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How The Mighty Have Survived
A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
December 5th, 2003

By Brent Holliday
Greenstone Venture Partners

"Risin' up -- straight to the top,
Had the guts, got the glory
Went the distance, now I'm not gonna stop
Just a man and his will to survive" - Survivor, Eye Of The Tiger

Now that the worst days of the worst downturn in technology are behind us, I thought it might be time to look at the success stories of BC's technology industry in a fresh light. How are they doing? Is their trajectory indicative or at least a leading indicator of where we are headed in BC? {Did I have to use such a cheesy band as Survivor in my lyric this week? Don't worry, there are no Rocky vs. Apollo Creed references or metaphors.}

Back in 1999, at the top of the market, the big eight companies, gathering all of the spotlight and buzz were these:

Ballard Power
Sierra Wireless
360 Networks

Fast forwarding to the post-downturn world, some of these companies have actually grown since 1999 (Angiotech, QLT, Creo) and many have fallen or pulled back with the majority of the industry, none with as loud a "thud" as 360 Networks (which is essentially a Seattle company now in its newest form). Still others have emerged as big players and "new" successes to tout:

MDA, after its spin-out from Orbital
Crystal Decisions, with its IPO filing and US$1.3B purchase
Xantrex, with its acquisitions and rapid growth

And some still red-hot local successes that aren't headquartered here:

Electronic Arts

Pivotal is grabbing all of the headlines among the local success stories today because it is about to become part of a US or Chinese company. It's fall from grace is largely due to market dynamics and sour enterprise IT spending, although its CRM products are world class and its original employees are out working for new companies, trying to re-create the late 90's magic that the company had.

Angiotech is an absolute rocket ship. It's partnership with Boston-Scientific and recent FDA approvals in the US have driven it to new heights. Similarly, QLT survived a scare with Macugen, a competitive drug to Visudyne, not showing marked improvement in macular degeneration. It continues to be a strong anchor company in biotech here in BC.

Sierra Wireless is the phoenix of the group. Having nearly melted in the downturn, the company switched gears to effectively adopt new products in the extremely rapidly changing wireless data world. They just raised a pile of money in a secondary offering, their numbers look great and their web site touts their one millionth product sold since founding in 1993.

Ballard Power is the anchor of an entire alternative energy sector that BC's tech industry is recognized for around the world. They are struggling a bit right now as they try to commercialize the promise that drove their stock to dizzying heights in the 90's. Their emergence as a profitable and rapidly growing company is very important to BC. Let's hope that they are on track, but it looks to me like a rough and winding road, especially on the vehicle side.

PMC-Sierra has emerged from the other end of a cataclysmic market downturn in early 2001 as a leaner, meaner machine. They recently had their first profitable quarter in 2 ½ years and indications are that they will continue to sell their legacy communications processors and newer MIPS based and SAN products at a decent clip. They continue to be a gorilla locally and have spawned a few decent start-ups already.

Creo continues to be an amazing story. The company employs the most technology workers of any company in BC. It does a significant amount of its manufacturing here and does all of its innovation here. It employs over 850 people in its Boston facility in the US, which would make that subsidiary the 5th largest technology employer in BC, if it was located here. The CTP product line, began in the far reaches of Dan Gelbart's mind in the late 1980's, is easily the technology product of the century in BC, as no other BC technology innovation that I'm aware of has sold more on a dollar basis (almost CDN$3B in product revenue in 10 years).

Interesting tangent on that subject of BC innovations and their commercialized value over time - What do you think is a close second to the Creo CTP line of products in lifetime value of a product innovated here? Crystal Reports? No, probably still under CDN$1B in all its varieties over the years. PMC-Sierra's original communications IC product line most of which was created here? No, probably north of US$500M though. My guess for 2nd place is the ATM Access product developed at MPR Teltech and sold to Newbridge (then Alcatel), which guys from Newbridge tell me probably did US$1.5-$2B for Newbridge in the 1990's. The whole MPR story is deserving of a column some time soon. Amazing what came out of there (PMC of PMC-Sierra, Sierra Wireless and the aforementioned ATM Access product, just for starters).

If we look at the landscape in BC today, we see many of the original, organically grown successes of BC making further gains in the market. There are newer ones (like Xantrex, Glentel, Westport Innovation) that are growing and may be gorillas someday. But Electronic Arts stands out as a company that will vie with Creo to employ the most people in BC over the next few years, especially if they stay on their trajectory of late. The video game business is enormous and EA is the king. Their largest single studio is in Burnaby and, when combined with the shiny new downtown office, they employ almost 1,000 people now here. They are opening a shiny new LA production center, but plans for continued expansion in BC already are approved.

Here's my cut at how many people are employed by the largest tech companies in BC, garnered from their totals and approximate sizes of their operations here (feel free to correct me, all you HR people out there):

Creo - nearly 2,000 employees here (4,000 worldwide)
Crystal Decisions - nearly 1,500 employees (1,800 worldwide)
MDA - about 1,200 employees locally (1,900 worldwide)
Electronic Arts - nearly 1,000 employees locally (4,000 worldwide) Sierra Systems - about 700 locally (1,000 worldwide)
Ballard Power - peaked at nearly 1,000, likely down to 700 locally (1,200 worldwide)
Creation Technologies - about 500 local employees (700 worldwide)
PMC-Sierra - approximately 600 employees locally (850 worldwide)
Xantrex - about 500 employees
Pivotal - peaked at 600, down to less than 400
Glentel - about 325 employees locally
MDSI - about 325 employees locally
Top Producer Software - nearly 300 employees locally
QLT - about 300 local employees
Sierra Wireless - nearly 230 employees
Westport Innovation - about 200 employees locally

Broadcom, Nortel, 3M, Nokia, HP, IBM, Intel, and others that have acquired companies and grown in this market or set up technology centers here - over 2,500 employees combined

There are two points of view on the data here. The glass half empty view is that Microsoft in Redmond, WA employs more people than the entire list above in one location. In other words, we are still a small outpost in technology, relatively speaking. And we are acutely aware of the jobs that have disappeared in the last two years, notably:

Gone, gone, gone -
Motorola Canada - 230 jobs
360 Networks - 100 jobs
Glenayre - 150 jobs
Redback - 200 jobs
Alcatel Canada - 100 jobs

The glass half full approach is that we are a diverse, growing industry with tremendous upside for jobs and opportunities as the cycle begins its recovery phase. The successes of 1999 were the product of 25 years of sweat to create something impressive from nothing. The successes of the next five years will be how those anchor companies continue to shine in the international marketplace and how new companies, seasoned with the professionalism, expertise and experience of these first successes will become the new stories to build on.

I'm partial to the second view, of course.

What Do You Think? Talk Back To Brent Holliday


Something Ventured
is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).

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