-stock deal. The acquisition has been approved by the boards of both companies and is expected to close before the end of June. Financial details were not disclosed.
Icera says it will keep Sirific's offices in Waterloo and Richardson, Texas. The company designs software-defined chips for wireless modems and will now add Sirific's chipsets for multi-mode wireless devices to its product line. Icera is a privately-held venture-backed company that just raised $40 million in its fourth round of funding and has raised over $140 million since it was founded in 2002 (Icera included its new Waterloo and Richardson offices in its news release announcing the new funding, which went out a day before the Sirific announcement). The Daily Telegraph called it "Europe's best-backed semiconductor company." Icera is based in Bristol, with additional design offices in Cambridge, UK and at the Sophia Antipolis tech park in Southern France. It plans to raise another round of funding later this year and expects to go public within two years.
Sirific was founded in 2000 by Taj Manku, who was then associate professor of electrical engineering at UW. It received support from OCE and raised seed funding from Tech Capital Partners and Richard Boyer, who served as the company's initial CEO. Celtic House led a $10 million round of funding later that year. The company hired Texas Instruments veteran Mike Hogan as its CEO in 2002 and soon after closed an $18 million round of funding led by BDC Venture Capital. Agilent Ventures made an investment the following year and in 2004, Sirific raised another $23 million in a round led by TD Capital Ventures which also included Intel. In this period, the company started referring to itself as being Texas-based. It raised another $19 million last year, which added Dallas' Hunt Ventures to its list of investors. Hogan left the company and was succeeded as CEO by Russ Johnsen, who had been on Sirific's board of directors for three years. That was last announcement the company made. Manku has remained CTO through Sirific's eight-year history.
[3]---------------------------------------------------------------
Software Innovation to become part of Nasdaq-listed companyMarch 31, 2008
Acorn Energy will acquire Software Innovation -- which is in the process of renaming itself Coreworx, after its main product. Terms of the deal were not disclosed, and the transaction still requires final due diligence from Acorn.
Acorn is based in Delaware and trades on Nasdaq with a market capitalization of just under US$50 million. It had sales of US$5.7 million in 2007 but most of its assets were in shares of Comverge, a company it spun out through an IPO a year ago and which was worth several hundred million when Acorn decided to sell its stake (Comverge has since plummeted in value over the last couple of months.)
Coreworx is led by Ray Simonson and develops software used by engineering and construction firms to manage large capital projects. Simonson was originally an investor in the company through Verdexus, an investment firm founded by Randall Howard. Howard invested in Software Innovation in 2004 and served as CEO. Simonson joined the company as CTO in 2004 and became CEO when Howard stepped down from the management team. The current team includes Stephen Grinyer and Mike Davis, who both worked with Simonson at BlueGill/CheckFree, Steve Traplin, former CEO of Waterloo's Ardesic, and Kevin Thomson, who previously led NCR's Waterloo engineering office.
Along with Verdexus, Coreworx investors include Tech Capital Partners, BDC Venture Capital, Covington Capital, and RoyNat Capital.
[4]---------------------------------------------------------------
MKS expects profitable finish to fiscal yearMarch 4, 2008
MKS lost US$754,000 on sales of US$12.8 million in the quarter ended January 31 (Q3 08). Sales were up 11% from a year ago but down 6% from the previous quarter.
A drop in gross margins, which would have been impacted by the rise of the Canadian dollar, led to a 9% sequential decline in gross profit.
License revenue was light in the quarter, but the company says it will do much better in Q4. It still expects to be profitable for the year, which would require Q4 earnings of at least US$900,000. To achieve that, MKS will likely need to report its best quarterly operating income in over two years.
MKS ended the quarter with US$10.6 million in cash, up from US$9.9 million at the end of Q2.
The company also disclosed that RIM will be expanding its use of MKS Integrity for requirements management. It expects all of RIM's software engineers performing requirements management will be using MKS software by the end of the year.
[5]---------------------------------------------------------------
Arise reports $4M loss; new plant to open this monthMarch 18, 2008
Just weeks away from the opening of its new manufacturing facility in Germany, Arise reported results from what it hopes will be its second-last pre-revenue quarter. In the period ended December 31 (Q4 07), Arise lost $4.1 million on sales of $315,000. All that revenue went in the front door and out the back, as the company actually reported a slightly negative gross profit.
Arise closed a $34.5 million share offering in the quarter (see October digest) and finished Q4 with $37.9 million in cash.
For 2007, Arise lost $11.5 million on sales of $1.2 million. Accumulated deficit climbed to $23.1 million at year-end.
[6]---------------------------------------------------------------
Com Dev sales climb 14%March 6, 2008
Com Dev earned $1.3 million on sales of $44.9 million in the quarter ended January 31 (Q1 08). Sales were up 14% from a strong Q1 last year and up 3% from the previous quarter. With the rise in the Canadian dollar, gross margins were still well below last year's levels but were double what they were in Q4.
The company received $32.7 million in new orders in the quarter, a bit below recent levels, but enough to give Com Dev an order backlog of $133 million.
R&D spending was much lower in Q4 than it had been in the previous three quarters, but the company says it expects its R&D costs will be going back up to the levels seen through most of 2007. SG&A costs in the quarter included $800,000 for the company's review of its previous stock option granting practices. A special committee of the board determined in January that no material adjustments to Com Dev's financial statements will be required. Recommendations made by that committee are expected to be announced this week.
After piling up the cash in the previous quarter, Com Dev used $13.2 million on operations in Q1 with an additional $3.5 million spent on capital assets. It ended the quarter with $14.3 million in cash. This was before the acquisition of the ETI passive microwave devices business, announced in February.
Com Dev's board has awarded CEO John Keating a $125,000 bonus to be paid each quarter for four years to be used -- after taxes -- to buy shares in the company. He received $376,000 in stock purchase bonuses in fiscal 2007. According to insider trading reports, Keating paid $196,304 for 38,200 shares in Com Dev over the year. No additional purchases have been reported over the last six months. Keating's total compensation for the year was $807,060, down from $842,196 and 400,000 options in 2006.
[7]---------------------------------------------------------------
RIM ships 4M BlackBerrys in Q4, doubles salesApril 2, 2008
RIM continues to double its sales year-over-year, reporting revenue of US$1.9 billion in the quarter ended March 1 (Q4 08) -- up 102% from the previous year and 13% from Q3. Earnings for the quarter were US$412.5 million, up from US$370.5 million in the previous quarter.
There were 2.2 million BlackBerry subscribers added in the quarter, well above the company's forecast of 1.8 million. It said that the majority of new subscribers were from the consumer market and was excited to point out that over one million users had installed the Facebook for BlackBerry application. RIM shipped 4.4 million devices in Q4. There are now more than 14 million BlackBerry users, and RIM expects to add another 2.2 million this quarter.
RIM is forecasting sales of US$2.23-2.3 billion in the current quarter. It ended Q4 with US$2.3 billion in cash, up US$210.7 million over the quarter.
For the year, RIM earned US$1.3 billion on sales of US$6.0 billion. Revenue was up 98% from 2007.
[8]---------------------------------------------------------------
Descartes finishes third consecutive profitable yearMarch 6, 2008
Descartes reported revenue of US$16.0 million in the quarter ended January 31 (Q4 08), up 3.5% from the previous quarter. The company made three acquisitions in the period, all in the second half of the quarter. Revenue climbed 18% from last year.
Net income was US$17.9 million, but that included a US$16.0 million non-cash deferred income tax recovery that will be expensed in future quarters. Excluding that, Descartes had net income of US$1.9 million, which was still good enough to set an all-time record for the company. Operating income was US$1.6 million, up from $1.3 million in Q3.
For the year, Descartes reported sales of US$59.0 million, up 14% from 2007. Earnings were US$22.4 million or US$6.4 million excluding the Q4 tax recovery. Over the year, Descartes acquired six businesses and saw its stock price decline by 18%.
It finished the year with US$44.1 million in cash, down US$4.2 million from the end of Q3.
[9]---------------------------------------------------------------
STOCK REPORT: MKS shares jump on near-record volumeMarch 2008
MKS shares climbed 33% in March -- their best month-end price since May and their strongest one-month performance since a 41% jump in May 2003. It wasn't the quarterly results that triggered the spike. If anything, the numbers were weaker than those of the previous quarter and the jump in the share price came more than two weeks after the results were announced.
The stock first jumped on March 24 and three days later the volume went through the roof, with 1.4 million shares traded on March 27. That made it the second most active trading day in MKS history, falling just short of the 1.5 million shares traded on February 12, 2003. CEO Phil Deck bought 100,000 shares on the open market, with COO Michael Harris buying 65,000 shares and Deck's investment partner Gerald Hurlow buying 80,000 shares.
For the month of March:
MKS [TSX: MKX] +33%
Arise [TSX: APV] +19%
Dalsa [TSX: DSA] +15%
RIM [TSX: RIM] +13%
Com Dev [TSX: CDV] +11%
TurboSonic [OTCBB: TSTA] +7%
Open Text [TSX: OTC] +2%
Descartes [TSX: DSG] +1%
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--S&P TSX COMPOSITE INDEX -2%
Virtek [TSX: VRK] -5%
ATS [TSX: ATA] -7%
--S&P TSX VENTURE INDEX -10%
RDM [TSX: RC] -25%
Biorem [TSXV: BRM] -38%
Sandvine [TSX: SVC] -40%
Dalsa shares also had their best month-end since May and are now up 76% over the first three months of 2008. Open Text shares were pretty quiet in the month but still rose to their highest month-end price since July 2004.
We covered Sandvine above, and things haven't been much better at RDM, where the company's stock has fallen 64% over the last five months.
Despite what looks like a big drop, Biorem shares have actually been in the same trading range for the last three months. It finished February at the high end of the range and was listed here with a huge gain and then it ended March at the low end and shows a big decline, but there's been almost no change in its range this year.
As of Friday's close, RIM had a market capitalization of $68 billion. Arise has climbed back ahead of Descartes for seventh place on the market cap list with a value of $230 million.
Companies with core operations outside the area:
Adobe [Nasdaq: ADBE] +6%
Oracle [Nasdaq: ORCL] +4%
NCR [NYSE: NCR] +3%
===================================
McAfee [NYSE: MFE] -1%
Sybase [NYSE: SY] -1%
ON Semiconductor [Nasdaq: ONNN] -5%
Blue Coat [Nasdaq: BCSI] -6%
Google [Nasdaq: GOOG] -7%
Ansys [Nasdaq: ANSS] -8%
Agfa-Gevaert [Brussels: AGFA] -23%
ON Semiconductor -- newly added to this list with the close of its acquisition of AMI Semiconductor -- has seen its shares climb 20% so far in April.
[10]---------------------------------------------------------------
Miscellaneous Tidbits- J. Paul Haynes and MedShare have split, with MedShare founder and president Barry Billings adding the CEO title he gave up last year when Haynes joined the company. Over the period that Haynes was CEO, MedShare raised millions of dollars from investors and saw its revenue grow by more than 600%, according to Haynes.
- Also parting ways are Kevin Thomason and AideRSS. Thomason co-founded the company last year with Ilya Grigorik and helped lead AideRSS through its launch last summer and to a seven-figure round of funding in December.
- One more: Bill Waters is no longer CEO of We-Create, the Web software company he led for more than eight years. He is now working as an independent communications and leadership consultant.
- LoyaltyMatch is in Boston to participate in the AlwaysOn/Vator.tv Venture Summit East 2008 competition. It received the most votes among 27 companies that submitted pitches to the competition's website. LoyaltyMatch launched its website in February, which helps users convert unused loyalty program points into cash. It is based in Kitchener and Ottawa.
- The 2008 Nicol LaunchPad $50K winner is Atreo Medical, an Ottawa-based startup out of McMaster University developing a high-tech glove to be used for CPR instruction and delivery. Second place finisher was VSM Technologies out of Carleton University, which has developed a tiny chip for wireless monitoring of human vital signs. I guess I didn't have to worry about being too harsh a judge at the business plan stage, since those were the two plans I was assigned. Third place went to Digital Dash, which has created technology for a curved tactile display. It is also out of McMaster.
- Upon reexamination, the U.S. Patent & Trademark Office has preliminarily rejected the validity of the patent used by Blackboard to sue Desire2Learn. The decision is a long way from being final and comes too late to be of much help to Desire2Learn, which was found to have infringed on the dubious patent last month by a jury in Texas (see previous digest).
- Dalsa is selling most of what's left of its Colorado Springs operations to Colorado-based Echoserve (see August digest). Financial details have not yet been disclosed. The company also announced that a special effects sequence in the next James Bond movie, "Quantum of Solace," was shot with eight of Dalsa's 4K Origin cameras. The movie is scheduled for a fall release.
