Last summer, cracks in the armor of struggling tech giant Research in Motion took the form of solid data.
After a quarter in which sales actually rose 16% to $4.9 billion, RIM’s stock was hammered because analysts were expecting a $5.2 billion topline. RIM responded with the largest layoffs in its history.
In July, approximately half of RIM’s global workforce totaling more than 18,000 were located in Waterloo. When the company laid off 2000 of them, it was expected that the Kitchener Waterloo area, often dubbed the “Tech Triangle” would suffer. After Nortel collapsed and dragged the Ottawa tech scene, which was once referred to as “Silicon Valley North”, down with it, many in the Waterloo area feared a similar fate.
But a funny thing happened: unemployment in Canada’s Tech-Triangle area actually went down.
This story is brought to you by Agrimarine (TSXV:FSH). Not all salmon farms are the same. Click here to learn how Agrimarine is meeting consumer demand for sustainable aquaculture.
As the accompanying chart from Statistics Canada shows, the unemployment rate in the Kitchener-Cambridge-Waterloo area declined, from 7.4% to 6.8% between May, 2011 and May, 2012.
Now, after a much worse quarter -RIM lost $518 million, on revenue of just $2.8-billion in its Q1, which was reported Thursday -RIM said it would cut 5,000 more jobs. Surely, the Tech Triangle will now be brought to its knees, right?
Not so fast.
On the same day as the RIM layoffs, The Conference Board of Canada released a report that said the Waterloo Region will have the highest economic growth in Canada amongst medium-sized cities in 2012.
The report said that The region’s gross domestic product will grow by 3.3 per cent this year. Led by strong growth in the manufacturing sector Conference Board senior economist Robin Wiebe says the unemployment rate in the area will once again fall, if only slightly. Wiebe cites an $818-million LRT project and the presence of Toyota, which may expand this year, as examples of increased manufacturing activity.
What isn’t in the report but is impossible not to notice is that Canada’s Tech Triangle has become truly diverse. Non-profit association Communitech estimates that Waterloo Region is now home to more than 800 tech companies. A quick scan of local tech job boards reveals that many of these companies, including Blue Coat Systems, Desire2Learn, Exinda Networks, LookSmart and, somewhat curiously, RIM itself, are hiring for multiple positions.
Still, the recent RIM layoffs will be the biggest test of resiliency in the history of the area, with the Conference Board of Canada report noting that ““deteriorating conditions at RIM could have widespread negative effects.”
Last year’s emergence of Open Text as the second billion dollar company, by revenue, in Waterloo underscores a simple fact; a real Silicon Valley North could simply not be built by a single company. The Kitchener-Waterloo Tech Triangle’s critical next stage will need to show the emergence of northern versions of companies like Adobe, Cisco, Intel and Oracle to complement the Hewlett-Packard like founder status that RIM will forever enjoy if the region’s tech scene can truly blossom.