January 2003

Compiled and written by
Gary Will

E-mail:
gary@garywill.com

Issue 71 -- February 3, 2003
In this digest:

1. Open Text reports record quarterly revenue
2. Open Text agrees to acquire Eloquent
3. STOCK REPORT: RDM moves to TSX after big month

4. Navtech finishes turnaround year with strong fourth quarter
5. Mitec makes $11.9M claim against Com Dev
6. Miscellaneous tidbits from Dalsa, Sandvine, Knexa, RDM, CME Telemetrix, Northern Digital, BlueNexus, Covarity, Virtek, RIM, MKS.

Open Text reports record quarterly revenue
January 23, 2003

Open Text continues to disappoint those who shorted the company's stock. For the quarter ended December 31 (Q2 03), the company reported record revenue of US$43.0 million and net income of US$6.2 million (US$0.31/share).

Revenue was up 14% from the previous quarter, partly due to the acquisition of Centrinity during Q3. But even after backing those number out, the company still logged a 10% sequential increase in sales. Revenue was up 8.5% from the same period last year.

The number of million-dollar deals closed in the quarter fell to four from five in the previous quarter and six in Q4. Average deal size fell from US$300,000 to US$250,000.

Operations provided US$11.7 million in cash, which is about equal to the cash that was used to acquire Centrinity. Open Text also spent US$1.1 million to repurchase 43,500 of its common shares. Cash balance at the end of the quarter was US$102.3 million, down only $672,000 from Q2.

Open Text agrees to acquire Eloquent
January 9, 2003

Open Text expects to acquire Eloquent Inc. of San Mateo, Calif., a developer of sales effectiveness software. It will pay up to US$6.7 million for Eloquent, or about US$0.34 a share. That amount could be reduced somewhat depending on how much cash Eloquent uses before the deal closes. Of the purchase price, US$1 million will be held in escrow to help protect Open Text from any effects of legal proceedings against Eloquent.

Eloquent shares had been climbing for the two weeks before the deal with Open Text was announced and were up to US$0.43 a share when the announcement was made. They lost a third of their value on the day of the announcement.

Eloquent was founded in 1995 and went public in February 2000 with an IPO that raised US$83 million. It stock traded in the US$40 range for a few weeks after the IPO and then the markets collapsed, taking Eloquent's stock with them.

CEO Cliff Reid said Eloquent was losing business because potential customers were anxious about the company's financial situation. Eloquent's board decided a year ago to look for a buyer and the company says it talked to over 60 companies over the last six months. It first met with Open Text in August. Eloquent says that one of Open Text's concerns was a series of class action lawsuits brought against the company related to the IPO (in the U.S. these kind of suits are filed just about every time a company's stock crashes).

The acquisition is expected to close by the end of March and still has to be approved by Eloquent shareholders.

STOCK REPORT: RDM moves to TSX after big month
January 2003

RDM shares jumped to their highest monthly close in a year and logged their biggest calendar-month gain since the good-ol' days of the first half of 2000. The company's stock is set to move to the Toronto Stock Exchange today, retaining its RC ticker.

For the month of January:

RDM [TSX: RC] +41%
Turbosonic [OTCBB: TSTA] +15%
Virtek [TSX: VRK] +13%
Open Text [TSX: OTC] +13%
CME Telemetrix [TSXV: YME] +5%
MKS [TSX: MKX] +2%
Navtech [OTCBB: NAVH] 0%
================================
--S&P TSX COMPOSITE -0.7%
Com Dev [TSX: CDV] -1%
Descartes [TSX: DSG] -3%
Dalsa [TSX: DSA] -5%
RIM [TSX: RIM] -6%
EMJ [TSX: EMJ] -7%
Finline [TSXV: FIN] -14%

Companies with headquarters outside the area:

Blue Coat [Nasdaq: BCSI] +43%
Eiger Technology [TSX: AXA] +25%
CheckFree [Nasdaq: CKFR] +20%
Siebel [Nasdaq: SEBL] +13%
Sybase [NYSE: SY] +7%
Senesco [Amex: SNT] +7%
Adobe [Nasdaq: ADBE] +7%
CVF Technologies [Amex: CNV] +6%
Agfa-Gevaert [Brussels: AGFA] +3%
Engineering.com [TSXV: EGN] 0%
=================================
Network Assoc [NYSE: NET] -5%
Bio-Rad [Amex: BIO] -9%
LSI Logic [NYSE: LSI] -24%
Knexa.com [TSXV: KNX] -33%

Navtech finishes turnaround year with strong fourth quarter
January 30, 2003

For the quarter ended October 31, 2002 (Q4 02), Navtech reported net income of US$153,000 on sales of US$1.7 million. Revenue was up 16% from the previous quarter.

For the year, sales of US$6.3 million were down slightly from 2001, but the bottom line shows how much the company's finances have improved. A year ago, Navtech lost US$1.8 million; in 2003 the company earned US$409,000.

R&D expenses, which had been cut to the bone, grew 59% sequentially in Q4 and are now up to 8% of revenue -- which is still low.

Over the year, operations provided US$698,000 in cash, enabling the company to reduce its debt and its working capital deficiency. It ended the year with a working capital deficiency $464,000, a significant improvement from US$900,000 a year ago and US$673,000 at the end of Q3. Navtech had $208,000 in cash at October 31, up US$79,000 over the quarter.

Mitec makes $11.9M claim against Com Dev
January 31, 2003

A cryptic news release from Com Dev on Friday said that the company "sees little" in a letter from Mitec Telecom "claiming for indemnification from Com Dev in the aggregate amount of $11,868,302."

"Indemnify" has at least two meanings. In its more common use, it means to secure against loss, but it can also mean "to provide compensation." Com Dev says its lawyers are assessing Mitec's claim.

Mitec bought Com Dev's wireless components business just over a year ago for about $20 million. It is now desperate for cash to stay alive.

Moving on to another of Com Dev's abandoned diversification projects, Montreal's SR Telecom announced that it has acquired the assets of M/ERGY from Axio Wireless. Purchase price was $1 million. Com Dev spent more than $50 million developing M/ERGY before giving it to its managers last year. SR says it intends to commercialize the product through its existing global sales network. SR and Axio Wireless, the company founded by the former Com Dev managers, have entered into an agreement to provide software licensing and support services.

Miscellaneous Tidbits

• Dalsa received a $2.2 million production order from an unidentified "producer of capital equipment for the semiconductor manufacturing industry." The order is for digital cameras to be delivered over the next 12-15 months.

• Sandvine has opened an office in the UK that will serve as its European, Middle East and African headquarters. The office is headed by ex-PixStreamer Chris Colman.

• J. Paul Haynes, founder of JPH International which evolved into EVER America, has already left Knexa's board of directors. Knexa acquired the business in November.

• Bob Nally has stepped down as chairman of RDM and has been succeeded by Tom DiGiacomo, who was RDM's interim CEO three years ago. Nally will remain on the company's board.

• George Masters, who was chairman of CME Telemetrix until June 2001, is resigning from the company's board at the end of this month. His spot will be filled by Paul Rode, who has been Motorola's observer to CME's board since last year.

• Kevin Crowley wrote in The Record that NDI's revenue in fiscal 2003 (ending this month) is expected to be around $29 million. That's the same level it was at two years ago.

• Unbeknownst to some of the people who used to work at the company, BlueNexus was apparently resurrected to some degree a couple of months ago with a new president, Gordon Morison, listed on the Web site.

• Covarity announced that Mennonite Savings and Credit Union has been using its ClearCredit risk management product for the last three months. ClearCredit was formally launched in December. I never mentioned last year that Covarity's CEO is Ron Shuttleworth, a former executive-in-residence at VenGrowth who was previously with ChannelWave Software. Shuttleworth had also been listed last year as an advisor to Cambridge's LogiSense Corp. Covarity recently moved into BlueNexus' old offices at 72 Victoria.

• Virtek placed a notice on its Web site looking for a US$5-10 million investment in FONA. It says it will use the money to hire a CEO for the company and to complete the design of the commercial release of the biosensors and detector instruments. Virtek claims that FONA's initial product has a US$250 million market opportunity and future products are targetted at a US$1.1 billion market. It also received a U.S. patent for its FONA technology in January.

• RIM announced that the U.S. Patent and Trademark Office has ordered a reexamination of some of the NTP patents that a jury said it had infringed on (see November digest).

• CourtLink reported that RIM made a new filing against Good Technology on January 22. It's probably related to the complaints that have already been announced.

• Handspring, whose market value has fallen to under CDN$190 million, was talking about the value of working with RIM, leading some observers to speculate that the company wouldn't mind if RIM used some of its cash to acquire it.

• MKS wants to extend the expiry date on 926,000 warrants it granted to Yorkton Securities and TD Securities two years ago. The warrants are set to expire in three weeks. MKS wants to extend that to April 29. The exercise price of the warrants is $1.35 a share and MKS stock closed Friday at $1.15. If exercised in full, the warrants would provide MKS with $1.25 million.