Waterloo Tech Digest - January 13, 2009
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
GO BEYOND STAFFING
For almost 40 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. 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.
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.
////////////////////////////////////////////////////////////
[1]---------------------------------------------------------------
2008: Stormy end to an otherwise encouraging year
The financial crisis was the big story of 2008, but -- nearly four months in -- it's still difficult to see what the impact will be on local tech companies. Stock prices and valuations have gone down since September, and a lot of wealth has been erased, but so far companies seem to be pulling through.
Looking at our public companies, while RIM had a rare miss in its September-to-November quarter, it's forecasting strong revenue growth in the current quarter. Open Text is hiring 200 people in Waterloo and is coming off another strong year. Com Dev is working on a near-record level order backlog. Sandvine is selling its next-generation product to Comcast, the customer that put it on the high-growth map. Dalsa has cut its one money-losing business. Arise is announcing big deals ... and just needs to show that it can make money on them. MKS and Descartes seem to be doing fine, but have only reported one month's worth of results since the meltdown.
Several local startups are coming off strong months at the end of the year, although there is some concern that startups may find angel funding harder to come by over the next year.
But in 2008, the investment money continued to flow, following a record year in 2007. Companies that closed new rounds of funding included Primal Fusion, AideRSS, Avvasi, Metranome, Well.ca, Igloo, J2Play, and Medicalis.
During the year, Arise opened a manufacturing plant in Germany while Com Dev opened a U.S. facility and Dalsa got rid of one, after pulling the plug on its digital movie camera business.
Patent infringement suits were back in the news, as Desire2Learn was successfully sued for infringement by its main U.S. competitor. As in the RIM-NTP suit, Desire2Learn was ordered to pay millions of dollars by the court, even though the U.S. patent office doubted that the disputed patent should ever have been issued. The dispute has now gone to the court of appeals.
RIM launched a hostile takeover while Virtek fended one off and avoided another before being acquired by a board-approved suitor. Coreworx and Spicer were acquired, with Spicer becoming part of Open Text. Sirific was acquired and later shut down (see below).
While the stock market had its worst year in the past decade, for public tech companies in the area, the drop in 2008 wasn't nearly as bad as what we saw in 2001 -- or even 2002 -- as measured by median performance. It was worse than any year since then.
Stock performance for 2008:
Open Text [TSX: OTC] +18%
===============================
ATS [TSX: ATA] -4%
MKS [TSX: MKX] -11%
Com Dev [TSX: CDV] -13%
Descartes [TSX: DSG] -14%
Dalsa [TSX: DSA] -16%
--S&P TSX COMPOSITE INDEX -35%
TurboSonic [OTCBB: TSTA] -47%
Biorem [TSXV: BRM] -55%
RIM [TSX: RIM] -56%
RDM [TSX: RC] -68%
--S&P TSX VENTURE INDEX -72%
Sandvine [TSX: SVC] -79% (78.8)
Arise [TSX: APV] -79% (79.1)
Arise and Sandvine had become two of the area's most valuable tech companies in 2007 -- and they still are, just not at the levels of a year ago. The 79% drops for Arise and Sandvine shares were the biggest calendar year loss of any company followed here since 2001, when Com Dev shares lost 80% of their value and the shares of a couple of other companies that few people will remember did even worse.
Mathematically, Arise gets the bottom spot for 2008 only because Sandvine's shares went up by a penny in December while Arise's had no change. It was last year's top performer, and becomes the first "first-to-worst" performer in the years we've been following local tech stocks. And Virtek, which was at the bottom of last year's list, would have gone from worst-to-first if it had still been listed at year-end. It was acquired at a per-share price that was 150% above its 2007 close.
But the top performer of 2008 was Open Text stock, which showed impressive gains for the third year in a row and was the only company to get out of the year with its shares showing a gain. At 18%, it was easily the lowest annual gain to top the year-end list in the last decade. In fact, this was the first year that at least one company didn't double its stock price.
Year-end market capitalization
in millions, using outstanding shares
(year-over-year change in parentheses):
1. RIM ----- $28,017 (-$35,129)
2. Open Text ----- 1,918 (+323)
3. ATS ----- 386 (-13)
4. Com Dev ----- 215 (-32)
5. Descartes ----- 189 (-31)
6. Dalsa ----- 129 (-30)
7. Sandvine ----- 110 (-413)
8. Arise ----- 67 (-185)
9. MKS ----- 56 (-13)
10. RDM ----- 18 (-38)
11. TurboSonic ----- 8 (-4)
12. Biorem ----- 5 (-7)
RIM's $35 billion drop in market capitalization in 2008 was almost exactly the same as its gains in 2007.
[2]---------------------------------------------------------------
More funding for Metranome, AideRSS
December 12 & 23, 2008
Two more investment deals were announced in December, both involving Tech Capital Partners.
Metranome, co-founded by former Tech Capital entrepreneur-in-residence Dave Kruis, closed a $1.5 million round, bringing the total invested in the company in the last year to over $2 million. The first version of Metranome's Poptiq mobile video software for iPod Touch and the iPhone was released in the summer.
AideRSS closed a second round of funding from Tech Capital. No financial details were disclosed. The deal came almost exactly one year after Tech Capital and some local angel investors provided a seed round of funding to the company.
And since I never mentioned it here, Tech Capital also invested in Avvasi a few months back, but the deal was never announced. Celtic House added Avvasi to their portfolio list in June without making an announcement and Tech Capital -- which invested with Celtic House -- did the same a few months later. According to the Ottawa-based lawyer who acted for the investors, it was a preferred share deal.
[3]---------------------------------------------------------------
Icera shuts Waterloo office; ON Semiconductor announces layoffs
December 2008
Waterloo's semiconductor industry is looking weaker following two announcements of job cuts in December.
First, UK-based Icera announced that it is closing its Waterloo office, acquired in May when it bought Sirific Wireless. Icera announced in December that it has raised US$70 million in funding ($60 million equity and $10 million debt, including money from Toronto's MMV Financial), but that was much less than it originally said it wanted to raise -- before the stock market collapse. At the same time, it announced job cuts, which included the Waterloo site.
Sirific was founded in 2000 by Taj Manku, who was then associate professor of electrical engineering at UW. The company raised more than $50 million in venture capital (see March digest for historical notes).
And Arizona's ON Semiconductor, the company that last year acquired the company that had acquired Waterloo's Dspfactory in 2004 (see December 2007 digest) announced that it is cutting staff. The number of employees being let go in Waterloo hasn't been announced. It wouldn't be surprising if ON decided to sell off its DSP business -- it certainly doesn't give it a prominent placement on its website, and the business doesn't fit very well with the other markets that ON is targetting. But that's what I thought a year ago and nothing happened.
[4]---------------------------------------------------------------
RIM makes hostile $66M bid for Certicom
December 3, 2008
RIM has made a $66 million -- $1.50 a share -- hostile bid for Mississauga-based Certicom, a company formed in 1985 to commercialize research from the University of Waterloo.
According to RIM, discussions about an acquisition began nearly two years ago when Certicom shares were trading in the $5-6 range. By the time RIM gave up on discussions with Certicom's board and publicly announced its intention to make an offer, Certicom shares had fallen to just 85 cents -- only about 10 cents above its cash per share.
In the quarter ended October 31, Certicom lost US$2.6 million on sales of US$6.6 million. But it had US$33.2 million in cash and securities on its balance sheet and not much debt, so it wouldn't be a very expensive acquisition for RIM.
Investors clearly don't expect that this will be the final offer for the company, as Certicom's shares jumped to more than $1.80 by the end of December.
As with many hostile takeover targets, Certicom's board went racing to the courts and the Ontario Securities Commission to try to block their shareholders from doing what they want with their stock, accusing RIM of violating confidentiality agreements in putting its bid together and of failing to disclose that it had confidential information in the circular it sent to Certicom shareholders.
The board rejected the bid as significantly undervaluing the company, although it was 76% above the price Certicom shares had been trading just before the offer was made. SEDI records show only one Certicom insider making any purchases of Certicom shares on the open market in the last six months. Before RIM's offer, Certicom shares hadn't closed above $1.50 a share since September 17. So far, there have been no other offers for the company.
Certicom was founded in 1985 as Cryptech Systems and later changed its name to Mobius Encryption before becoming Certicom in 1995. Its core product was based on research from UW's Data Encryption Group (now the Centre for Applied Cryptographic Research), and co-founder and UW professor Scott Vanstone remains a director of Certicom, as well as the company's EVP of strategic technology. It was created during the Bob Nally era at UW and Nally's investment company later said it had invested $2.5 million in Certicom and sold its shares for $34.0 million between 1996 and 1998. Certicom went public with a TSX listing in 1995 and followed that with a Nasdaq listing in 2000.
Certicom became of Canada's great bubble-propelled moonshots in 2000, when its shares peaked at what would today be $125 (adjusted for a stock split) in March of that year. When the bubble burst, it took Certicom with it. By June 2001 its stock was under $5 and a year after that, it was below $1 and the company lost its Nasdaq listing. There have been occasional signs of life since then, but Certicom shares fell 69% in 2007 and began 2008 at $1.58.
Less contentiously, RIM also announced that it is acquiring Vancouver's Chalk Media Corp. for $23 million in cash. The deal must still be approved by Chalk shareholders and is expected to close in February. Chalk is the developer of the Mobile Chalkboard platform used to push multimedia content to BlackBerrys.
[5]---------------------------------------------------------------
RIM misses targets, but reports 66% growth
December 18, 2008
A rare subpar quarter for RIM -- which, in its case, means sales were only up 66% from the previous year -- with sales and profits falling below the company's forecasts. Not a big surprise, since the forecasts were made before the start of the economic collapse in September. In the period ended November 29 (Q3 09), it reported earnings of US$396.3 million on sales of US$2.78 billion, falling short of its targets of US$510-550 million and US$2.95-3.10 billion, respectively. The company issued an earnings warning on December 2 and followed with full results a couple of weeks later.
According to RIM, about a third of the shortfall was caused by the higher U.S. dollar (RIM reports its results in U.S. dollars). The 2.6 million new BlackBerry subscribers in the quarter fell 300,000 below the company's expectations.
The current quarter will include results from the holiday buying season in December, and RIM says it had a strong start to the period. It is forecasting sales of US$3.3-3.5 billion in Q4 with earnings of US$475-520 million and 2.9 million new BlackBerry subscribers.
RIM ended the quarter with US$2.49 billion in cash, up US$249.0 million from the end of Q2.
RIM disclosed just one new patent infringement suit brought against it in the quarter, along with two complaints to the U.S. International Trade Commission alleging infringement. And RIM filed its own suit in November seeking judgment of non-infringement, invalidity or unenforceability of four Kodak patents.
[6]---------------------------------------------------------------
Com Dev sales continue to climb
December 11, 2008
Com Dev ended its fiscal year with another good quarter, earning $4.3 million on sales of $59.8 million in the period ended October 31 (Q4 08). Sales were up 16% from last quarter and 38% from a year ago, and margins were up significantly from Q3, but so were expenses. The bottom line was a $500,000 improvement from the previous quarter. For the year, sales climbed 28% to $210.3 million with earnings of $12.4 million.
Com Dev received $60 million in new orders in the quarter and ended the year with an order backlog of $158 million. Com Dev USA contributed $6.5 million in sales in Q4, up from $3.6 million in Q3. Operations generated $11.3 million in cash, leaving Com Dev with $16.1 million in cash at year-end.
Com Dev is forecasting revenue growth of at least 10% in fiscal 2009.
The company also announced that CEO John Keating has joined its board of directors. Late in the month it was reported that Com Dev is one of a few companies working on a Canadian-designed lunar rover. New Hamburg's Ontario Drive and Gear is also involved.
[7]---------------------------------------------------------------
STOCK REPORT: Best month in two years for Com Dev shares
December 2008
We saw some stability in the markets in December, with only three declining stocks -- and one of them was just down a penny. It was the first time since August that there were more gainers than losers. Only two stocks had more than a 10% shift in December, and even one of those gets an asterisk.
For the month of December:
TurboSonic [OTCBB: TSTA] +120%
Com Dev [TSX: CDV] +19%
Descartes [TSX: DSG] +8%
Dalsa [TSX: DSA] +8%
RDM [TSX: RC] +5%
--S&P TSX VENTURE INDEX +4%
Open Text [TSX: OTC] +4%
Sandvine [TSX: SVC] +1%
Arise [TSX: APV] 0%
ATS [TSX: ATA] 0%
===============================
Biorem [TSXV: BRM] -2%
--S&P TSX COMPOSITE INDEX -3%
MKS [TSX: MKX] -8%
RIM [TSX: RIM] -9%
Com Dev shares had a strong month, although the jump wasn't an immediate response to the company's financial results. It was about two weeks after the results were announced that the stock started to take off. After a big October and a terrible November, December ended up being the best month for Com Dev shares since a 23% gain in July 2006.
TurboSonic shares had the same trading range in December as in November, but in November it closed at the bottom of the range (and was on the bottom of last month's list) and in December it closed at the top, giving the appearance of a huge gain.
Shares of Biorem, RDM, RIM, Sandvine, and TurboSonic all hit their low mark for the year in intra-month trading in December -- with RDM and Sandvine bouncing back before the end of the month.
Companies with core operations outside the area:
ON Semiconductor [Nasdaq: ONNN] +16%
McAfee [NYSE: MFE] +14%
Oracle [Nasdaq: ORCL] +10%
Google [Nasdaq: GOOG] +5%
Sybase [NYSE: SY] +1%
===================================
Ansys [Nasdaq: ANSS] -3%
Blue Coat [Nasdaq: BCSI] -6%
NCR [NYSE: NCR] -7%
Adobe [Nasdaq: ADBE] -8%
Agfa-Gevaert [Brussels: AGFA] -21%
Acorn Energy [Nasdaq: ACFN] -30%
[8]---------------------------------------------------------------
Miscellaneous Tidbits
Gary Will
gary@garywill.com
In this issue:
- 2008: Stormy end to an otherwise encouraging year
- More funding for Metranome, AideRSS
- Icera shuts Waterloo office; ON Semiconductor announces layoffs
- RIM makes hostile $66M bid for Certicom
- RIM misses targets, but reports 66% growth
- Com Dev sales continue to climb
- STOCK REPORT: Best month in two years for Com Dev shares
- Miscellaneous tidbits from Open Text, Navtech, Coreworx, ATS, Arise, Covarity
A D V E R T I S E M E N T S
GO BEYOND STAFFING
For almost 40 years, Procom has been matching people with companies, for jobs that are a perfect fit - contract, full-time, or part-time. We partner with large and small companies across North America, including some of the world's best-known enterprises, to provide a range of services, training tools, and the ideal candidates to help them flourish. We've been named one of Canada's 50 Best Managed Companies and go beyond staffing to look strategically at the processes and people that will truly help a company succeed. 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.
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.
////////////////////////////////////////////////////////////
[1]---------------------------------------------------------------
2008: Stormy end to an otherwise encouraging year
The financial crisis was the big story of 2008, but -- nearly four months in -- it's still difficult to see what the impact will be on local tech companies. Stock prices and valuations have gone down since September, and a lot of wealth has been erased, but so far companies seem to be pulling through.
Looking at our public companies, while RIM had a rare miss in its September-to-November quarter, it's forecasting strong revenue growth in the current quarter. Open Text is hiring 200 people in Waterloo and is coming off another strong year. Com Dev is working on a near-record level order backlog. Sandvine is selling its next-generation product to Comcast, the customer that put it on the high-growth map. Dalsa has cut its one money-losing business. Arise is announcing big deals ... and just needs to show that it can make money on them. MKS and Descartes seem to be doing fine, but have only reported one month's worth of results since the meltdown.
Several local startups are coming off strong months at the end of the year, although there is some concern that startups may find angel funding harder to come by over the next year.
But in 2008, the investment money continued to flow, following a record year in 2007. Companies that closed new rounds of funding included Primal Fusion, AideRSS, Avvasi, Metranome, Well.ca, Igloo, J2Play, and Medicalis.
During the year, Arise opened a manufacturing plant in Germany while Com Dev opened a U.S. facility and Dalsa got rid of one, after pulling the plug on its digital movie camera business.
Patent infringement suits were back in the news, as Desire2Learn was successfully sued for infringement by its main U.S. competitor. As in the RIM-NTP suit, Desire2Learn was ordered to pay millions of dollars by the court, even though the U.S. patent office doubted that the disputed patent should ever have been issued. The dispute has now gone to the court of appeals.
RIM launched a hostile takeover while Virtek fended one off and avoided another before being acquired by a board-approved suitor. Coreworx and Spicer were acquired, with Spicer becoming part of Open Text. Sirific was acquired and later shut down (see below).
While the stock market had its worst year in the past decade, for public tech companies in the area, the drop in 2008 wasn't nearly as bad as what we saw in 2001 -- or even 2002 -- as measured by median performance. It was worse than any year since then.
Stock performance for 2008:
Open Text [TSX: OTC] +18%
===============================
ATS [TSX: ATA] -4%
MKS [TSX: MKX] -11%
Com Dev [TSX: CDV] -13%
Descartes [TSX: DSG] -14%
Dalsa [TSX: DSA] -16%
--S&P TSX COMPOSITE INDEX -35%
TurboSonic [OTCBB: TSTA] -47%
Biorem [TSXV: BRM] -55%
RIM [TSX: RIM] -56%
RDM [TSX: RC] -68%
--S&P TSX VENTURE INDEX -72%
Sandvine [TSX: SVC] -79% (78.8)
Arise [TSX: APV] -79% (79.1)
Arise and Sandvine had become two of the area's most valuable tech companies in 2007 -- and they still are, just not at the levels of a year ago. The 79% drops for Arise and Sandvine shares were the biggest calendar year loss of any company followed here since 2001, when Com Dev shares lost 80% of their value and the shares of a couple of other companies that few people will remember did even worse.
Mathematically, Arise gets the bottom spot for 2008 only because Sandvine's shares went up by a penny in December while Arise's had no change. It was last year's top performer, and becomes the first "first-to-worst" performer in the years we've been following local tech stocks. And Virtek, which was at the bottom of last year's list, would have gone from worst-to-first if it had still been listed at year-end. It was acquired at a per-share price that was 150% above its 2007 close.
But the top performer of 2008 was Open Text stock, which showed impressive gains for the third year in a row and was the only company to get out of the year with its shares showing a gain. At 18%, it was easily the lowest annual gain to top the year-end list in the last decade. In fact, this was the first year that at least one company didn't double its stock price.
Year-end market capitalization
in millions, using outstanding shares
(year-over-year change in parentheses):
1. RIM ----- $28,017 (-$35,129)
2. Open Text ----- 1,918 (+323)
3. ATS ----- 386 (-13)
4. Com Dev ----- 215 (-32)
5. Descartes ----- 189 (-31)
6. Dalsa ----- 129 (-30)
7. Sandvine ----- 110 (-413)
8. Arise ----- 67 (-185)
9. MKS ----- 56 (-13)
10. RDM ----- 18 (-38)
11. TurboSonic ----- 8 (-4)
12. Biorem ----- 5 (-7)
RIM's $35 billion drop in market capitalization in 2008 was almost exactly the same as its gains in 2007.
[2]---------------------------------------------------------------
More funding for Metranome, AideRSS
December 12 & 23, 2008
Two more investment deals were announced in December, both involving Tech Capital Partners.
Metranome, co-founded by former Tech Capital entrepreneur-in-residence Dave Kruis, closed a $1.5 million round, bringing the total invested in the company in the last year to over $2 million. The first version of Metranome's Poptiq mobile video software for iPod Touch and the iPhone was released in the summer.
AideRSS closed a second round of funding from Tech Capital. No financial details were disclosed. The deal came almost exactly one year after Tech Capital and some local angel investors provided a seed round of funding to the company.
And since I never mentioned it here, Tech Capital also invested in Avvasi a few months back, but the deal was never announced. Celtic House added Avvasi to their portfolio list in June without making an announcement and Tech Capital -- which invested with Celtic House -- did the same a few months later. According to the Ottawa-based lawyer who acted for the investors, it was a preferred share deal.
[3]---------------------------------------------------------------
Icera shuts Waterloo office; ON Semiconductor announces layoffs
December 2008
Waterloo's semiconductor industry is looking weaker following two announcements of job cuts in December.
First, UK-based Icera announced that it is closing its Waterloo office, acquired in May when it bought Sirific Wireless. Icera announced in December that it has raised US$70 million in funding ($60 million equity and $10 million debt, including money from Toronto's MMV Financial), but that was much less than it originally said it wanted to raise -- before the stock market collapse. At the same time, it announced job cuts, which included the Waterloo site.
Sirific was founded in 2000 by Taj Manku, who was then associate professor of electrical engineering at UW. The company raised more than $50 million in venture capital (see March digest for historical notes).
And Arizona's ON Semiconductor, the company that last year acquired the company that had acquired Waterloo's Dspfactory in 2004 (see December 2007 digest) announced that it is cutting staff. The number of employees being let go in Waterloo hasn't been announced. It wouldn't be surprising if ON decided to sell off its DSP business -- it certainly doesn't give it a prominent placement on its website, and the business doesn't fit very well with the other markets that ON is targetting. But that's what I thought a year ago and nothing happened.
[4]---------------------------------------------------------------
RIM makes hostile $66M bid for Certicom
December 3, 2008
RIM has made a $66 million -- $1.50 a share -- hostile bid for Mississauga-based Certicom, a company formed in 1985 to commercialize research from the University of Waterloo.
According to RIM, discussions about an acquisition began nearly two years ago when Certicom shares were trading in the $5-6 range. By the time RIM gave up on discussions with Certicom's board and publicly announced its intention to make an offer, Certicom shares had fallen to just 85 cents -- only about 10 cents above its cash per share.
In the quarter ended October 31, Certicom lost US$2.6 million on sales of US$6.6 million. But it had US$33.2 million in cash and securities on its balance sheet and not much debt, so it wouldn't be a very expensive acquisition for RIM.
Investors clearly don't expect that this will be the final offer for the company, as Certicom's shares jumped to more than $1.80 by the end of December.
As with many hostile takeover targets, Certicom's board went racing to the courts and the Ontario Securities Commission to try to block their shareholders from doing what they want with their stock, accusing RIM of violating confidentiality agreements in putting its bid together and of failing to disclose that it had confidential information in the circular it sent to Certicom shareholders.
The board rejected the bid as significantly undervaluing the company, although it was 76% above the price Certicom shares had been trading just before the offer was made. SEDI records show only one Certicom insider making any purchases of Certicom shares on the open market in the last six months. Before RIM's offer, Certicom shares hadn't closed above $1.50 a share since September 17. So far, there have been no other offers for the company.
Certicom was founded in 1985 as Cryptech Systems and later changed its name to Mobius Encryption before becoming Certicom in 1995. Its core product was based on research from UW's Data Encryption Group (now the Centre for Applied Cryptographic Research), and co-founder and UW professor Scott Vanstone remains a director of Certicom, as well as the company's EVP of strategic technology. It was created during the Bob Nally era at UW and Nally's investment company later said it had invested $2.5 million in Certicom and sold its shares for $34.0 million between 1996 and 1998. Certicom went public with a TSX listing in 1995 and followed that with a Nasdaq listing in 2000.
Certicom became of Canada's great bubble-propelled moonshots in 2000, when its shares peaked at what would today be $125 (adjusted for a stock split) in March of that year. When the bubble burst, it took Certicom with it. By June 2001 its stock was under $5 and a year after that, it was below $1 and the company lost its Nasdaq listing. There have been occasional signs of life since then, but Certicom shares fell 69% in 2007 and began 2008 at $1.58.
Less contentiously, RIM also announced that it is acquiring Vancouver's Chalk Media Corp. for $23 million in cash. The deal must still be approved by Chalk shareholders and is expected to close in February. Chalk is the developer of the Mobile Chalkboard platform used to push multimedia content to BlackBerrys.
[5]---------------------------------------------------------------
RIM misses targets, but reports 66% growth
December 18, 2008
A rare subpar quarter for RIM -- which, in its case, means sales were only up 66% from the previous year -- with sales and profits falling below the company's forecasts. Not a big surprise, since the forecasts were made before the start of the economic collapse in September. In the period ended November 29 (Q3 09), it reported earnings of US$396.3 million on sales of US$2.78 billion, falling short of its targets of US$510-550 million and US$2.95-3.10 billion, respectively. The company issued an earnings warning on December 2 and followed with full results a couple of weeks later.
According to RIM, about a third of the shortfall was caused by the higher U.S. dollar (RIM reports its results in U.S. dollars). The 2.6 million new BlackBerry subscribers in the quarter fell 300,000 below the company's expectations.
The current quarter will include results from the holiday buying season in December, and RIM says it had a strong start to the period. It is forecasting sales of US$3.3-3.5 billion in Q4 with earnings of US$475-520 million and 2.9 million new BlackBerry subscribers.
RIM ended the quarter with US$2.49 billion in cash, up US$249.0 million from the end of Q2.
RIM disclosed just one new patent infringement suit brought against it in the quarter, along with two complaints to the U.S. International Trade Commission alleging infringement. And RIM filed its own suit in November seeking judgment of non-infringement, invalidity or unenforceability of four Kodak patents.
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Com Dev sales continue to climb
December 11, 2008
Com Dev ended its fiscal year with another good quarter, earning $4.3 million on sales of $59.8 million in the period ended October 31 (Q4 08). Sales were up 16% from last quarter and 38% from a year ago, and margins were up significantly from Q3, but so were expenses. The bottom line was a $500,000 improvement from the previous quarter. For the year, sales climbed 28% to $210.3 million with earnings of $12.4 million.
Com Dev received $60 million in new orders in the quarter and ended the year with an order backlog of $158 million. Com Dev USA contributed $6.5 million in sales in Q4, up from $3.6 million in Q3. Operations generated $11.3 million in cash, leaving Com Dev with $16.1 million in cash at year-end.
Com Dev is forecasting revenue growth of at least 10% in fiscal 2009.
The company also announced that CEO John Keating has joined its board of directors. Late in the month it was reported that Com Dev is one of a few companies working on a Canadian-designed lunar rover. New Hamburg's Ontario Drive and Gear is also involved.
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STOCK REPORT: Best month in two years for Com Dev shares
December 2008
We saw some stability in the markets in December, with only three declining stocks -- and one of them was just down a penny. It was the first time since August that there were more gainers than losers. Only two stocks had more than a 10% shift in December, and even one of those gets an asterisk.
For the month of December:
TurboSonic [OTCBB: TSTA] +120%
Com Dev [TSX: CDV] +19%
Descartes [TSX: DSG] +8%
Dalsa [TSX: DSA] +8%
RDM [TSX: RC] +5%
--S&P TSX VENTURE INDEX +4%
Open Text [TSX: OTC] +4%
Sandvine [TSX: SVC] +1%
Arise [TSX: APV] 0%
ATS [TSX: ATA] 0%
===============================
Biorem [TSXV: BRM] -2%
--S&P TSX COMPOSITE INDEX -3%
MKS [TSX: MKX] -8%
RIM [TSX: RIM] -9%
Com Dev shares had a strong month, although the jump wasn't an immediate response to the company's financial results. It was about two weeks after the results were announced that the stock started to take off. After a big October and a terrible November, December ended up being the best month for Com Dev shares since a 23% gain in July 2006.
TurboSonic shares had the same trading range in December as in November, but in November it closed at the bottom of the range (and was on the bottom of last month's list) and in December it closed at the top, giving the appearance of a huge gain.
Shares of Biorem, RDM, RIM, Sandvine, and TurboSonic all hit their low mark for the year in intra-month trading in December -- with RDM and Sandvine bouncing back before the end of the month.
Companies with core operations outside the area:
ON Semiconductor [Nasdaq: ONNN] +16%
McAfee [NYSE: MFE] +14%
Oracle [Nasdaq: ORCL] +10%
Google [Nasdaq: GOOG] +5%
Sybase [NYSE: SY] +1%
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Ansys [Nasdaq: ANSS] -3%
Blue Coat [Nasdaq: BCSI] -6%
NCR [NYSE: NCR] -7%
Adobe [Nasdaq: ADBE] -8%
Agfa-Gevaert [Brussels: AGFA] -21%
Acorn Energy [Nasdaq: ACFN] -30%
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Miscellaneous Tidbits
- Open Text is looking to hire about 200 people in Waterloo over the next few months. It held a recruitment open house in December. Open Text has 3,500 employees worldwide, but only about 15% of them are in Waterloo. With this round of hiring, the Waterloo office will grow to around 700 people.
- David Strucke has left Navtech, where he had been CEO for seven years. He joined the company in 1999, initially in financial roles, becoming CFO before being appointed CEO.
- Coreworx announced that it recently signed three contracts with a total value of $3.1 million. Specific customers were not disclosed, but the company also issued a news release discussing its work with CITC Pacific Mining on a project in Australia -- a big contract that Coreworx won in 2007.
- ATS is raising $50 million through a bought deal share offering that it expects will close this week. Under the terms of the deal, the company will sell 10 million shares at $5 each. If the underwriters exercise their full overallotment option, it would provide an additional $7.5 million in gross proceeds.
- Arise has signed a four-year PV cell supply deal that it says will be worth about $200 million if all cells are taken by the buyer. The deal is with Germany's Asola Advanced and Automotive Solar Systems GmbH.
- Covarity announced a multi-year deal to provide its commercial loan management software to BMO. The software will be used at more than 900 Bank of Montreal branches across Canada.
posted by Gary Will at 1:01 AM
