O CANADA!

Our nothern neighbor's high-tech industry is booming thanks to smart programmers, a soft dollar and strong U.S. tied

ept. 22 -- Four o'clock in the afternoon is a great hour for a nap, but it's ground zero for a trade show. And this one shows all the signs of deteriorating: Salesmen playing catch with giveaway gewgaws, a pile of doughnuts congealing in the corner, the convention center staff breaking down the coffee machines. Gandalf Technologies Inc. reps are trying to get rid of their stick deodorant handouts, stamped "No Sweat" to highlight the Ottawa-area company's pitch for its networking communications systems.

It is rumored that the players, breezing through from the Canadian big seven integrators, showed up for a few minutes at about 8 a.m., handed out business cards and disappeared.

But this is a different kind of trade show, after all. It was meant to be an all-Canada affair, with small companies presenting technologies created in Canada for the Canadian government and commercial infotech markets.

Yet by subtraction, the show -- sponsored by the Canadian Advanced Technology Association -- one of Canada's two main industry groups for the market, illustrates the success of the country's high-tech industry: Most of its business, up to 95 percent for some companies, is done with the big neighbor to the south.

And Canada's infotech business is blossoming.

Propelled by several strong nests of software businesses across the country and a long-established proficiency in telecommunications, Canadian information technology is solidifying a strong reputation in the U.S. for the elegance of its software products, a customer-service-oriented approach, and a weak dollar that on a good day is worth about 0.7 cents across the border.

"From a financial standpoint, we are extremely competitive because of the dollar," said Shirley-Ann George, Ottawa executive director for the technology association. "If you want programs done, have them done in Canada. It's easier to reach than Texas."

Conversely, the Canadian ability to partner with American firms has fertilized at least two "Silicon Valleys" in Ontario, with others springing up in Quebec, in Vancouver, British Columbia, and even in Nova Scotia -- a hard-winter province once known for fishing, but now home to more than 80 software developers. The three major high-tech exports to the U.S. -- aerospace products, data processing and automating equipment, and telecommunications products -- rank 15th, 16th and 17th on Canada's top 50 export list, behind automobiles and the natural-resource based Canadian staples like wood products. Aerospace topped out at just more than $2 million in 1991; office machine parts, data processing and automating grew steadily from U.S.$1.3 million in 1990 to $1.5 million in 1993, with a 1991 high of $1,524,796. Telecommunications, long a Canadian specialty, swelled from U.S.$880,331 in 1990 to almost $1.3 million last year. And computer hardware and software, the country's 28th ranked export, almost doubled from U.S.$527,818 in 1990 to $925,720 in 1993, with a first quarter of 1994 positioned to break the $1 million mark.

According to the U.S. Commerce Department's 1994 U.S. Industrial Outlook, much of the recent growth in the Canadian economy -- it tends to mirror the United States' -- came from increased exports. In part because of the Canadian dollar's weakness, its economy could grow as much as 3.4 percent in 1994, the best prospect among industrial countries.

For Canadian infotech companies looking for government contracts, the equation is simple: Their home country's market is close to the size of California's -- about $1 billion. The U.S. market is $30 billion or more.

"Canadian high-tech is definitely booming," said Michael J. Cannata, president of Cybermation Inc., a business automation firm in Markham, Ontario, just outside Toronto. Next to Ottawa, the capital, and nearby Kanata, home to telecom firm Mitel, Markham's population has tripled to 161,000 since 1973, and attracted Canadian bases for IBM, ATI, Toshiba, Sun Microsystems, and Apple Canada, and 500 other high-tech companies.

In nearby Mississauga, Ontario, another Toronto satellite, lies giant Northern Telecom; in Toronto proper is Unitel -- its predecessor company sent the first Canadian telegram in 1846.

"It's definitely strong growth here," said Peter McIntyre, vice president of Davgro Corp., a privately held CDN$5 million systems integrator, one of the Markham 500. That's because the same sorts of business and government automation trends familiar in the United States are picking up steam in Canada, where Davgro does all its business -- much of it with municipal and provincial agencies.

"The whole 'do more with less' is having an impact, and we're starting to have fun," he said. Also maturing into a high-tech corridor is the Waterloo-Kitchener area, home to the University of Waterloo, which has a place in Canadian high-tech legend.

Depending on who tells the story, Seattle giant Microsoft either recruits 40 percent of its programmers from the Ontario school, or is the only place the company will hire recruits straight from campus. Waterloo's program is said to have influenced the nest of Canadian companies that are building a fast-growing niche presence in standard generalized markup language, a powerful means of text manipulation from databases and other sources.

Ottawa-area Microstar, Exoterica Corp., also in Ottawa, and a handful of others are known as the worldwide SGML leaders.

There are, of course, other reasons for Canada's success: A high-tech industry that grew out of private companies, not the defense industrial complex; a university system that works with business to produce students that fill a skilled labor pool; young, upstart software companies that identify small niche markets and go after them; and sprawling, wide-open borders that hone the internal need for advances in telecommunications.

The Genesis of Canadian High-Tech

In the beginning, there was Northern Telecom and Bell Northern Research, which begot Microsystems International, which united one Michael Cowpland and one Terry Matthews unto each other. But the union was not fertile, at least for the substance of this parable, and so Cowpland, whom Canadians consider their Bill Gates, went off to found the venerable Corel Systems Corp. in Ottawa, maker of CorelDRAW, which is sort of to the IBM computer what PhotoShop and Adobe are to Macintosh. Before people were talking about "scuzzies," Corel brought forth CorelSCSI, an interface software package that permits seven different peripherals to be connected to a PC with a single interface board.

Brother Matthews, meanwhile, went off to found Newbridge Networks, a stone's throw away in what one might call the other Canadian Silicon Valley: Kanata, Ontario. Newbridge racked up $308 million in 1993 sales, a 70 percent increase over the previous year, attracted customers like NYNEX, Moscow's local telephone carrier, and provinces in China, and is still a hot stock property, despite the fact the company's recent fiscal first quarter earnings, which reflected a healthy profit, did not live up to analysts' expectations.

You might say that from there, the Canadian high-tech industry grew, with a private-sector role model. And from there, the telecom, defense and government infotech sector grew, with players like TRW, GTE and E-Systems netting some of the Canadian intelligence and defense work. And so grew companies like Software Kinetics, a Dartmouth, Nova Scotia, and Ottawa-based systems and software engineering company that has managed to cross borders to the Pentagon, where it is working on a secure military message handling system for the U.S. Air Force.

Once those kinds of partnerships started happening, Canadian firms began to enter the U.S. market (see related story.)

"From a high-tech perspective, the borders have always been open," said Tony A. Moretto, corporate director of marketing for 15-year-old Software Kinetics.

The "Electronic" Highway

Canada's core strength in telecom also helped spawn a strong push toward information networks. The Canadian "electronic highway" is alive and growing, with at least seven Internet access providers springing up in Toronto in the last year or so. In fact, a high-profile deal is brewing that could position a Canadian conglomerate along with the Time Warners and TCIs of the world in terms of content-providing. The Canadian Radio-Television and Telecommunications Commission, sort of an FCC for all seasons, began debating Sept. 20 whether it should approve a takeover attempt by Rogers Communications Inc., a CDN $1.3 billion cable giant, of CDN $3.1 billion Maclean Hunter Ltd., a huge publishing company that includes properties like Macleans magazine, the Canadian equivalent to Time, and Canadian Business, an equivalent to McGraw-Hill's Business Week. That would be the biggest takeover in Canadian telecom history, with ripples resounding through high-tech to the basic cable subscriber. Rogers would lock up 63 percent of the most populous province's cable market, and become the second largest telecom company, behind Bell Canada. Rogers would not only take up the largest cable system in the country, it would absorb Cantel, the leading cellular phone company; 16 radio stations, some television concessions, pay channels, and a chunk of Unitel, a Canadian equivalent to Sprints and MCIs which, it bears noting, has had large chunks taken from it by AT&T.

This would be sort of like TCI taking over Time-Warner, with big chunks of AT&T, Sprint, MCI and McCaw thrown in for posterity. Needless to say, the Stentor Alliance, Canada's parallel to the RBOCs, made up of Bell Canada and eight sister companies across the country, are fibrillating. Stentor in April already committed to a plan to build the Canadian electronic highway for CDN $8 billion over 10 years. Moreover, like the RBOCs, they're struggling to bring video-on-demand to Canadian homes.

This is convergence on a grand, nasty scale, and would seriously re-map the landscape of who will provide what kinds of entertainment and information over whose networks. Rogers' leader, Ted Rogers, is obviously making his company vulnerable in the process, but at the same time claims to be warding off invasion from foreign media giants. Rogers wants a Canadian player in the North American Market's Big Four: $20 billion Time Warner (which recently merged with Newhouse); $14 billion Bertelsmann AG of Germany, and Rupert Murdoch's $10 billion News Corp.

Communicating Across Wide-Open Spaces

Some of Canada's government officials, used to having to travel a day by small plane from some of the remote provinces, have taken up the social enhancement aspects of the electronic highway cause -- promoting it at a level unparalleled in North America.

One of them is Georges Corriveau, who bears the title, "Minister of State for the Electronic Information Highway of the Government of New Brunswick." New Brunswick, perched at the end of Maine between the St. Lawrence river and the northern Atlantic, has been described as fiber-wired from end-to-end. Government cohorts in Ottawa and from far-flung outposts in remote provinces seek the advice of Corriveau, named to the position Jan. 25. New Brunswick's government, meanwhile, has announced that all students will have to demonstrate basic computer literacy to graduate from high school or community college by 1996. New Brunswick wants to become Canada's first all-digital province.

That's only one of the links between electronic highway development and education in Canada. SchoolNet, a CDN $1.6 million initiative over five years by the federal and provincial governments, education and industry, is trying to link all Canada's 16,500 schools to the global highway.

Canada is also emerging as a leader in multimedia, and entertainment-oriented technology, playing on Toronto's appeal to U.S. television and movie producers, who like to use it as a double for New York and Chicago -- so spawning software houses that help create movie special effects like "morphing," and other computer-generated processes.

Still, like its counterpart in the United States, Canadian high-tech companies tend to be whizzes at identifying problems and finding ways to fix them -- it's just marketing and selling what they do that isn't so smooth.

"Company resources are most often directed to hardware acquisition and software development rather than marketing the product," says a terse U.S. Commerce Department intelligence report on Nova Scotia's software industry. That province's little industry is expected to grow 20 percent, but it's in, well, Nova Scotia. It's like the Canadian joke about the crane arm in the U.S. space shuttle, emblazoned with the maple leaf: Everyone remembers it was made in Canada, but no one remembers who made it. "The mark of your competitiveness is that people don't look at your country of origin," said Cynthia Rudge, who is marketing the study in the U.S. "Expertise just flows across boundaries."

Reported from Toronto, Markham, Ottawa, and Kanata, Ontario

The Giant, Boring Sound

OTTAWA, Ontario -- For a while, it was the trade agreement that wouldn't go away, and it was the news story the public seemed utterly uninterested in -- except for the distraction of Ross Perot's soundbites about giant sucking sounds. NAFTA didn't stir much enthusiasm in the 50 states that truly mattered, or, for that matter, in the U.S. high-tech community.

But it arrived for better or worse on Jan. 1. In Canada, you could say it meant a lot to the beer and timber industries, but what about Canadian high-tech? Did it break down that legendary "Buy American" bias? Suddenly unlock doors of major U.S. prime contractors? Did it right legendary Mulronian wrongs, imagined or enacted?

Well, no.

"In Washington, NAFTA means American companies can sell anything anytime they want in Canada, and in Ottawa, it means American companies can sell anything anytime they want in Canada," said Shirley-Ann George, Ottawa executive director of the Canadian Advanced Technology Association, one of two counterparts to U.S. groups like the Information Technology Association of America or the Electronics Industry Association. "There is a strong feeling of 'Buy American,' so in Canada, it's kind of a free-for-all [for U.S. customers]. That's why Canadian companies look for U.S. partners."

Even so, the United States is still the biggest customer by far for Canadian infotech, and many Canadian companies have been doing business with American partners for years.

"NAFTA cleared up a bit of paperwork," said Bob Gardiner, vice president of sales for Keyword Office Technologies Ltd. of Calgary, Alberta, an office document automation company with customers like the White House. Keyword's largest single customer is the U.S. government, a relationship the 15-year-old company built by partnering with U.S. systems integrators and value-added resellers. NAFTA "just made a few things easier, and customs has gotten less noisy," he said.

If anything, the agreement seemed to boost activity among Canadian government officials in the United States to root out partners. "NAFTA is a yawn to most Canadian software companies," said Michael J. Cannata, president of Cybermation Inc. of Markham, Ontario. The company specializes in automation and does 80 percent of its business in the United States. It counts Johns Hopkins, JCPenney, AT&T, Computer Sciences Corp. and Nike among others. "This company wouldn't exist today if we couldn't get south of the border," he said. "NAFTA or not wouldn't make much difference."

--Beau Brendler

Incontext Exploits Canada's Proficiency in SGML

Software firm picks up the Pentagon as a client for the markup language

A narrow niche often leads hungry high-tech companies to broader markets. Kick the door open, say, in defense, and by the time the technology catches on elsewhere the firm has the revenue stream, product maturity and marketing resources to beat latecomers.

That's the business plan at Toronto-based Incontext Systems Inc., a 25-man software house that has leveraged U.S. Pentagon demand and positioned itself for dominance in emerging electronic publishing technologies.

The way InContext sees it, the computer revolution has gone through two stages -- and the firm hopes to be at the center of the third and decisive stage. First came standardization of personal computer hardware, with Intel emerging as the winner. Then Microsoft handily defeated all comers in forging a standard operating system for those systems to use. Now comes the third and final phase, to wit: Data standardization. That basically means a standard way to access and manipulate data, no matter what word processing or graphics package creates it. In the obscure argot of electronic publishing, this standard is called SGML, for standard generalized markup language, and it promises to dramatically speed up access to information while lowering related costs. It also happens to be one of the fastest-developing Canadian niche markets.

Certainly, penny-pinchers at the Pentagon need that kind of technology. And the same logic applies to civilian aerospace, pharmaceutical companies, telecommunications equipment manufacturers and the auto industry. They all spend and squander billions by updating, printing and ineptly accessing information for their products and services.

Dr. Robert Arn, a 16-year veteran of high-tech management, launched InContext Systems Inc. in 1991. He first ran into the technology while managing a subsidiary of Canada's Meridian Technologies, which attempted to sell it to educational markets. Arn recognized the potential, but realized the product needed a more lucrative vertical market. He purchased the rights to the technology for $3.3 million and contracted with the market research firm Dataquest, which pegged the Pentagon as the real market.

The firm developed the product for use with the industry standard Windows computer interface -- rather than the more arcane interfaces for the techie UNIX operating system. InContext also set up an American subsidiary in Bethesda, Md., and worked with defense contractors such as SAIC to tailor products for Pentagon consumption.

Meanwhile, Arn found an inactive, publicly-traded gold mining company. Through a "reverse acquisition" by that company, InContext was able to get itself listed on the Vancouver Stock Exchange -- saving the $500,000 it often costs for small companies to be publicly traded.

--Andrew Jenks

Xenos Tackles the Inscrutable Printer

A niche that's earned a 90 percent U.S. customer base

In an ideal world, we all use the newest equipment, duly certified as adhering to the latest international technical standards.

But the real world is full of incompatible computers, printers, modems, tangles of wires, routers, applications and operating systems. And so much money and expertise is tied up in this "information technology infrastructure" that few companies can afford to scrap it all and start from scratch.

Hence, the need for systems integrators such as the Xenos Group. The firm labors within a clutch of software and systems integration houses in a high-tech suburb of Toronto known as Richmond Hill. Its specialty is making printers talk to computers. "We are the printing integrator," said president and founder Marian Lewandowski, who in the last decade has cultivated a special relationship with printing maven Xerox Corp. to develop and market a product known as Corridor. The product helps link IBM mainframes to printers and related workstations from other suppliers.

With annual printing volume rising 10 percent annually -- the paperless revolution notwithstanding -- Xenos appears to have found the right place.

Still, systems integration is no easy feat. It involves cobbling together systems and software never designed to work together. The Royal Air Force uses the slang term "to graunch" for systems integration, meaning to make something work by excessive use of force.

Can Lewandowski graunch with the best of them? A systems programmer at IBM in an earlier career, Lewandowski launched Xenos in 1980 as a consulting company. The premise then, as now, was that big companies such as Xerox make copiers and printers -- and are set up to make money in that business rather than related consulting and services. So Xenos got its start connecting Xerox printers to IBM mainframes. It has since followed the computer industry in providing similar services for the networks of smaller computers now replacing, in some cases, the venerable IBM mainframe. Along the way, the firm has crafted its consulting expertise into a product suite known as Corridor.

The company recently sold a printing outsourcing business, so its revenue, at $4 million annually, is half what it used to be. But the privately-held firm can now focus on product marketing and sales, which Lewandowski figures can reach $10 million annually within five years.

As with most Canadian high-tech companies, Xenos garners most of its business from the U.S. -- in fact, 90 percent of its revenues. "That's very typical," said Lewandowski. "It's easier to sell to the U.S. Americans make quick decisions."

-- Andrew Jenks

TRUE NORTH PRIMES

Canada's Big Seven Systems Integrators

(In Canadian Dollars, based on 1993 revenues)

1. IBM Canada of Markham, Ontario: $6.5 billion 

2. SHL Systemhouse Inc. of Ottawa, Ontario: $912

million 

3. ISM Information Systems Management Corp. of

Calgary, Alberta: $378 million*

4. DMR Group of Ottawa: $267 million 

5. EDS Canada of Ottawa: $260 million 

6. Andersen Consulting Canada of Ottawa: $105 million 

7. CGI Information Systems and Management

Consultants Inc. of Ottawa: $85 million**

* Estimate, based on 1992 revenue statement

** For fiscal year ended March, 1994

  Multinational

Source: Independent research; Canadian Advanced Technology Association

A Pinch of Luck and U. Waterloo

MKS taps North America's best young programmers and parlays its consulting and Internet Anywhere product into a $10 million business

"We had astute insight and a pinch of luck," says Ruth Songherst, a vice president at Mortice Kern Systems Inc., of her company's formula for success.

MKS is situated in Waterloo, a provincial city about 60 miles outside Toronto. But despite its isolation, the city boasts Canada's premier technical college, the University of Waterloo. Known as Canada's MIT, Waterloo arguably churns out the world's best programmers -- Microsoft hires more Waterloo grads than any other U.S. or Canadian university.

MKS itself was founded by three Waterloo grads, and the firm frequently taps the institution for new hires.

The company's unusual name is derived from the typesetting terms mortice and kern, reflecting the company's early intention to enter the desktop publishing market.

But that original plan fizzled, and instead the company got into the computer consulting business. As part of one project for Exxon, the company developed, for its own use, a set of tools that would bring advanced software features and international open systems standards to personal computers. The company realized the tool kit itself could become a revenue generator, particularly among users -- mostly government -- attempting to make their systems adhere to mandated standards.

Songherst, one of four MKS owners and vice president of marketing and sales, says the firm is really more like a Silicon Valley startup than a Canadian company: minimal corporate bureaucracy, a passion for cool technology, new hires straight from the university immediately thrown into the trenches. They learn by working, and are offered lucrative financial rewards if they succeed.

The company is certainly hitting its stride. It had $6.4 million in 1993 revenues and $10 million in fiscal year 1994 -- with 50 percent growth slated for next year.

MKS has so far shunned public markets for financing. Instead, the firm has lived by its bootstraps -- even while managing to launch itself into promising new product directions. The original toolkit is still a strong seller. But the firm has also licensed much of that technology to computer manufacturers -- in large part because it found it difficult to sell directly to U.S. customers. So MKS has worked with nearly every major computer manufacturer -- from IBM and DEC to Sun Microsystems and Hewlett-Packard -- to help make their products standards compliant.

But MKS's biggest future revenue generator may come from a product effort launched last year called Internet Anywhere. The package attempts to tap the exploding environs of cyberspace with a Windows-based program providing access to the Internet. By putting a familiar interface on the notoriously unnavigable Internet, MKS hopes to win the looming "interface" battle as competitors strive to make Internet as easy to use as services like America Online.

For now, MKS is targeting the wired executive looking for an easy way to access the Internet. "It's a whole new area for MKS," said Songherst.

-- Andrew Jenks

An Advocate On Capitol Hill

The Canadian Embassy provides some powerful assistance to get high-tech work for its country

Government intercession on behalf of business has long been a way of life in Canada. In part, that's because Canadian firms are so dependent on exports; but it also reflects a more European attitude toward government and its role in promoting economic development.

So it is not surprising that the Canadian Embassy in Washington, D.C. -- the only foreign embassy located on the Mall just below the Capitol -- goes to astounding lengths to help drum up business for Canadian firms.

The Embassy holds receptions to introduce Canadian companies to potential partners; it sponsors huge booths at trade shows for Canadian firms; it holds company hands as they attempt to work their way through a foreign and often hostile U.S. procurement process.

But perhaps the Embassy's greatest service is playing matchmaker. That role goes beyond simply arranging cocktail parties and inviting "potential" partners from both sides of the world's longest demilitarized border. The Embassy, much like a consultancy and research service, actually compiles a list of companies going after government high-tech contracts in "pre-RFP" stage. Pre-RFP -- for before request for procurement -- is a kind of mantra among government contractors, who live and die by their ability to sniff out a project and find qualified teaming partners long before it ever gets officially launched and announced in the Commerce Business Daily.

The Canadian Embassy even provides a "coaching coordinator" to assist in preparing proposals. Twenty-eight U.S. partners are listed in the Embassy's 1994 Canadian Technology Partnership Program. Those companies range from rocket launcher Orbital Sciences Corp. to electronic eavesdropping specialist E-Systems. The guide provides detailed profiles of U.S. participants, including financial and contract information that most of the firms would usually not provide to business reporters. E-Systems, for instance, notes that its Melpar Division booked $50 million in defense contracts during the first quarter of 1994 -- information it would never give knowingly to the public. And privately held firms often list employees and revenues.

But the profiles do stop short of providing some of the most sensitive and strategic information. "Most of the American partners are working on ideas that they haven't listed here. The Technology Partnership Program can tell you about some of the plans they didn't mention to you," notes a proposal guide provided by the Canadian Embassy.

Most of the participating U.S. firms are small companies owned by members of an officially designated minority group. Those that aren't -- such as SAIC, E-Systems and HFSI -- tend to do much of their business with top-secret agencies. The proposal guide urges firms to remember "to consider your secure and classified projects, too. Many Canadian firms already do such work in Canada as well as the United States, and are issued clearances through Memorandums of Understanding between the government of Canada and DoD and NSA."

So why do the U.S. firms participate in the program? For starters, teaming partners with particular kinds of technical expertise can make the difference between a winning and losing bid. To have access to Canadian firms increases the available pool of labor. Canadian firms have an exceptional reputation for technical excellence, and they tend to be extra careful to deliver on their promises -- so as to insure future selection and allay any concerns about giving business to a "foreign" company. But there is another quid pro quo: When Canadian firms direct partnership proposals to U.S. companies, they are expected to propose partnerships on projects in Canada. Though the Canadian market pales in comparison to the United States, it does provide ample opportunity. Hughes, for instance, won a critical air-traffic control modernization program for Canada -- the analog of a competition it lost to IBM Federal Systems, now Loral, in the United States. The U.S. system has been way overbudget.

The Canadian effort has gone more smoothly, and Hughes has not spared any effort in reminding the U.S. Congress of that fact -- and proposing its own Canadian system as a solution. By staking out ground in the Canadian market, Hughes may just have found a back door into the larger U.S. market.

-Andrew Jenks

One of Telecom's Old-Time Players

On the rebound, the company moves into foreign markets in China and Russia

No survey of Canadian high-tech would be complete without Toronto-based Northern Telecom, one of world's largest telecommunications equipment manufacturers.

Founded in 1895, Northern Telecom sells products and services to the telecommunications and cable television industries, other businesses, governments and universities. The corporation did more than U.S. $8 billion worth of business in 1993, employs 58,000 worldwide (including 22,000 in the U.S.), and has more than 100 million digital lines in service in some 90 countries throughout Europe, Asia and the Americas. Its distinctive building-with-logo sticks out at its Mississauga, Ont., offices, and an almost-identical one is a familiar sight in Tysons Corner, Va., too.

Northern Telecom, which introduced digital technology to telecommunications way back in 1976, supplies digital switching systems to the Baby Bells, long-distance carriers, and the U.S. military. The company also maintains 54 manufacturing plants in Canada, Australia, France, Malaysia, Thailand, China, Ireland, the U.K. and America.

Despite, or perhaps because of its global reach, Northern Telecom has not been immune to downturns in some of the many markets in which it competes. In 1993, the company lost $884 million, or $3.54 per share. The company attributed its disappointing year-end performance to revenue losses in Canada and the United States, which failed to offset gains in Europe and other international markets.

The 1993 balance sheet also reflected a company in the throes of costly change, with more than one billion dollars in restructuring and other charges.

At the start of this year, Jean C. Monty, president and CEO, said: "As I have emphasized in the past, 1994 will be a year of transition for Northern Telecom as we build toward more traditional levels of profitability in 1995."

Although Monty predicted an operating loss for the first quarter of 1994, the company enjoyed net earnings of $88 million, aided in no small measure by a one time net gain of $72 million from the sale of a fiber optic manufacturing plant in Saskatoon. But it seems the proverbial corner has been turned.

For the second quarter of 1994, Northern Telecom reported a 14 percent increase in revenues and net earnings of $37 million. By contrast, excluding a one-time $940 million restructuring charge, the company lost $88 million in the second quarter of 1993.

-Jorgen Wouters

A Modem for All Seasons

Sierra Wireless' joint venture coalesces in the PocketPlus

Sierra Wireless is a newcomer to Canada's high tech landscape, but not one without a past.

Incorporated in 1993, the Vancouver-based company is owned by two companies on opposite sides of the U.S.-Canadian frontier: Sierra Semiconductor of San Jose, CA, and MPR Teltech, a subsidiary of BC Tel of Vancouver, British Columbia.

Sierra Wireless' heritage is somewhat convoluted, but revealing nonetheless. In 1975, Mobile Data International, a Vancouver company, was created to market then new-fangled wireless data technology to North American police forces. Besides installing many public safety, utility and fleet dispatch systems, the company's customers included Federal Express and Hutchison Mobile Data, whose Hong Kong network was the first public radio data network.

Motorola purchased the company in 1988, but a group of Mobile Data International engineers had other ideas. They were dismayed by the prospect of a wireless industry dominated by expensive, custom-tailored vertical applications. Instead, the cellular mavens wished to pursue development of low-cost, non-proprietary wireless data communications solutions and standards.

That group, which included Mobile Data and Motorola engineers, joined MPR Teltech. While there, the team they contributed to the completion of the CDPD (cellular digital packet data) specifications on behalf of the U.S. cellular consortium in July 1993.

In that same year, with financial backing from MPR and Sierra Semiconductor, the team incorporated Sierra Wireless to design and manufacture wireless data modems for wide-area mobile computing applications.

The first fruit of the young company's labors is manifest in the PocketPlus. Due to hit the market in October, the PocketPlus is the industry's first CDPD, circuit-switched, wireless modem compatible with both Windows and Macintosh-based laptops. The PocketPlus, which also operates over wireline public telephone networks, allows users to send and receive data, e-mail, graphics and faxes. In CDPD mode, the device offers Internet access as well.

While it's too early to declare the PocketPlus a winner or loser, much of its success will hinge on how soon CDPD becomes available. The protocol, developed by the cellular arms of Ameritech, Bell Atlantic, GTE, NYNEX, PacTel and Southwestern Bell, as well McCaw, is currently in the trial stage throughout America, Canada and Mexico.

CDPD is an overlay technology, essentially allowing for a relatively inexpensive grafting of digital, packetized transmission technology over the existing cellular networks. However, the ultra-fast transmission technology is not yet widely available.

All of the above carriers, with the exception of SouthWestern Bell, are deploying CDPD service, which is expected to be available in the 60 largest North American cities by the first quarter of 1995. By that time, if Sierra Wireless has its way, enough units of its new modem will have found its way into the pockets of mobile professionals.

-- Jorgen Wouters

Ears In Foreign Places

Mitel is a Canadian telecom leader worldwide, setting record revenues

You may not have heard of Mitel Corp., but chances are good its equipment has heard you.

Mitel specializes in the design and manufacture of PBX (private branch exchange) systems, the on-site switching equipment that handles voice and data and connects the business to the public network.

Since its founding in 1971, Mitel has sold some 173,000 PBX systems in more than 80 countries. The company enjoys the largest installed base of PBX equipment in Canada and the U.S., where nearly one in four PBX systems bear the Mitel name.

The Kanata, Ontario firm also supplies a broad range of customer premise equipment, known as CPE in telecommunications jargon, including consoles, dialers, telephones, semiconductors, hybrid circuits and custom wafers.

Mitel is also involved in other evolving areas of telecom, including wireless and computer telephony applications. In fact, the company recently established CTI (computer/telephony integration) Solutions, a new business group dedicated to exploiting this market by supplying packaged and integrated applications and services.

Mitel's 3,500 employees are spread among the company's subsidiaries in the U.S., the U.K., Italy, Germany, Hong Kong, Mexico and South America. The company maintains four manufacturing plants: two in Canada and one each in the United States (New York) and the U.K. (Wales).

Mitel is committed to "open distributed" architecture, or non-proprietary, client/server-based telecommunications solutions. The company uses a "building block" approach for easy integration of its various telecom applications, peripherals and platforms.

Mitel has adopted a three-pronged approach to fulfill that mission and take advantage of exploding telecommunications needs brought on by the increasing globalization of business.

To that end, the company supplies telecom components, systems, subsystems, hardware and software; acts as a value-added reseller of components from other suppliers; and provides systems integration services, making Mitel products work with other brands of telecommunications equipment.

The company's strategy appears to be working.

During the company's latest fiscal year, ended March 1994, Mitel reported record revenues of U.S. $379 million, and net income of U.S. $15.8 million, a 17 percent jump over the previous year's performance.

Thus far into fiscal year 1995, the company has continued to outstrip previous quarters. Revenue for the first quarter of fiscal 1995, ended July of this year, were U.S. $94.7 million, while the company netted U.S. $2.2 million, a 22 percent increase over the same period last year.

The company recently penciled an agreement with a subsidiary of Southern New England Telecommunications Corp. to supply its Radicall set handler. Radicall provides users of Mitel's digital business telephones with access to desktop features offered by local telcos such as network, information management, long-distance, directory, publishing, and advertising services.

-- Jorgen Wouters


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