| 1. | RIM | +551%
| 2. | Descartes | +213%
| NASDAQ COMPOSITE | +86%
| 3. | *Control Advancements | +79%
| GLOBE&MAIL TECHDEX | +63%
| 4. | Virtek | +62%
| 5. | DALSA | +55%
| 6. | *RDM | +41%
| 7. | CME Telemetrix | +40%
| TSE 300 COMPOSITE | +30%
| 8. | MKS | +17%
| 9. | *Finline | +13%
| 10. | Open Text | -31%
| 11. | Com Dev | -40%
| 12. | GUARD | -60%
| | | | | | | | | | | | | | |
In December, the Descartes rocket continued on all burners, gaining 111% to close the month at $31.75 -- more on momentum than any particular news. This followed a jump of 166% in November.
Although Open Text shares lost nearly a third of their value in 1999, they finished the year with two strong months, gaining 19% in December following a 25% jump in November. The same is true for Com Dev -- up 67% over Nov-Dec.
Shares of CME Telemetrix have now gone up 72% over the last two months, despite the absence of any news since the summer.
RIM's streak of monthly gains was stopped at nine months by a 12% drop in December to $66.70. The shares traded as high as $87.50 during the month and as low as $54.00.
Looking at companies with development offices in Waterloo, Cyberplex stock had another great month, gaining 62% to $18.25, following a 63% increase in November.
Excluding Descartes, the most interesting stock story this month involved EMJ of all companies. Over the last year and a half its shares have been anything but volatile, flatlining in the $3-$3.50 range.
That all changed with December's Linux frenzy. When California's VA Linux had the most explosive IPO in history -- gaining 697% in its first trading session on December 9 -- it carried on its coattails just about every public company that had ever mentioned Linux in a news release.
In Canada, Corel's Linux ties initially saw its shares zoom (this was followed by a big drop and an earnings warning, but unfortunately it didn't happen quickly enough to prevent Michael Cowpland from showing up on TV and in the papers), but another beneficiary of Linux insanity was EMJ. In September, EMJ announced its own compact Linux distribution -- developed by EMJ Embedded Systems in Apex, NC (just southwest of Raleigh). Even though the word "Linux" doesn't appear once in EMJ's recent annual information form (dated October 15), the connection was still good enough to send EMJ shares from $3.25 on December 9th to $12 at the opening on the 10th -- the highest price they've seen in years.
EMJ's average trading volume had been below 4,000 shares per day, but 1.5 million shares changed hands on the 10th. By December 22, EMJ stock had dropped below $4, but at month-end it rebounded to $5.50 -- good for a 75% gain in December.
Descartes share offering will raise $60-69 million
December 21, 1999
Descartes has put together a "bought deal" with Griffiths McBurney and RBC Dominion Securities that will see those two firms purchase and resell 3 million Descartes shares at a price of $20 per share.
Since this is well below the current market price (Descartes shares traded above $20 for the first time ever on December 17 and hit $30 on the first day of trading after Christmas; they traded at $5.00 as recently as November 8), there's a good chance the over-allotment option of an additional 450,000 shares also be sold. That would create total gross revenues of $69 million (of which $65.9 million would go to the company -- about US$45 million). This will more than make up for the cash that has been whittled away from the balance sheet by recent losses.
The prospectus filed by Descartes does list acquisitions as one possible use for the money, although that line is essentially boilerplate material these days.
The company initially announced it was selling 2.5 million shares at $20, but within hours Descartes distributed a new announcement of the 3 million share offering.
Descartes signs Foster's Brewing, partners with Cap Gemini
December 17 & 20, 1999
In a one-sentence news release, Descartes announced that Foster's Brewing Group of Australia has selected Descartes' DeliveryNet product. Terms weren't announced, although the deal was estimated to be in the $2-3 million range. Although Descartes' traditional strength was in various bottling & distribution industries, this is the first DeliveryNet deal the company has signed with a consumer packaged goods customer.
The company also unveiled a partnership with France's Cap Gemini -- a global IT and management services company. The alliance should strengthen Descartes' visibility in Europe.
RIM's BlackBerry on a roll; BellSouth sales disappoint
December 21, 1999
Mixed news from RIM and a correspondingly schizophrenic market response this month. For the quarter ended November 30 (Q3 00), RIM reported net income of US$3.2 million (US$0.05/share) on revenue of US$23.7 million (RIM has switched to U.S. dollar reports beginning this quarter).
Revenues were up 35% from the same period last year, and 22% above the previous quarter.
The good news was the booming success of RIM's BlackBerry service, which accounted for 20% of revenue in Q3 -- up from 5% last quarter. BlackBerry sales of US$5.0 million were up 150% from Q2. BlackBerry revenues are expected to overtake pager sales this quarter to become the largest component of RIM's revenues. RIM co-CEO Jim Balsillie said that BlackBerry had 12,000 subscribers in 1,800 companies at the end of the quarter. "It's excelerating beyond our expectations," he said in the conference call.
Interactive Pager sales contributed 50% of RIM's revenues -- down from 68% in Q2 -- and declined by 11% from the previous quarter to US$11.5 million.
Revenues and margins for the quarter were aided by a one-time jump in custom engineering revenues. OEM sales were also strong -- up 40% from the previous quarter to US$4.7 million.
BellSouth and RIM did finally come to terms on a new interactive pager supply contract in December, but the bad news was that sales through BellSouth channels have been slower than hoped for, and the new contract doesn't begin until April. Under the new contract, BellSouth has only committed to taking 100,000 units, but that number could be expanded if demand warrants it.
Poor sales from troubled PageNet were pointed to as one cause of the shortfall, but another difficulty is the superiority of RIM's BlackBerry service to BellSouth's offering. BlackBerry offers a richer feature set and BellSouth is coming up short in the competition among RIM's channels.
Between the delay and the potentially smaller-than-expected order, RIM's interactive pager sales in Q4 and FY 2001 could be significantly below previous expectations. BlackBerry's strength, however, should still see the company's revenues grow strongly next year.
Balsillie said that the company should have news about its activities in Europe before the next conference call in three months.
In other news from RIM, the company opened an R&D office in Kanata and a sales office in Kitchener during the month. To read the report in the Ottawa Citizen -- headlined "RIM's next BlackBerry to be Made in Kanata" -- you'd think that the Waterloo developers are going to be getting out the comic books while the Kanata gang does the real work. "Mike Lazaridis said that Kanata will be the base from which the 15-year-old firm develops the next generation of its popular handheld device," wrote Citizen reporter Christopher Guly. In The Record, a RIM spokesman told Kevin Crowley that Waterloo will remain the company's main R&D site.
The Kanata office is expected to employ 40 people within six months. Industry minister John Manley attended the opening ceremony.
RIM also moved its sales and support group into the Galleria in downtown Kitchener this month. How long they'll be there remains to be seen, as Balsillie once again said that RIM expects to open a new facility by the end of the year.
CheckFree acquires BlueGill for US$250 million in stock
December 21, 1999
Atlanta's CheckFree Holdings (Nasdaq:CKFR) will acquire BlueGill Technologies in an all-stock deal worth US$250 million. BlueGill is headquartered in Ann Arbor, Michigan but does all its development work in Waterloo (or, as the CheckFree release twice called it, "Toronto, Canada").
CheckFree says the acquisition will add US$5 million in revenue for the remainder of this fiscal year (ending June 30) and dilute earnings per share, before acquisition charges, by US$0.10/share. The company has a market capitalization of more than US$5 billion -- more than double what it was just two months ago.
BlueGill was founded in 1996 by Hal Davis and Ray Simonson, who oversees operations in Waterloo. The management team will remain with the company.
Waterloo Ventures makes first deal -- invests $500K in Ardesic
December 17, 1999
Waterloo Ventures has invested $500,000 in Ardesic, in exchange for an unspecified minority stake in the company. Ardesic is a start-up developer of Web-centric e-relationship management (eRM) software. The company will use the money to hire additional developers and sales staff, and expects to have its product in beta release by the spring.
It is the first investment by the $5 million fund, which was formally launched in September. Waterloo Ventures' board of directors includes Descartes CEO Peter Schwartz and Richard Black, VP of Helix Investments and an Open Text director.
Weak space group sales drag Com Dev down in 1999
December 10, 1999
For fiscal 1999, ended October 31, Com Dev reports a net loss of $68.1 million ($2.12/share) on revenues of $162.4 million. Excluding one-time charges related to discontinued operations and restructuring, the company lost $23.7 million. For the second straight year, annual revenues declined by 6%.
Space group revenues declined in every quarter in 1999, hitting a low of $17.5 million in Q4, down 12.5% from the previous quarter and 25% from the same period last year. The group's order backlog stands at $42 million, which is apparently above where it was at the end of the previous quarter (which was the first and only quarter where the backlog was not disclosed in the quarterly release) but is still well below the level of $55 million at the end of Q2, which was the lowest backlog level in two years at that time.
Wireless group revenues continue to rebound and increased every quarter in 1999. Q4 sales of $23.1 million exceeded the previous quarter's results by 18.5% and jumped 74% above 1998's Q4. Q4 was the first quarter where wireless group revenues topped revenues from the space group.
The company is forecasting a return to profitability late next year. At mid-year, it was expecting to be profitable by the end of FY99, but as it turned out, in Q4 Com Dev reported a net loss of $5.2 million ($0.16/share) on revenues of $40.6 million.
The balance sheet shows working capital of just $5.3 million -- down from $23.9 million at the beginning of the quarter ($10 million in loans payable moved from the long-term to current liabilities section this quarter, while bank indebtedness increased by $8.3 million). The company reports cash levels of $984,000 with net bank indebtedness of $22.3 million. Cash used in operations 1999 was $23.9 million
To boost the balance sheet, the company is planning a $25 million equity issue that will be backed by Technology Horizons (destined to be remembered as the Com Dev spin-off that missed out on hundreds of millions of dollars by disposing of most of its 15% stake in RIM under murky circumstances; of course, it also made millions off RIM if you prefer to see the glass as 10% full rather than 90% empty). Com Dev has also arranged a $30 million financing facility with the TD Bank.
RDM reports 63% annual revenue growth in 1999
December 6, 1999
For the year ended September 30, RDM reports a net loss of $211,484 ($0.02/share) on revenue of $4.7 million, up 63% from $2.9 million in 1998.
In Q4, the company reported a one-time gain of $538,000 coming from the settlement of claims from the creditors of RDM's former subsidiary, Mindflight Technologies. Since that company was wound down three years ago, RDM had been carrying %566,000 in current liabilities on its balance sheet related to those claims. Excluding this gain, RDM's net loss for 1999 was $749,395 ($0.07/share), still well below losses of $1.4 million in 1998.
For the second year in a row, RDM's reported general & administrative expenses for the year that are less than what it previously reported for the first three quarters. I'm not sure how to interpret Q4 numbers with unexplained negative G&A expenses.
Open Text raises share purchase offer to US$20
December 14, 1999
Open Text has modified and extended its special issuer bid, and will now pay US$20/share for up to 4 million shares with a deadline of January 14.
The original offer, announced in November, was for US$14/share with a December 14 expiration date. Under that offer, 1,600 shares were tendered.
Open Text's shares closed Monday at US$18.50 on Nasdaq. The company says it has realized gains of about US$35 million so far this quarter from the sale of Internet-related stocks.
It also reported that it is completing a restructuring in operations that will result in a one-time charge of US$2 million this quarter.
Thomas Hearne, Open Text's former CFO, was appointed CFO of Richmond Hill-based Delano Technology on December 6.
Compelis software licensed by Hospital for Sick Children
December 16, 1999
Kitchener-based Compelis, formerly known as Pioneer Media Group, has licensed its ActiveRMS retail management software to the Hospital for Sick Children.
Compelis is a subsidiary of Treasury International Inc., traded on the OTC BB in the U.S. under the ticker TREY). It has one of the more bizarre histories of any company in this area, although the oddest parts happened before it acquired Pioneer in May.
The company was incorporated in Delaware in 1995 and initially distributed shampoo, razors, condoms, band aids and similar products in South America. Naturally, it acquired a manufacturer of plastic containers and a distributor of silver-plated jewelry in 1997 (both of which have since been sold). A new management team was announced this year with the Pioneer acquisition.
This month, Treasury International acquired software products developed by Virtual System Solutions, a company based in Michigan with a development office in India.
Control Advancements acquires all of Betacom
December 20, 1999
Control Advancements has completed its acquisition of Betacom, announced in September. It expects to change its name to Betacom at its annual general meeting, scheduled for February -- almost a year after its February year-end.
"The year 2000 will see us moving forward rapidly in the visual impaired marketplace," said CEO Jeff Preitauer, who will soon be succeeded by Betacom CEO Brian McCarthy. The company has not yet said what it will do with technologies it has developed that do not fit within the visual impaired category.
Communal vanity press book light on high-tech
December 1999
I finally saw an unwrapped copy of the book "Canada's Technology Triangle" produced by Community Communications in Alabama. It's a nice looking book with some good photographs (by a Winnipeg photographer), but the business content was determined by who was willing to write a big cheque. Not surprisingly, few high-tech companies were. The book's technology chapter consists of profiles of Semex, Gencor, and Agri-Food Labs from Guelph, Communitech, UW, Dalsa, and Second Foundation from Waterloo, Bell, and ATS.
The hired pens for the book were Jerry Amernic, best remembered as a Toronto Sun columnist in the mid-1980s, and Gary Nyp, a reporter for The Record in the early 1990s.
WATERLOO TECH DIGEST
Compiled and edited monthly by
Gary Will
gary@garywill.com
75 King Street South, Box 40005, Waterloo, Ontario, Canada N2J 4V1
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