Top 10 Canadian Technology Stories For 2011

by: Louis Rhéaume

Here are the top 10 tech stories in Canada for 2011 according to the Financial Post, followed by my comments.

  1. BlackBerry on Fire – The decline of Research In Motion (RIMM)

On a 5-10 year financial analysis only, RIM appeared a very interesting stock. However, in the smartphone market, new products emerge every 3-4 months. RIM had very poor management of its strategic portfolio of innovation projects. I sold my RIMM shares this month after the company announced the new operating system BB 10 will be launched only at the end of 2012. RIM has a certain takeover value for its patent and large subscribers' base, but current managers/owners don't want to sell.

  1. Usage-based billing becomes a national issue

In January, the Canadian Radio-television and Telecommunications Commission gave BCE Inc. (NYSE:BCE) the green light to impose so-called “usage-based billing” practices on its wholesale Internet customers; namely the small ISPs that lease network space from the Montreal-based telecommunications giant.

Again the CRTC helped the incumbent telco.

  1. Nortel’s patent portfolio is sold for US$4.5-billion

John Roth was the Canadian CEO of the year around 1999-2000. He acquired tech start-ups with few or no revenues for billions of dollars and put the company in bankruptcy later. Accounting irregularities accelerated the process.

  1. U.S. Supreme Court sides with Toronto’s i4i over Microsoft (NASDAQ:MSFT); David vs. Goliath comparisons run rampant.

It showcased the skyrocketing value of patents in the technology industry. Now in smartphones and chips, most of the players are being sued for patent infringement.

“This has become one of the most important business cases in decades that the Supreme Court has taken on, and we’re clearly very pleased with the outcome,” i4i chairman Loudon Owen (pictured above) said in an interview at the time. “We’ve been operating under a cloud and that cloud of litigation has certainly impeded our ability to grow our business.”

  1. Canadian tech startups enjoy big exits (to foreign powers)

For instance: Kobo and Radian6 Technologies Inc were sold. Canada’s technology powerhouse RIM acquired TinyHippos in March and Montreal’s Tungle in April. It is very likely to continue into 2012 as Canada’s startup community continues to grow and gain increased attention from international interests.

  1. Sports goes digital — Rogers and Bell team up to buy MLSE

Convergence plays where an intelligent mix of content and pipes can create value in the long term. Both Rogers (NYSE:RCI)) and Bell (BCE) are betting on sports as content for their pipes.

  1. CPPIB cashes in on Microsoft-Skype deal

The Canada Pension Plan Investment Board (CPPIB)- which purchased a 15% stake in Skype in 2009- pocketed roughly US$933 million. As part of its relationship with Silver Lake Partners, the private equity firm which led the deal to acquire Skype from eBay Inc. (NASDAQ:EBAY) in 2009, CPPIB also secured a US$50-million stake in the California-based private-equity firm, which is expected to yield an additional US$150-million as a result of the Skype transaction.

Pension plans are bigger and will pay a more active role in tech mergers and acquisitions in the future.

  1. Canada’s venture capital industry shows signs of recovery

For instance, the Ontario Municipal Employees Retirement System (OMERS) launched an innovative new $180-million fund in early October called OMERS Ventures, which plans to make “end-to-end” investments across a company’s entire lifespan. Then Montreal’s iNovia Capital launched a $110-million fund in late December, further raising hopes Canadian startups in 2012 will see more consistent access to cash.

  1. Canada’s own Stephen Elop charts a bold new course for Nokia

In an interview with the Financial Post in the spring, Mr. Elop said Nokia (NYSE:NOK) would begin shipping a phone running Microsoft software in volume in 2012, but that the company was hoping to see the first Windows Phone-powered devices in stores before the end of 2011. True to his word, Nokia launched the Windows Phone-powered Lumia 800 in Europe in November, a positive sign for a company seen to be on the verge of disaster just 18 months ago.

Well, Nokia is in fact losing market share faster than RIM. I am totally bearish on Nokia. Similarly to RIM, Nokia has a very poor management of its strategic portfolio of innovation projects. The new Windows/Nokia phones are late and the competition is more fierce than ever with Google's (NASDAQ:GOOG) Android and Apple (NASDAQ:AAPL) gaining market share.

  1. Wi-Lan’s failed attempt to acquire Mosaid

Wi-Lan Inc (WILN). became the most valuable public company in Ottawa earlier this year, thanks to its focus on intellectual property enforcement and the growing importance technology companies placed on patents. Mud slinging, rumors of personal motivations being at play, a poison pill plan and a surprise “transformative” deal with Microsoft Corp. and Nokia Corp. scored by Mosaid (OTC:MBTHF) just weeks after Wi-Lan launched its initial $480-million hostile bid, made the process far more than a typical M&A.

Despite twice extending the deadline for Mosaid shareholders to accept its offer and eventually raising its bid to $532-million, Wi-Lan eventually lost the bidding war to a $590-million offer from Sterling Partners; a multibillion-dollar private equity firm based in the United States.

Wi-Lan bid was opportunistic and too low to become reality. Mosaid found easily a white knight.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.