Ottawa’s Six Most Valuable Tech Stocks

"You take a look at Ottawa, and you’ll say Nortel’s melted down, well true,” Ottawa tech-legend Terry Matthews told Bloomberg recently. “The fact of the matter is it is coming back. The activity level for new companies starting up is wild."

When the final pieces of Nortel’s patent portfolio were sold off early this summer, it might have left a gaping hole in the once burgeoning Ottawa tech scene. But to be realistic, Nortel hasn’t been a factor for nearly a decade in the nation’s capital. And while the TSX and TSX Venture haven’t seen a surge of new listings from the area, there has been a mini-boom in new private tech firms, and not just in telecom, where the city made its mark. While there is currently just two Canadian listed tech firms with a market cap of more than half a billion dollars, more established firms, such as Zarlink and Mosaid are seeing a surge in their share prices, bringing them nearer to that mark.

Some Ottawa-born techs, such as Mitel, are now listed only in the US. Others, such as Bridgewater Systems, which was recently acquired by US firm Amdocs, have gone the way of Cognos, Creo, Corel and JDS Uniphase and have been snatched up or merged with a US based firm. If we are to believe Ottawa tech legend Terry Matthews, however, this list might be very different very soon. “You take a look at Ottawa, and you’ll say Nortel’s melted down, well true,” Matthews told Bloomberg recently. “The fact of the matter is it is coming back. The activity level for new companies starting up is wild.”

We count down the six largest Canadian listed Ottawa tech firms.

1. WiLAN (TSX:WIN)
August 10th Price: $6.50
Current Market Cap: $795.7 million

WiLAN isn’t playing second fiddle to anyone in this nation’s capital. After trading as low as $1.19 in late October, 2008. the company’s stunning run to nearly $8 means the company is now the most valuable technology concern in Ottawa. Founded in 1992, WiLAN has developed a range of communications and consumer electronics products including routers, 3G handsets and WiMAX base stations. The Company now has nearly a thousand patents, and has already licensed their technologies to blue chip techs such as Cisco, Nokia, Panasonic, Samsung. In doing so, the company’s revenue has climbed from just over $2 million in fiscal 2006 to over $50 million in 2010. In October, 2007 WiLAN filed patent infringement claims against 22 companies, including Apple, Hewlett-Packard, Intel, Sony and Toshiba over technology relating to Wi-Fi and power consumption in DSL products. The Company also has a wide ranging suit against several blue chips regarding technology in wireless handsets.

2. Nordion (TSX:NDN)
August 10th Price: $8.82
Current Market Cap: $568 million

Nordion’s roots go all the way back to the 1940’s; the company is a spinoff of the federally created Atomic Energy of Canada Limited, which was a crown corporation. Today, the firm is a world leader in the medical use of isotopes and targeted Cancer therapies such as its TheraSphere®, which is used in the treatment of inoperable liver cancer. Shares of the company have tailed off since 2008, the company has posted three straight years of losses.

3. Zarlink (TSX:ZL)
August 10th Price: $3.02
Current Market Cap: $363.3 million

Last month Zarlink, which been an Ottawa stalwart for decades, announced it had received and rejected an unsolicited bid from Irvine, California based Microsemi (NASD:MSCC). While the board’s decision to pass, it said, was unanimous, shares of Zarlink rocketed, closing up 50% to $3.60 as more than twenty-six million shares changed hands. The real reason may have been the open ended language of the denial in its official press release, which certainly didn’t close any doors on the proposal. But that subtle opening clearly wasn’t enough rope for Microsemi. After being rebuked by the board twice, it is now appealing directly to the shareholders of Zarlink. In a letter to Zarlink’s board, Microsemi’s CEO James Peterson, said “Your continued refusal to discuss our proposal compels us to directly inform your shareholders of our attractive proposal,”

4. Mosaid (TSX:MSD)
August 10th Price: $30.50
Current Market Cap: $362.4 million

Mosaid, which can date its history back to 1975, was once best known for its key circuit technology, an innovation used in the memory of most of the world’s computers. It wasn’t until 2007, however, that the Ottawa company went virtual and decided to get out of the memory test equipment manufacturing and semiconductor IP design and focus on defending its now impressive stable of patents, which it had begun to license in 2009. Mosaid shareholders won’t argue that this was the wrong move, shares of the company have more than tripled since the beginning of that year.

Click here for Cantech Letter’s recent interview with John Lindgren, Mosaid’s President and CEO.

5. Calian Technologies: (TSX:CTY)
August 10th Price: $19.10
Current Market Cap: $146.9 million

Calian, whose roots go back to 1982, when it was a small consulting firm now employs nearly 2500 people in offices across Canada. The company, which sells technology solutions to governments has grown slowly, but is consistently profitable. In May, Cantech Letter contributor and value investor Saj Karsan said Calian met the criteria of John Greenblatt’s famous value tome “The Little Book that Beats the Market” Click here for that article.

6. DragonWave (TSX:DWI)
August 10th Price: $3.59
Current Market Cap: $127.3 million

DragonWave’s incredible run of 2009, in which the company went from trading under a dollar on the Canadian Venture exchange to a full NASDAQ listing and share price over (US) $13, was interrupted when Q4 2010 data revealed that 87% of the Ottawa company’s revenue was derived from one customer; Clearwire. DragonWave provides wireless microwave transmission systems for internet protocol networks. These products that enable the rollout of broadband voice, video and data. Many analysts believe that as large carriers like AT&T and Verizon roll out into suburban and rural areas, where microwave equipment has natural advantages over fiber, companies like DragonWave will be natural benefactors. The fortunes of Clearwire are clearly a big deal to DragonWave, and the company has stated one of its goals is to reduce its dependence on its largest customer. But between fiscal 2010 and fiscal 2011 Revenue decreased by $40.0 million. Shares of the Ottawa based company, which had hit a high near $14 in the first few days of 2010 cooled off to recent levels under $4.

________________________________________________________________________________

_________________________________________________________________________________