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Year in Review: Top 5 Canadian ICT News Stories of 2010

Tuesday, December 21, 2010

Branham300Canada's ICT Industry made headlines throughout 2010. Whether it was the alleged impending doom of Canada's ICT leader, Industry's continued struggles due to challenging economic conditions, or the battle between Canada's Big Three and the new crop of wireless upstarts, it was an eventful year for Canada's ICT Industry and the companies that comprise it. While many Canadian ICT Industry stories emerged and developed over the course of the past twelve months, the following highlights Branham’s Top 5 Canadian ICT News Stories of 2010.

#1 The Alleged Impending Doom of Research In Motion

Research In Motion (RIM) is undoubtedly Canada's largest and most well known technology company. Since its foundation, the company has experienced tremendous top- and bottom-line growth, reporting more than $15 billion in revenues and approximately US$2.5 billion in net income in its 2010 fiscal year, which closed in late-February of this year. RIM's growth has showed no signs of slowing down either, as the wireless solutions pioneer has reported 32 per cent and 41 per cent increases in revenues and net income through three quarters of its 2011 fiscal year, respectively. Its subscriber base has grown to approximately 55 million users and it is shipping tens-of-millions of smart phones on an annual basis. Despite this growth, RIM has been the target of much criticism throughout 2010 as analysts, competitors and smart phone enthusiasts alike have repetitively discounted the company's long-term outlook. There is no doubting the fact that the global smart phone market is becoming increasingly fierce, and this competitive trend is showing no indication of slowing down with Google and its Android operating system gaining traction and the recent launch of Microsoft's Windows 7 phone. However, RIM laid the tracks for the global smart phone market, and given the company's storied history of high flying performance, it seems too soon to count Canada's top technology company out of the race. 

#2 The Economy Continued to Impact Canada's ICT Industry

When 2009 came to a close nearly twelve months ago, many optimists believed that the economic conditions of the past two years would largely be left behind and the Canadian and global market would slowly return to the norm in 2010. Branham even stated in the 2010 Edition of the Branham300 (released in April 2010), that it expected moderate growth to return to the Canadian ICT Industry in calendar 2010. It's still early and the numbers are still being tabulated, but it looks as though the Canadian ICT Industry experienced stagnant growth in 2010, at best. Many factors led to this result, including high-levels of M&A activity, the strong Canadian dollar, which lessens Canada's currency advantage when doing business in the U.S. and abroad, and lower than anticipated levels of investment in ICT-related activities. 2010 will be looked back upon as a bridge year for Canada's ICT Industry, as the country's tech leaders picked up the pieces from the past two years and began to reinvest in core activities, with the hopes of capitalizing on growth opportunities in 2011 and beyond.

#3 Mobile Wars: The Heavy Weights vs. The Upstarts

Things are only just beginning to heat up in Canada's wireless sector, as four new entrants entered the competitive landscape in 2010, with plans already in the works for a few more to enter in 2011. From the outside looking in, it was an ugly battle between the new upstarts and the Big Three, as 2010 was a year plagued by aggressive discounting, well-documented network issues among new entrants, advertising wars that largely turned into mud-slinging and alleged false statements, and claims that market consolidation on the low-end could very likely already be in the works. The Canadian Government hopes to have another wireless spectrum auction in 2012, possibly opening the round to foreign buyers, so the competitive waters of Canada's wireless sector will continue to crowd. Although turbulent, the end result for Canadians is and will be positive, simply because the market will offer a lot more of what it lacked before - choice.

#4 M&A Deals Aplenty in 2010

Merger and acquisition activity was in abundance in the Canadian ICT Industry over the course of 2010. Several of Canada's largest ICT companies acquired complimentary technologies to improve their competitive offerings. Major M&A deals by existing ICT leaders in 2010 included:
Meanwhile, a number of small and medium sized players were bought-out by foreign players and will no longer appear on future editions of the Branham300. Prominent 2010 departures include:
  • BreconRidge - acquired by Sanmina SCI for US$53 million
  • Protus IP Systems - acquired by j2 Communications for $213 million
  • Clarity Systems - acquired by IBM for an undisclosed sum
  • Fusepoint Managed Services - acquired by Savvis for $121 million
  • Matrikon - acquired by Honeywell for $145 million
  • Sirit - acquired by Federal Signals for $49.5 million
  • Xenos - acquired by Actuate for US$35.5 million
Look for M&A activity to remain stable in 2011 as market conditions slowly improve and companies with deep pockets continue to search for undervalued or struggling companies with considerable upside.

#5 IPO Market Remains Quiet

For the first time in recent Branham300 history, the majority of Canada's leading technology companies are privately-held firms. Of the companies landing on the 2010 Edition of the Branham300, approximately 47 per cent were publicly-traded and 53 per cent were privately-held, compared to a 52-48 per cent split in favour of publicly-traded firms the year before. It wasn't all that long ago that high-growth technology companies raced to go public, but with today's market conditions companies have all but forgone the IPO route. With the loss of several publicly traded companies to M&A activity over the course of 2010, and only two prominent IPO's finalized over the course of the past year (Mitel & Smart Technologies), it is expected that this trend will continue until market conditions stabilize. At that point, it is expected that IPO's will once again become an exit-strategy of choice for Canada's emerging and existing tech leaders.  
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