October 2000

Compiled and written by
Gary Will

E-mail:
gary@garywill.com

Issue 44 -- November 7, 2000
In this digest:

1. PixStream agrees to pay UBS $25M to settle suit
2. JPH International acquired by French firm
3. Intellitactics raises US$6.5 million in first-round financing
4. RIM share offering raises $929.4 million
5. RIM founders and CEOs give $120 million for physics institute

6. Descartes raises $192M; DALSA gets $8M
7. Open Text acquires California software developer for US$6.5M
8. Open Text revenues climb 18%; looks to spin out b2bScene
9. Dalsa reports steady quarter
10. Rodin Communications completes reverse takeover

11. STOCK REPORT: Com Dev shares at highest point since 1998
12. Miscellaneous tidbits from Waterloo Maple, MKS, Finline, Packet Works, AccessTNG, Quack.com, INM

PixStream agrees to pay UBS $25M to settle suit
October 30, 2000

The lawsuit filed by Unique Broadband Systems against PixStream was quickly settled, with PixStream agreeing to pay UBS $25 million in cash without admitting any liability. The settlement is contingent upon PixStream's acquisition by Cisco, which is expected to close next month.

Cisco shares have fallen more than 20% in the two months since the PixStream deal was announced (and today could be a volatile day after the announcement of Cisco's quarterly results after the bell on Monday).

JPH International acquired by French firm
October 16, 2000

Waterloo's JPH International has a new owner -- EVER SA of Lyon, France. EVER acquired the assets of JPH from Calgary's Enbridge, which had been JPH's owner for the last three years. Financial details were not disclosed.

JPH's assets have been transferred to a new company, EVER America Corp. which will continue to operate as JPH International. J. Paul Haynes remains CEO and owns 20% of the new corporation. JPH has 37 employees, according to the release.

EVER specializes in document management and among its customers are the City of Paris, the City of Nice, and other governmental organizations that will be potential customers for JPH's CRM applications. It says its combined annual revenues following the acquisition are about $26 million.

Intellitactics raises US$6.5 million in first-round financing
October 10, 2000

Intellitactics has closed a US$6.5-million round of financing, led by Baltimore-based venture capital firm JMI Equity Fund and Cabletron Systems of New Hampshire.

According to the release, Intellitactics will be working with Cabletron's Aprisma Management Technologies subsidiary, which calls itself a provider of "e-business infrastructure management software." Cabletron has a market cap of about US$5 billion.

Intellitactics says the money will be used in part to acquire "businesses, products, and technologies." The company employs 60.

RIM share offering raises $929.4 million
October 26, 2000

RIM has closed an offering of 6 million common shares at a price of $154.90/share for net proceeds of $929.4 million. The company will put about $893.9 million of that into its coffers, with the balance going to the underwriters, led by Merrill Lynch. Expenses related to the offering are expected to be around $1.4 million.

An additional 900,000 shares are available through the underwriters' over allotment option, which expires later this month. If those shares are sold, it would boost RIM's net to over a billion dollars.

There are now about 78 million outstanding shares in RIM, which gives the company a market capitalization of more than $12 billion.

RIM founders and CEOs give $120 million for physics institute
October 23, 2000

Mike Lazaridis, Jim Balsillie, and Doug Fregin have provided $120 million to launch the Perimeter Institute for Theoretical Physics, scheduled to open in the fall of 2001.

Perimeter Institute (PI -- the logo is like the Greek letter) will operate independently of any university and is expected to begin operations with 10 to 15 researchers and grow that number to 40 over its first five years.

The institute will be built on the site of the Waterloo Memorial Arena -- aka "the bubble" -- which will be torn down in the spring. City of Waterloo council is voting as I write this on Monday night and will no doubt approve a 50-year lease with two 25-year renewals at Perimeter's option. Perimeter would pay the City $1 per year in rent through the entire term of the lease and all buildings on the site would become city property when the lease expires or sooner if Perimeter ceases operations.

The City has also just purchased the railway station that is across the train tracks from the institute site.

Lazaridis will provide $100 million for the institute while Balsillie and Fregin will give $10 million each.

Descartes raises $192M; DALSA gets $8M
October 2000

Some more big money financing closing or announced in October:

• Descartes raised $192 million through a bought-deal share offering of 3 million shares at $64.00/share.

• DALSA raised $8 million through an offering of 1 million warrants at $8.00/warrant. Each warrant is exercisable for one common share and half a warrant to purchase an additional share for $8.75 over the next two years. Yorkton Securities was the agent for the offering.

• Com Dev added an extra 150,000 warrants to the underwriters' over allotment option for its offering, mentioned in the last digest. That added an extra $1.8 million to the size of the offering, bumping the total gross proceeds up to $33.1 million.

• GUARD, whose market cap has fallen below $7 million following a lengthy decline its share price, says it is trying to raise between $15 and $25 million through an unspecified equity financing, led by Harris partners and First Delta Securities.

• One of GUARD's subsidiaries, Elite Display Systems, is looking to raise $10 million through Canaccord Capital.

Open Text acquires California software developer for US$6.5M
October 25, 2000

Open Text has paid US$6.5 million in cash for Bluebird Systems of Carlsbad, California. Bluebird has 68 employees and annual sales of US$6.5 million. Open Text says Bluebird is profitable and should add about $200,000 in quarterly net income. It forecasts a 35% revenue growth rate for Bluebird, which will operate as a division of Open Text.

Bluebird was founded in 1982 and has recently described itself as a specialist in "workflow-enabled document imaging solutions." Its products included applications that don't fit into Open Text's business -- such as the SuperDOS operating system and Receipt Manager for credit unions -- but Open Text CEO Tom Jenkins said on the conference call that these are among a group of Bluebird assets that had been spun off into a separate company before the acquisition. Open Text describes Bluebird as a specialist in the delivery of solutions for PeopleSoft applications.

Open Text revenues climb 18%; looks to spin out b2bScene
October 26, 2000

For the quarter ended September 30 (Q1 01), Open Text reported revenue of US$30.0 million, up 18% from a year ago. Net income was US$2.9 million (US$0.13/share), excluding a US$800,000 acquisition-related amortization charge.

Over half of those profits was provided by interest income of US$1.6 million. Open Text had US$109.3 million in cash at the end of the quarter, down US$4.6 million over the quarter. The company says that operations provided $4.7 million in cash, excluding a large one-time income tax payment. Working capital is US$100 million.

Revenues were down 7% sequentially, but Open Text traditionally has lower licensing revenues in Q1 than in the previous quarter. This year, licensing revenues declined 20% from a strong Q4 while service and maintenance revenues climbed 9%.

Sales and marketing expenses fell 15% from the previous quarter and were flat with the year-ago period.

In its conference call, the company said it's ASP business has booked US$5.2 million in orders expected to be filled over the next year. Its European partnership with KPNQwest, announced in April, is now in operation with 40 new corporate customers. Open Text signed an additional 60 new corporate customers over the quarter and new customers accounted for 49% of license revenue over the period.

In the conference call, Jenkins said that the company's b2bScene division has received a term sheet from a lead investor and that Open Text is looking to spin off the division with shares in b2bScene transferred to Open Text shareholders via a dividend scheme.

IBM's Lotus Notes remains Open Text's largest competitor, although IBM was one of the companies listed as Open Text customers in the end-of-quarter summary.

Dalsa reports steady quarter
October 26, 2000

For the quarter ended September 30 (Q3 00), Dalsa reported revenues of $13.7 million -- up 29% from a year ago, but only 2% sequentially. Net income, excluding acquisition-related costs, was $1.25 million ($0.11/share), down 20% from the previous quarter.

R&D spending increased by 29% from the previous quarter to $3.3 million or 24% of revenue. Working capital is $7.9 million with $2.9 million in cash, down $866,000 over the quarter. (This was before the warrant offering mentioned above.)

The company reported a sales backlog of $14.8 million at quarter-end. It also announced that subsequent to the reporting period, it received a $1.1 million order from Toshiba for the Dalsa Spyder camera. Toshiba will use the cameras in its electronic inspection systems.

Rodin Communications completes reverse takeover
October 31, 2000

Rodin Communications of Cambridge has merged with Cheni Resources Inc., a former mining company listed on the TSE. Cheni's shares were suspended by the exchange earlier this year and Rodin is now seeking to be listed.

While Cheni's mining operations shut down years ago, the company maintained a healthy balance sheet with a strong cash position, which will benefit the cash-poor Rodin. At May 31, Rodin's balance sheet showed a working capital deficiency of $650,000, but the combined companies had proforma working capital on the same date of $5.1 million.

Over the first seven months of fiscal 2000 (ended October 31), Rodin had revenues of $1.5 million and net income of $167,000. In 1999 the company had sales of $2.5 million, down from $2.8 million in 1998 and $3.5 million in 1997.

Rodin's financial statements also show that the company has borrowed $200,000 from Newbridge Networks over the last 18 months. Newbridge is one of Rodin's key suppliers as it builds what it describes as a "cross-Canada wide area network."

Rodin says it now has 2,000 customers in Southern Ontario.

STOCK REPORT: Com Dev shares at highest point since spring 1998
October 2000

Com Dev shares continued their recent climb, closing October at $17.25. It's their highest monthly closing price since the shares collapsed in mid-1998. Com Dev stock has now gained 163% in value over the last four months. In October, the company announced a pair of multi-million dollar deals for its space division.

Open Text shares got a nice bump from its quarterly results, gaining 33% over the last three days of trading in October.

Monthly stock movement for October:

Open Text [TSE: OTC] +31%
Com Dev [TSE: CDV] +29%
RDM [CDNX: RC] +6%
RIM [TSE: RIM] +2%
Virtek [TSE: VRK] -4%
Dalsa [TSE: DSA] -14%
CME Telemetrix [CDNX: YME] -17%
Descartes [TSE: DSG] -17%
Gensel Biotech [CDNX: GSB] -18%
MKS [TSE: MKX] -19%
Finline [CDNX: FIN] -32%
GUARD [CDNX: GUA] -34%

Miscellaneous Tidbits

• Jim Cooper has become president (and presumably CEO, although the release doesn't say so) of Waterloo Maple, where he has been exec VP of R&D since June 1999. Cooper is Maple's third president in the last three years. Dieter Hensler resigned in May 1998, while Ian Suttie was at the helm from February 1999 until leaving to join PrinterOn three months ago.

• Anthony Hull has resigned from MKS' board. He had been a director of the company since April 1997 -- before MKS' IPO later that year. Rejoining the board after a two-month sabbatical is Alex White, MKS co-founder and the company's second largest shareholder. White did not stand for re-election to the board at MKS' AGM in September, but had previously served as a director since the company began.

• Finline announced that it has fired Todd Grunberg, the COO it hired just five months ago. It's the second time in two years that Finline has parted ways with a COO that it had hired only months earlier. No update yet on Finline's announced deal in Cuba, which the company said was expected to close by October 16.

• Packet Works, the host of garywill.com (although I don't believe that's how it promotes itself), has become a subsidiary of AccessTNG. John Fagg, Packet Works founder and CEO, is CTO of AccessTNG. The company is headed by Eric Meger, who was COO of OnSat.net Canada for most of the last year.

• AOL has launched its "AOL by Phone" service, using technology developed by Quack.com. Quack, which has a research office in Waterloo, was acquired by AOL at the end of August.

• Markham's VoiceIQ (formerly BCB Voice Systems), which owns about a third of Waterloo's INM and is looking at merging the two companies, raised $9 million (gross) in October through a share offering.