NextWindow's Canadian owner sees its shares crash 25% in a day
UPDATE May 19: North America's Smart Technologies reported a weak result after the market closed Thursday (Friday NZ time) and was punished in Friday Nasdaq trading - a situation that is sure to further fray nerves at the company's Auckland office, home to its $60 million NextWindow touchscreen business. One insider has relayed staff fears that the recently acquired NZ outpost will be shuttered (see below).
Smart had warned earlier this month (below). But the result was worse than investors had expected. Many headed for the doors, and the stock fell 25.6% - making it the second-biggest decliner for the day.
Shares [NAS:SMT] - which have a 52-week high of $US7.28 - fell to $US1.45.
Smart lost $US2.7 million dring its fourth quarter. In the year-ago quarter it made a $US7.6 million net profit.
Revenue fell 11.5% to $148 million. The company said it sold 81,716 interactive display units, down from last year's 86,717.
Nervousness at $65m tech company’s Auckland office as McKinsey circles
May 2: It’s a familiar tech story (think Navman or The Hyperfactory). An overseas owner moves in to take over an NZ company (often built up, in part, with tax breaks or government grants) and pledges to keep jobs local. But as soon as the wind changes, the promise evaporates.
Now, staff at Auckland-based NextWindow (2010 revenue: $65 million) are worried it could be happening to them.
Canada’s Smart Technologies bought NextWindow in April 2010. The New Zealand touchscreen company succumbed to a takeover offer, with chief executive Al Monro telling NBR NextWindow could not afford to defend a patent suit brought by Smart.
In December, NBR revealed that Mr Monro was quitting the company he helped found.
Smart Technologies CEO Nancy Knowlton flew over to reassure NextWindow’s Auckland-based staff as Mr Monro’s departure was announced.
Mr Monro told NBR his departure coincided with his 10th anniversary as CEO; it was time to move on.
Auckland staff numbers had increased slightly since Smart bought NextWindow, and would likely rise again over 2012 (as taxpayers might well expect. The government recently gave Smart a $6 million R&D grant).
Revenue and profit for the were up, with HP, Sony, Lenovo and Asus among the big PC makers buying NextWindow’s touchscreen components. Microsoft’s pending Windows 8 upgrade – which has a strong focus on touchscreen features – had potential to boost business further.
Now, Ms Knowlton is gone too.
While its NextWindow touchscreen business may be chipper, Smart Technologies' core interactive whiteboard business has been struggling. According to a Calgary Herald report, Smart was once the only game in town - but now it faces a raft of commodity competition.
Ms Knowlton - and her husband and company co-founder David Martin - stepped down on April 26.
The company is due to report on May 17. Investors appear to have assumed the worst. Smart's shares (dual listed on the Nasdaq and Toronto exchanges) have dropped from a 52-week high of $US10.09 to $US2.69.
NBR understands that on April 10, McKinsey was brought in to undertake a "undertake a deep strategic review" of Smart.
"There's some worry in the Auckland office that McKinsey may recommend shutting them down in favour of development in Calgary," a reliable source close to the company told NBR.
After Mr Monro's Christmas departure, Smart brought in a Canadian, Richard Turski, to run NextWindow and its Auckland office.
Mr Turski has been shuttling back and fourth between Auckland and Calgary, but NBR understands he is in the process of moving his family to New Zealand.
This week he is in Canada, and could not immediately be reached for comment.
Well positioned for Windows 8
If NextWindow does get restructured by new owner Smart, it will come at a time when, ironically, it's on the brink of another great leap forward - at least according to a recent post by former employee Geoff Walker.
Another NextWindow alumni summarised for NBR:
"Because Microsoft has significantly increased the touchscreen requirements for Windows 8 [due later this year], most manufacturers can't meet them.
"In fact, there are only three companies still doing logo testing - two are high-end capacitive screens and the other is NextWindow.
"PC manufactures who make All-In-One models have complained to Microsoft because if only the high-end capacitive screens pass then they can't afford to keep putting touchscreens in their units, effectively removing touch from Windows 8.
"NextWindow is the only one doing a cost-effective solution so if it gets Windows 8-certification it's a huge opportunity - it'll be the only supplier [to PC manufacturers who want to add Windows 8-compatible touchscreens].
"Optical touch competitors like Qisda license the patent from Smart but it only allowed up to three cameras [NextWindow's latest design uses six].
"NextWindow has announced the technology, but Microsoft will only grant the Windows 8 logo to a specific screen, so it needs to get a contract with a manufacturer."
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Comments and questions7
I am surprised there hasn't been any comment on this. It must be because Al Monro has a low profile having quietly gone about building a successful business rather than spending most of his time on self promotion.
Al has done a superb job at Next Window, delivered fantastic career opportunities to the staff and great returns for the investors.
I don't think any of the local funds backed him. NZVIF and the VCs whose funds it puts millions into must have been too busy feeling important and spouting platitudes to the local media to take a look at Next Window.
I really hope Al does get involved at the Icehouse and with VIF. They desperately need someone who can achieve something rather than just pontificate.
Not quite true - I think that Ascot Private Equity (run by David Glenn) backed him and made a huge profit out of it. Just a shame no-one else in the market had the same foresight.
so did i-cap till 2007
The Ascot Private Equity Fund was the demise of the I-Cap Private Equity Fund and the only asset that was succesful yet invesors have lost thousands in other investments, namely Canterbury of NZ, Altitude Science to name a few.
What an opportunity! If Smart Technologies is on its financial knees, then it would have trouble funding the patent case that mr Munro was unable to conclude last time. Is there an opportunity there to reopen the case and take the technology back from Smart?
This just proves that the Government funding should be by way of loans not grants
The Government agencies should lend the money at no interest for infinity unless the company is sold when principal and interest is payable if the company is sold to an offshore party.
NZ ends up funding the start up companies and then the overseas buyer and the major local shareholders beneifit and the Government/ taxpayer loses out totally.
It's about time the Government employees/management get real and treat the Government money as if it was their own - not one giant lolly scramble with no accountability.
Loans, equity - it doesn't matter - if NZ wants the prize at the end of the day they need to own it - not sell it offshore early in order to fund it. So National should buy it so when Labour gets in they could sell it down ;) or maybe Crafar needs some touchscreens ...