January 1999

Compiled and written by
Gary Will

E-mail:
gary@garywill.com

Issue 23 -- February 1, 1999
In this digest:

1. STOCK REPORT: Huge gains for MKS, RIM; Open Text drops
   
2. Descartes offering raises $40 million; trades on NASDAQ
   
3. RIM launches wireless e-mail service across North America
   
4. Old RIM technology wins an Oscar to go with its Emmy
   
5. Open Text quarterly revenues surpass US$20 million

6. DALSA annual revenues grow 9% after drop in Q4
7. Control Advancements shows sales growth, makes acquisition
8. International software company plans Waterloo R&D office
9. MKS looks for new home in Waterloo
10. RDM to raise $1.2 million; loses $1.4 million in 1998

11. Balsillie, Stepien, LivePage at Internet World/ISPCON

STOCK REPORT:
Huge gains for MKS, RIM; Open Text drops
January 1999

After that sell-off of more than 500,000 shares at the end of 1998, MKS stock went into overdrive in January, more than doubling to close the month at $11.00. It is the highest MKS shares have traded, other than four a few hours last May when they received a brief artificial bounce from a news release announcing a deal with Microsoft.

RIM shares had their biggest monthly jump yet, up 49% to $15.30. They had been trading as high as $16.90 before falling late in the month. Both of RIM's co-CEOs, Jim Balsillie and Mike Lazaridis, filed notices with the TSE that they intend to sell up to 500,000 shares each (of the combined 17.4 million shares they hold). The National Post reported on January 21 that RIM had been downgraded to a "hold" from "accumulate" by Canaccord Capital analyst Paul Bradley. RIM shares have now gone up 186% in the last three months.

The month started out well for Open Text, who saw their shares trade as high as $48.00 on January 19. But just two days later, the stock plummeted $9.00 and ended up falling to $30.30 before rebounding a little to close the month at $31.90, down 15.5%.

A report in the National Post suggested that the cause for the drop may have been a report from Howard Schilit's Center for Financial Research and Analysis that questioned Open Text's accounting in their acquisition of Information Dimensions.

Both Open Text and RIM were added this month to the TSE 300 index. They, and Cognicase of Montreal, replaced three gold mining companies whose market caps had fallen below TSE standards for the index. Last fall, when the TSE announced their new strategic direction, they emphasized that the exchange was "the mining capital of the world" -- but for this quarter at least, mining is out and IT is in.

Another TSE 300 member, ATS Automation Tooling Systems, saw their shares drop by more than a third in January after announcing their revenues from a contract with Intel will be significantly lower than anticipated in fiscal 2000 (actually, they cryptically said "a major microelectronics customer" who awarded the contract to ATS in August 1997) as Intel shifts to a new technology sooner than anticipated.

The deal was originally announced as being worth up to US$375 million over three years. ATS expects about $100 million in revenue from Intel in fiscal 1999 (year ending March 31), the first year of the deal, but "substantially lower" volumes than forecast in future years.

Descartes offering raises $40 million; trades on NASDAQ
January 27, 1999

Descartes Systems Group began trading through the NASDAQ system last Wednesday following a US/Canada offering that raised more than US$26 million gross (about C$40 million).

Of the 3.5 million shares in the offering, 2.76 million were sold by the company and 740,000 were sold by Descartes vice-chairman Mark Lee. The underwriters have a 30-day over-allotment option to purchase 525,000 more shares, of which the company would sell 375,000 with CEO Peter Schwartz selling the remaining 150,000.

The offer price was US$7.50 and after three days of trading, Descartes shares closed the month at US$8.12.

Descartes also announced this month they had won orders from transportation company Con-Way Integrated Services, greeting card company Gibson Greetings Inc., and bottler Pepsi-Cola Philippines Inc. (PCPPI). Gibson will integrate Descartes' Energy with J.D. Edwards' One World enterprise system, while PCPPI will integrate it with Oracle's ERP product. No values were placed on the agreements.

RIM launches wireless e-mail service across North America
January 19, 1999

RIM has introduced a complete wireless e-mail service called BlackBerry, available in Canada from Cantel and in the U.S. from BellSouth.

The BlackBerry package includes the RIM 386-based wireless handheld device with organizer software (calendar, addressbook, task list), along with a docking cradle and synchronizing software to connect with a PC.

E-mail is encrypted using Triple DES and remains encrypted at all points between the desktop PC and the handheld device.

In Canada, the device will sell for $549 (including activation fee), or can be rented for $25/month plus a one-time $69 activation fee. Cost for the service is an additional $50/month, of which half will be rebated monthly for the first 12 months. There is also a 30-day full-refund guarantee.

Old RIM technology wins an Oscar to go with its Emmy
January 27, 1999

Years ago, when RIM first launched its Web site, one of the featured items was the Emmy award they received in 1993 from the Academy of Television Arts and Sciences. It was for the DigiSync technology developed by RIM in partnership with the National Film Board between 1989 and 1991.

RIM has since moved in other directions and rarely mentions DigiSync anymore, but in February the technology will be honoured with a technical achievement Academy Award from the Academy of Motion Picture Arts and Sciences. Mike Lazaridis and Dale Brubacher-Cressman from RIM will receive the award on February 27, along with two members of the NFB's technical team.

According to the NFB's release, RIM still holds the license to manufacture DigiSync, which has been used in several movies, including Lost in Space and GI Jane.

Open Text quarterly revenues surpass US$20 million
January 27, 1999

For the quarter ended December 31 (Q2 99), Open Text reports revenues of US$20.8 million -- up 113% from the same period last year and 20% from the previous quarter. It is the 12th consecutive quarter that the company has reported quarter-over-quarter revenue growth.

Excluding a one-time charge related to the acquisition of LAVA Systems, net income was US$3.3 million (US$0.15/share). With the charge, Open Text had a net loss of US$103,000 (US$0.01/share).

Licensing fees accounted for 62% of revenue with services making up the remaining 38%.

Net working capital is US$41.1 million, with US$33.1 million in cash.

DALSA annual revenues grow 9% after drop in Q4
January 28, 1999

For fiscal 1998 (year ended December 31), DALSA reported net income of $4.1 million ($0.72/share) on revenues of $29.4 million. Annual revenue growth was 9%, down sharply from 55% in 1997.

In the fourth quarter, revenues declined by 5.4% from the same period last year (a particularly good quarter for DALSA) to $7.9 million, but a slight improvement in gross margins and a 15% cut to R&D spending created a 13% increase in net income over last year to $1.2 million. Revenues were up nearly 5% from the previous quarter.

DALSA's net working capital remained nearly unchanged over the fourth quarter at $23.2 million, with $19.4 million in cash.

In his annual review, DALSA CEO Savvas Chamberlain cited the Asian economic slowdown and a stagnant semiconductor industry as reasons for this "challenging" year. Within North America, DALSA's revenues grew by more than 40%.

A year ago, the company was forecasting long-term annual revenue growth of more than 30%. In an interview with Mike Strathdee in The Record, Chamberlain said the company's goal for 1999 is 15-20% growth in revenue and net income.

DALSA also announced they are splitting their sales & marketing group, with Dave Litwiller becoming their new director of marketing and Ralph Beier serving as director of world sales.

Financial statements show DALSA paid $1.2 million in the fourth quarter to buy back 109,300 shares of the company. Under a normal course issuer bid, they may buy an additional 140,700 shares before October 13.

DALSA's AGM will be held at 4:00 on May 4 at the company offices.

Control Advancements shows sales growth, makes acquisition
January 27, 1999

For the quarter ended November 30 (Q3 99), Control Advancements reports revenues of $765,000 and a net loss of $215,000 ($0.02/share). It was the second quarter for the company since they began to generate significant revenues from product sales. Revenue climbed 21% from the previous quarter with product sales accounting for 96% of revenues.

The balance sheet at November 30 showed net working capital of $112,000 with $47,000 in cash.

The company also announced they have acquired Smart-Tech Inc. of Kitchener, an engineering design and manufacturing services company. The acquisition was made through Control Advancements (Canada) Inc. (CACI), a subsidiary of Control Advancements.

Cost of the acquisition was $200,000, of which $150,000 was paid in cash and the balance paid in Control Advancements shares.

"With the acquisition of STI, Control Advancements (Canada) Inc. becomes a complete research and design facility," said Control Advancements CEO Jeffrey Preitauer in a release.

Smart-Tech president and founder Robert Walker becomes CEO of CACI, while Kevin Tuer, engineering VP for Control Advancements, becomes CACI's president.

Control Advancements is going ahead with their name change to Odyssey Corporation, reported in the October Digest. They expect to make the change in the next four weeks.

International software company plans Waterloo R&D office
January 20, 1999

Waterloo's iGate Technologies has been acquired by Sanga International Inc., a software company based in the Barbados with offices in 12 countries.

Terms of the deal were not announced, but Sanga says they will build an R&D "center of expertise" in Waterloo and create up to 150 jobs.

iGate is currently a very small company, but its co-founder and former CEO Gary Bartholomew told Mike Strathdee that he expects they will hire 30-40 people in the next year.

Sanga will initially incorporate iGate's technology into Java-based mobile commerce applications for the financial services industry.

MKS looks for new home in Waterloo
January 18, 1998

Back in November, when MKS began referring to Waterloo in its news releases as just its "Canadian headquarters" -- with Chicago listed as the company's "U.S. headquarters" -- there were a few whispered queries about whether this might be an ominous development ... especially after CEO Randall Howard went to Chicago for the release of the last quarterly results.

But any fears were put to rest this month when MKS issued an RFP for new, expanded headquarters in the city. They're looking for a minimum of 75,000 square feet with room to grow up to 100,000 square feet. They currently occupy 50,000 square feet at two locations in Waterloo and space is apparently becoming as tight as it was in MKS' final years in the old post office on King Street.

Mike Strathdee reports that the WATPARK consortium -- developers of the UW research park -- is one of the companies making a bid for the MKS corporate HQ.

MKS officially opened their Chicago U.S. headquarters this month. Last summer, MKS acquired the SDM business unit of Silvon Software in Westmont, Illinois, but they chose to leave that city and go up the highway to Lombard, Illinois, a short drive from O'Hare airport.

The Lombard offices will include sales & marketing, R&D, and services and support staff. "A solid U.S. presence has always been of strategic importance to MKS," said Howard. "Now, with the bulk of our business and a significant population of employees based in this market, the timing is right to launch a focal point of our business south of the border."

RDM to raise $1.2 million; loses $1.4 million in 1998
January 29, 1999

RDM has filed a preliminary prospectus with the OSC for a public offering that would raise a minimum of $1,250,000. RDM, whose shares trade on the Vancouver Stock Exchange, will now become a reporting issuer in Ontario.

The exclusive agent for the offering is Burgeonvest Securities Ltd. of Hamilton, which has also been given the option to act as lead agent on any further RDM public offerings over the next 18 months.

RDM raised about $100,000 this month in a private placement of 87,500 shares at $1.15.

For the 1998 fiscal year (ended September 30), RDM reported a net loss of $1.4 million ($0.18/share) on revenues of $2.9 million. Sales of the company's MICR products accounted for the majority of sales. Revenues were up 13% from 1997, when the company lost $311,000 on sales of $2.5 million.

The RDM annual meeting will be held at 10:00am on March 11 at the Waterloo Inn.

Balsillie, Stepien, LivePage at Internet World/ISPCON
February 2-5, 1999

Internet World Canada is being held this week, February 2-5 (Tuesday to Friday) at the Metro Toronto Convention Centre.

Representing CTT tech companies will be:

• Jim Balsillie of RIM, who's speaking on wireless access and the Net
• Terry Stepien of Sybase, speaking twice: once in an Internet appliances forum and once on "supporting the enterprise"
• LivePage Corporation, who will be an exhibitor