January 2004

Compiled and written by
Gary Will

E-mail:
gary@garywill.com

Issue 83 -- February 2, 2004
In this digest:

1. RIM tops $10B market value after share offering
   
2. Dalsa saves its best quarter for year-end
   
3. Open Text flexes its muscles for Ixos shareholders

4. THL sells its stake in Com Dev
   
5. Navtech completes profitable year
   
6. STOCK REPORT: Navtech and Virtek valuations play catch-up

7. Miscellaneous tidbits from Agfa, ARISE, CME, LogiSense, Reqwireless, eSolutions, RIM, RDM, Descartes

RIM tops $10B market value after $1.2B share offering
January 21, 2004

I said in the year-end digest that RIM's 2003 was like 1999, so I guess it makes sense that 2004 is looking a lot like 2000. RIM's stock offering ended up grossing $1.2 billion, surpassing the billion dollars that the company raised in its 2000 offering. After the underwriters' commission of US$37.8 million, RIM will keep net proceeds of US$907 million.

RIM sold 12.075 million new shares at US$78.25 each, which was CDN$101.80 at the time the offering closed. That's a price RIM shares hadn't seen in all of 2003, and 2002, and almost all of 2001. For the last three years, anyone could have had all the RIM shares they wanted for a price well below what the company received through this offering, and now they can't buy enough at that price. The offering was expanded from the 10.35 million shares that were initially up for sale (see December digest).

RIM now has about 91 million shares outstanding, and at Friday's closing price of $115.18, that works out to a market capitalization of $10.5 billion. That puts RIM in the same valuation ballpark as Magna, Bombardier, and Enbridge.

(And Nortel has just re-taken the title of Canada's most valuable corporation from the Royal Bank, so it really does feel like 2000 all over again.)

Dalsa saves its best quarter for year-end
January 29, 2004

Dalsa's traditional digital imaging business bounced back from some lukewarm quarters to end the year strongly, posting sales of $24.1 million in the quarter ended December 31 (Q4 03). That's a 27% increase from the previous quarter. The company said sales to the semiconductor inspection market were particularly strong in Q4.

Overall, Dalsa earned $4.2 million ($0.25/share) on sales of $37.7 million. Revenue was up 14% from Q3 and 10% from a year ago. Digital imaging accounted for 65% of the profits, up from just 23% in Q3. Revenue from Dalsa's semiconductor business was $13.6 million, down 3% sequentially.

Operations generated $8.5 million in cash, up from $7.2 million in Q3. Dalsa used $2.7 million to repay all of its remaining bank debt. The company ended the quarter with $3.0 million in cash, a $4.8 million improvement in its net cash from the beginning of the quarter. Capital expenses used $3.0 million in cash.

During the quarter, Dalsa used the last of its TPC funding for the development of its digital cinema technology.

For the year, sales were $136.7 million, up 21% from 2002. Net income for 2003 was $11.6 million ($0.69/share), up slightly from $11.5 million in the previous year.

Dalsa is targetting sales of $155-163 million for 2004, an increase of 13-19%. Net income forecast is $15.5-16.5 million, about $4-5 million more than in the previous two years. It expects Q1 revenue will be lower than that in Q4, which is usually the case for Dalsa.

Open Text flexes its muscles for Ixos shareholders
January 22, 2004

Open Text rebounded from a relatively weak Q3 to post strong numbers in the quarter ended December 31 (Q2 04). The company completed two acquisitions in the quarter, and that helped boost sales to US$61.7 million, up 40% from Q1 and 43% from a year ago. Net income was US$7.7 million, up from US$3.4 million in the previous quarter.

License revenue was up 65% sequentially and 61% from a year ago to US$27.9 million. About one-sixth of the quarter-over-quarter increase came from acquisitions, with the remaining 55% being organic growth.

Cash at the end of Q2 was US$112.3 million, down US$8.5 million over the quarter. Operations generated US$5.2 million in cash and $13.2 million was spent on the two acquisitions.

Open Text quickly announced the record results in an attempt to impress the shareholders of Ixos, who had to decide in January whether to tender their shares to Open Text's acquisition bid (see October digest). The acceptance period was supposed to expire on January 16, but as of January 13 only 42% of Ixos' outstanding shares had been tendered -- and three-fifths of those shares came from Ixos' largest shareholder. That led Open Text to extend the bid to January 30 and to waive the condition in its offer that 67% of Ixos shares had to be tendered.

As of January 13, of the Ixos shareholders who had accepted Open Text's offer, about one-quarter wanted cash and the other three-quarters preferred to take shares and warrants in Open Text. At current prices, the Open Text stock being offered for each Ixos share is worth considerably more than the cash alternative and are valued at a significant premium to Ixos' current share price, so it is still likely that the acquisition will be completed.

[Just as I was sending out the Digest, the announcement was made that 70% of Ixos shares have been tendered and that over 90% of the shares have been tendered for Open Text shares and warrants. There will now be an additional two-week acceptance period which Open Text says is mandatory under German law.]

THL sells its stake in Com Dev
January 14, 2004

Technology Horizons Ltd. (THL) has sold all of its remaining shares in Com Dev. It sold just under 3 million shares -- about 5% of the company -- at $2.85 a share for gross proceeds of $8.5 million. THL recently received $5 million as the initial installment of the $20 million Com Dev owes to THL (see previous digests).

"The marketplace in general did not have a favourable view of the concentration of ownership in our company by a related party such as THL," said Com Dev CEO John Keating in a release.

Most of THL's shareholders, including its largest shareholder, Val O'Donovan, continue to own shares in Com Dev.

I just noticed that SEDI, Canada's embarrassingly poor insider trading reporting system, still has no record of Com Dev shares held by John Keating or Keith Ainsworth or Val O'Donovan or several other company executives and directors. Com Dev seems to be the only company tracked here that hasn't filed complete insider reports with SEDI.

Navtech completes profitable year
January 29, 2004

Navtech ended its fiscal year with sales of US$1.8 million in the quarter ended October 31 (Q4 03). That was flat from the previous quarter, but an improvement in margins and a reduction in expenses led to what appears to be an operational income of US$95,200, which was an improvement from US$40,200 in Q3.

For the year, Navtech earned US$705,000 (US$0.15/share) on sales of US$6.9 million. Revenue was up 11% from 2002, when the company earned US$409,000. Navtech's bottom line this year was helped by a US$312,000 gain from income tax recovery as well as a US$160,000 bad debt recovery.

The company continues to chip away at its working capital deficiency, which is now down to US$111,000 from US$464,000 at the beginning of the year. It expects to eliminate the deficiency in 2004. Cash at year-end was US$139,000 and operations generated US$323,000 in cash over the year.

Navtech continues to spend a minuscule amount on R&D. Its R&D expenses for the year were less than 7% of revenue, and the percentage was even lower in Q4. It says it has begun working on the next generation of its technology and that R&D will be "an area of focus" in 2004.

The company had 93 employees in November, which included its new CFO, Gordon Heard, who was previously with Descartes.

Navtech says it hopes to expand into the Asia Pacific market. It has hired a salesperson for the area and is in tests with an initial customer from the region.

STOCK REPORT: Navtech and Virtek valuations play catch-up
January 2004

No sooner had I mentioned in the last digest that Virtek and Navtech were the only two companies tracked here that were valued below their run-rate gross profits when -- boom -- it was no longer the case. They were the two biggest gainers of the month. Virtek shares closed the month above $1 for the first time since the summer of 2002.

They're still the two companies trading at the lowest multiple of gross profits -- Navtech at 1.1x and Virtek at 1.2x. The next-lowest is MKS at 2.3x. Virtek had reached the 1x mark at the beginning of January, but then saw its shares jump over 40% in the second week of the new year. RIM is now up to 27x.

For the month of January:

Navtech [OTCBB: NAVH] +46%
Virtek [TSX: VRK] +41%
Open Text [TSX: OTC] +37%
RIM [TSX: RIM] +33%
MKS [TSX: MKX] +19%
Dalsa [TSX: DSA] +19%
ARISE [TSXV: APV] +16%
Descartes [TSX: DSG] +14%
RDM [TSX: RC] +14%
Com Dev [TSX: CDV] +9%
--S&P TSX COMPOSITE INDEX +4%
CME Telemetrix [TSXV: CEM] +3%
--S&P TSX VENTURE INDEX +2%
===============================
Turbosonic [OTCBB: TSTA] -7%

RIM shares have now gained value in 11 consecutive months, which is a record among the companies followed here since 1998. Over that period, RIM stock has gone up 515%.

Dalsa shares closed the month almost exactly where they were a year ago, erasing 11 months' worth of losses.

Companies with headquarters outside the area:

Eiger Technology [TSX: AXA] +30%
Knexa [TSXV: KNX] +20%
LSI Logic [NYSE: LSI] +16%
Network Assoc [NYSE: NET] +15%
CheckFree [Nasdaq: CKFR] +14%
Blue Coat [Nasdaq: BCSI] +11%
CVF Technologies [Amex: CNV] +10%
SBS Technologies [Nasdaq: SBSE] +8%
Sybase [NYSE: SY] +5%
Agfa-Gevaert [Brussels: AGFA] +4%
==================================
Adobe [Nasdaq: ADBE] -2%
Ansys [Nasdaq: ANSS] -4%
Siebel [Nasdaq: SEBL] -4%
Bio-Rad [Amex: BIO] -6%
Senesco [Amex: SNT] -14%

Miscellaneous Tidbits

• There was a significant round of layoffs at Agfa HealthCare Informatics -- the former Mitra -- in January. At least 40 people in Waterloo lost their jobs. The writing had been on the wall for a few months as the company went through a restructuring. Additional jobs were cut at the company's Milwaukee office. Agfa still employs 300 people in Waterloo.

• ARISE says it's trying to raise $5 million through a private placement led by Research Capital. It did not say how it has priced or structured the offering. ARISE's market capitalization at the end of January was just over $6 million so, as expected, there will be some significant dilution of existing shareholders if the offering is successful.

• CME Telemetrix hasn't been able to close its private placement and has postponed the closing date to February 6 -- this Friday. It's the second time the closing has been postponed. To keep afloat, the company sold the rights to its food analyzer business (which generates very little revenue) as well as some unspecified "non-essential intellectual property rights." CME hasn't yet disclosed how much it received for these assets.

• LogiSense's EngageIP Hotspot Suite is being used by Idaho- and Toronto-based Truckstop.net, which creates Wi-Fi hotspots at truck stops and other sites serving truckers across the U.S. and Canada. Truckstop.net expects to have 511 locations running by the beginning of April and hopes to add about 200 additional sites each month over the next year. According to Truckstop.net, 25% of truckers currently use laptop computers.

• Reqwireless has signed a distribution agreement with Sony Ericsson, which will see all of the Reqwireless applications distributed through Sony Ericsson's existing channels worldwide.

• Waterloo's eSolutions Group, a division of Conestoga-Rovers & Associates, was in the news for developing the leadership campaign website for Belinda Stronach, belinda.ca.

• RIM took sixth place in the annual KPMG/Ipsos-Reid survey of Canada's most respected corporations. It finished eighth in 2002 and sixth in 2001.

• RDM settled its copyright infringement suit against Ingenico. The suit was filed in September 2002. Details of the settlement were not disclosed.

• Florida-based Arrival Star Inc. has filed a patent infringement suit against Descartes. In 2002, Arrival Star filed suit claiming patent infringement against 14 corporations, including Delta Airlines, American Airlines, The City of Atlanta, and American Express, so Descartes is in good company. The complaint against Descartes was filed in the U.S. District Court for the Southern District of New York.