April 1999

Compiled and written by
Gary Will

E-mail:
gary@garywill.com

Issue 26 -- May 3, 1999
In this digest:

1. Mitra spins off technology into new company
2. Open Text makes another offer for PC DOCS
3. Open Text warrant sale raises US$100 million
4. Record revenues continue through Q3 for Open Text
5. STOCK REPORT: Open Text has another strong month

6. Steady Q4 gives RIM a record year
7. RDM and Descartes both demo products with RIM pager
8. RDM revenue jumps in Q2
9. Big losses continue for CME Telemetrix
10. Control Advancements to raise up to $1.1 million

11. Thinkage holds out against Intel's "bullying"...for now
12. MKS jumps on Linux bandwagon
13. Maple software loaded on new Casio device
14. PwC Techmap calls Electrohome CTT's tech pioneer

Mitra spins off technology into new company
April 8, 1999

Mitra Imaging and Agfa-Gevaert of Belgium have created a new company called IMPAX Technology Inc. and given it ownership of Agfa's IMPAX radiology imaging technology. The new company will be based in Waterloo on the former HP site where Mitra is located.

Mitra and IMPAX will have separate project development groups, but will share some support staff. The 15-20 person team at Mitra which developed IMPAX has been transferred to the new company, along with 10 others. IMPAX expects to hire an additional 25-30 people in its first year. Mitra CEO Eric Peterson takes on double duty as IMPAX Tech's first president.

The IMPAX technology had been developed by Mitra for Agfa on a contract basis. It was this contract that helped launch Mitra in 1991 and initially provided most of its revenue. According to Mitra's announcement, the original contractual relationship had continued through the years with no long-term commitment on either side, causing concern both to Mitra and to hospitals using IMPAX.

Last fall, The companies began to figure out how they would continue, with the new company the result of those talks. In their announcement, Mitra says they "insisted on terms that give IMPAX Tech effective control over its own product development, and a corporate structure that gives Mitra a decisive voice in the future of IMPAX Tech."

Agfa is part of the German-based Bayer Group which had worldwide sales of US$5 billion last year.

Open Text makes another offer for PC DOCS
April 29, 1999

Open Text has made another offer to acquire PC DOCS, this time an all-cash offer of $8.50/share, or about $205 million in total. By the time you read this, a vitriolic rejection from PC DOCS management will likely have been released.

In December, PC DOCS quickly rejected an offer of a 4-for-1 stock swap from Open Text. Since then, the price of Open Text shares have more than doubled and at current market prices, the December offer would be valued at $14.38/share (at the time, it was $6.98/share).

PC DOCS shares closed at $8.55 on Friday, up from $7.95 when Open Text made their latest offer.

In March, PC DOCS management accepted an all-stock acquisition offer from Hummingbird Communications of Toronto. At Friday's close, the value of that 3-for-1 share swap was $8.33/share, a little below Open Text's cash offer. The Hummingbird offer was coming up for a vote by PC DOCS shareholders on May 14.

In their release, Open Text says they have requested access to all non-public information provided to Hummingbird by PC DOCS. I don't think they're holding their breath.

Hummingbird CEO Fred Sorkin called Open Text's offer unethical in an interview with Financial Post writer David Akin.

Open Text has hired RBC Dominion Securities as their lead advisor for this offer.

Open Text warrant sale raises US$100 million
April 28, 1999

Open Text's ability to make acquisitions was enhanced at the end of the month when they raised US$102 million (gross) through the sale of 3 million special warrants at US$34/warrant. The warrants are exercisable for one common share and were purchased by an unspecified "syndicate of investment dealers."

Initially, the company was only offering 2.5 million warrants, but they increased the amount to 3 million due to investor demand.

The money will be used for acquisitions and general working capital.

Record revenues continue through Q3 for Open Text
April 21, 1999

For the quarter ended March 31, Open Text reports revenues of US$25.0 million and net income of US$4.7 million (US$0.20/share). Revenues more than doubled from the same period last year -- up 112%, while profits increased by 362%. Revenues were also up 20% from the previous quarter.

Revenues from Livelink licenses grew by 84% from the previous year, but it was again in services where the largest gains were made, up 160%. Services accounted for 43% of revenue in the quarter.

The balance sheet at March 31 (before the warrant sale) shows US$38.2 million in cash and net working capital of US$103.0 million.

STOCK REPORT: Open Text has another strong month
April 1999

Open Text was again the top gainer on the stock market this month, climbing 21% to close April at $57.50 on the TSE. The shares briefly hit the $60 level on April 30, an all-time high. Open Text shares have now gone up 80% in the last three months.

The biggest local gainer this year actually hasn't been Open Text. If you include penny stocks, RDM has seen their shares jump by 88% to $1.60 in 1999, after declining steadily and sharply over the last half of 1998. Excluding penny stocks, the biggest gains in calendar 1999 have been from RIM -- up 72% this year. Open Text shares have increased 52% over the same 4-month period.

The biggest declines last month came from Descartes, down 26% to $9.30. Their shares have alternated 20+% gains and losses each month this year.

MKS shares were again off in April -- down 12% to $6.70. It was their third straight month of double-digit declines after more than doubling in January.

Steady Q4 gives RIM a record year
April 29, 1999

For the quarter ended February 28 (Q4 99), RIM reports net income of $4.3 million ($0.07/share) on revenues of $27.1 million. Revenues were up 110% from the same period last year. Sales of the Inter@ctive Pager 950 accounted for 85% of revenues.

RIM has changed how they report revenue, and now exclude government grants and tax credits from the revenue line, so this number isn't directly comparable to what has been previously reported. Under the old method of reporting, revenues were $29.2 million this quarter.

Income actually declined slightly in Q4 from the previous quarter -- income from operations and investments were down a combined 6% before taxes. But a low income tax charge allowed RIM to report record profits in the quarter. For the quarter, 78% of income came from operations, up from 47% a year ago when investments accounted for most of the company's income.

For fiscal 1999, RIM had revenues of $70.5 million -- up 127% from $31.1 million in 1998 (as adjusted), and made a profit of $9.5 million ($0.15/share).

"We're very pleased with the results," said co-CEO Jim Balsillie. "We've again doubled revenue year-over-year, and of equal importance we've continued to lay the foundation for more growth in the future."

Balsillie said that over 300 companies are already using Blackberry (probably including evaluation units) and significant revenues from Blackberry should begin to appear in Q2. BellSouth is said to be well ahead of expectations with their wireless service using the RIM pager.

He also revealed that RIM is testing their product in Europe with "an extremely large telecommunications partner."

(Under the heading of "You know you're too deferential to your lawyers when..." -- the time it took to read RIM's "forward looking statements" disclaimer during their conference call: 1 minute 30 seconds. I think that's 10 minutes in Internet time, and it sure felt like it.)

RDM & Descartes both demo products with RIM pager
April 19 & 28, 1999

RDM demonstrated a wireless eCheck payment technology at an industry show in Florida, using the RIM Inter@ctive Pager 950. The demonstration illustrated how RDM technology can be used for secure electronic payments from a mobile source.

Descartes also made use of the RIM pager to introduce their new Energy DeliveryNet.com Mobile Business Optimizer. The Descartes system allows delivery drivers to send update messages to their office with a wireless device, which can then be used to re-optimize the route, if necessary, or send messages through the Web to customers about delivery status.

RDM revenue jumps in Q2
April 30, 1999

A strong quarter for RDM saw the company achieve revenues of $1.4 million for the three months ended March 31 (Q2 99). That's about equal to half of their sales in 1998, and is a 161% increase from the same period last year (and 81% above the previous quarter). Net loss was $13,000 ($0.00/share), compared to a loss of $505,000 a year ago.

The revenue jump was attributed to increased sales of the company's traditional core MICR products and technologies.

Production facilities were expanded during the quarter with the completion of the assembly and test line for their new EC5000i cheque imaging product. The product began shipping against its order backlog in April.

Sales and marketing expenses for the quarter were $245,000, up from $157,000 last year, but 26% below Q1.

Big losses continue for CME Telemetrix
April 21, 1999

For the quarter ended December 31 (Q4 98), CME Telemetrix lost $1.3 million ($0.29/share) on revenues of only $407,000. For the year, the company lost $4.1 million ($0.60/share) on revenues of $1.6 million.

Revenues for the year declined 58% from $3.8 million in 1997 after CME lost its funding from an American partner (see January 1998 Digest). Those revenues were in turn down from $5.2 million in 1996 after the company's Japanese partner withdrew funding. At the end of the year, CME's balance sheet shows $869,000 in cash.

Having sold off their Advantage Medical division with its EMG product, CME is essentially now in a pre-revenue stage as it continues to work on developing a non-invasive near-infrared (NIR) blood glucose monitor. They have not received a response from the U.S. FDA on their proposal in December for approval of the device as a supplement to traditional sampling techniques.

The details of the sale of Advantage Medical to Neurosoft of Sterling, Virginia were released this month. CME has received $2.5 million from Neurosoft, and will receive an additional $1.25 million a year from now, and another $1.25 million in two years, subject to adjustments based on inventory and tax credits. CME acquired Advantage Medical for $810,000 in 1996.

As part of the transaction, CME also paid US$300,000 to acquire ownership of technologies that had been developed with an unidentified third party.

CME said the sale was "consistent with a commitment to re-capitalize the company and focus on the NIR technology platform." In a release, CEO Duncan McIntyre said CME couldn't "burden [their] core NIR technology with under-performing assets which are of more value to larger companies with existing synergistic technologies."

Control Advancements to raise up to $1.1 million
April 23, 1999

Control Advancements hopes to raise up to $1.1 million through a private placement. Global Equities S.A. of Paris, France will act as agent.

A maximum of 2.2 million units will be sold at $0.50 each. Each unit consists of one share and one warrant entitling the purchase of another share for $0.60. Control Advancements shares closed Friday at $0.70 and have traded in a $0.45-$0.80 range in 1999.

The company says they still plan to change their name to Odyssey Corporation, as announced more than half a year ago. They say the name change should happen within the next four weeks ... but they said that three months ago too.

Thinkage holds out against Intel's "bullying"...for now
April 1999

The May issue of Red Herring has an interesting article called "I'm Gonna Sue Your Ass!: How industry leaders are putting startups through legal hell." It's primarily about patents, but you may have seen an article in The Record in February about a similar situation involving a local tech company and a trademark dispute with an industry giant.

Thinkage has developed a product called C Inside -- a source code viewer that simplifies debugging C and C++ code at the preprosessor stage. It's distributed as shareware (registration cost is $25) and available from Thinkage's Web site.

Thinkage applied to register their C Inside trademark, and for a while everything seemed to be going okay ... until Intel heard about the application. "Intel is quietly attempting to corner the word 'inside' as a trademark," writes Thinkage president Peter Fraser in a letter sent to several government representatives. On March 29, Thinkage's lawyer was told that Intel intends to sue the company for trademark infringement, says Fraser, even though the Thinkage product would never be confused for an Intel offering by anyone with even the slightest knowledge of the computer industry.

"These are simply bully tactics," Fraser says, "the sad part is that Intel will likely succeed." Faced with potential costs in the hundreds of thousands of dollars, Fraser expects his company will have to capitulate to the deep pockets of Intel. "We don't want to --we don't like being bullied--but we've been backed into a corner."

Intel has apparently been acquiring other "inside" trademarks in an effort to create after-the-fact a trademark family. "It is clear they simply want a monopoly on the word 'inside,' writes Fraser, "even though they could never hope to get such a trademark through normal means."

MKS jumps on Linux bandwagon
April 27, 1999

MKS announced this month the immediate availability of MKS Source Integrity for Linux. They also pledged their long-term support for the OS. "MKS ensures that no matter which platform our customers develop on, they can rely on a proven SCM solution," said Bill Skowera, MKS's VP of product development.

Maple software loaded on new Casio device
April 21, 1999

Casio has unveiled a new Windows CE-based handheld device for the math & science educational market, and it comes with software developed by Waterloo Maple.

The device, called Cassiopeia, was designed for math & science teachers and students and is loaded with programs from three math software developers, including Maple. It also includes a 640x240 display, 16Mb RAM, and a Hitachi SH-3 processor.

PwC Techmap calls Electrohome CTT's tech pioneer
April 8, 1999

The PricewaterhouseCoopers CTT Techmap was unveiled in April, providing a family tree of tech companies in the area going back 90 years (the majority, of course, are of a little more recent origin -- 90% founded since 1975).

Three hundred organizations are included on the map. Nearly a third are, defunct, non-tech organizations, or non-CTT organizations linked to local tech firms, leaving a net of about 200 existing firms in IT, advanced manufacturing, and biotech.

The biggest chunk of the map traces the progeny of UW. According to the PwC release, nearly a third of the companies have ties to the university.

The earliest tech companies in CTT according to the Techmap were Electrohome (founded as Pollock Manufacturing in 1907), Hammond Manufacturing (1917) and Marsland Engineering (listed as 1926; I believe it's actually 1929).

It's a very good first effort. A project of this scope is probably impossible to do without some errors and inconsistencies sneaking in, but there were certainly many companies on the map I'd never heard of before (mostly from Guelph and Cambridge).

I don't know if copies are still available, but if you're interested in getting a copy, contact Steve Currie of PricewaterhouseCoopers at steve.currie@ca.pwcglobal.com.