“Profit is like food, but cash is like oxygen.”
This analogy, attributed to a long-forgotten Silicon Valley exec named Robert C. Wilson, has been repeated for decades by those with an eye for a margin of safety in their investments. Today, tech companies like Apple and Cisco have unprecedented levels of cash in the bank. More in fact, in a certain Cupertino concern’s case, than the US Government does.
A list of the best capitalized techs will turn up household names such as Microsoft, IBM and Google. A more interesting take on the money equation is to compare the cash hoards of a company to its market capitalization. We did this with stocks listed in the TSX Technology sector and turned up eleven than have more than half of their total market cap in cash and short term investments. Here they are, ordered by the percentage of cash they have compared to their market capitalizations.
1. Craig Wireless (TSX:CWG) 221%
Market Cap: $5.14 million
Cash and Short term Investments: $11.34-million
The balance sheet of Craig Wireless got a shot in the arm two years ago after the sale of the company’s Canadian spectrum assets to Inukshuk Wireless Partnership, a joint venture of Bell Canada and Rogers Communications, for $80 million. After the taxes were paid and the company issued a hefty one time dividend Craig had cash reserves of just over $30 million, which has fallen to just $11-million as the company, whose roots go back to the 1940’s, has struggled to convert its license spectrum holding into revenue.
2. Espial (TSX:ESP) 118%
Market Cap: $8.75-million
Cash and Short Term Investments: $10.32-million
Despite record annual revenue of $14.7-million for fiscal 2011, Espial has to date been awash in red ink. The $2.5-million, or eighteen cents a share the company was down last year, however, will likely be trimmed considerably this year as 2012′s first half loss was just over $658,000. The Ottawa-based company, which is a supplier of IPTV television software, remains undervalued, says 4Front Capital Partners analyst Dushan Batrovic.
This story is brought to you by Serenic (TSXV:SER). Serenic’s cash position as of May 31st, 2012, $4.45-million, was greater than its market cap as of September 6th, which was $3.86-million. The company has zero long-term debt. Click here for more info.
3. Cyberplex (TSX:CX) 103.6%
Market Cap: $6.37-million
Cash and Short Term Investments: $6.6-million
Cyberplex’s recent woes overshadow a bigger picture. The Toronto based company, which provides online advertising solutions for multinational corporations, lost a whopping $61 million in fiscal 2010, and tacked on another $9.1-million in 2011. The company’s meteoric rise in revenue has not only stalled but reversed its trend, and shares of the company have fallen from nearly $2 in 2009, to mere pennies today.
4. Intrinsyc Software (TSX:ICS) 88.5%
Market Cap: $13-million
Cash and Short Term Investments $11.5-million
Intrinsyc, which was founded in 1992 as ITC Microcomponents, soared to over $3 in 2001. But the Vancouver-based company has battled through a myriad of restructurings and false starts in the decade-plus since. Today, Intrinsyc operates on a smaller scale; its revenue has fallen to less than half 2008’s $24.7-million topline, but the company has tightened its belt, and is nearing profitability.
5. RDM Corp (TSX:RC) 66%
Market Cap: $25.6-million
Cash and Short Term Investments $16.88-million
A slow and gradual slide. Recently, RDM Corp seemed unable to break out of a slump that saw it reporting a slightly worse topline each year. Revenue slipped from nearly $34-million in 2007 to $11.1-million in 2010. But the Waterloo based company, which designs and sells remote check deposit systems, bucked the trend, if only marginally, in 2011. Improvement on its bottom line are likely the reason the company’s stock has risen throughout 2012.Shares of Bill Tatham’s Nexj Systems have not performed well since last year’s IPO, but, perhaps emboldened by his company’s large cash position, the CEO is buying his own stock.
6. NexJ Systems (TSX:NXJ) 64.1%
Market Cap $85.2-million
Cash and Short Term Investments: $54.6-million
Toronto-based CRM specialist NexJ Systems along with Vancouver’s Avigilon (TSX:AVO), were part of a small group of Canadian tech IPOs last year. But while Avigilon has raced to new highs, NexJ went the other way, falling to less than half its $9 IPO price. Recently, however, insiders have been buying the stock.
7. Mitel Networks (TSX:MNW) 59.2%
Market Cap: $131-million
Cash and Short Term Investments: $77.5-million
In April of 2010, Mitel went public for the second time. The company listed on the Nasdaq at $14 a share, but the IPO was not a success. In January of 2011, Mitel brought in industry veteran Rich McBee from Danaher to right the ship. McBee now presides over a new Mitel with increasing revenue, record gross margins and an growing sweet spot in moving small and medium sized businesses to the cloud. Shares of Mitel, which bottomed to near the $2 mark last fall, more than doubled before falling back on a disappointing recent quarter, its first after returning to Canada with a TSX listing in June.
8. Research in Motion (TSX:RIM) 56.5%
Market Cap: $3.41-billion
Cash and Short Term Investments: $1.93-billion
RIM’s cash position, once considered an important margin of safety in the long wait between its BlackBerry 7 and BlackBerry 10 platforms, has dwindled, and its market cap has shadowed the move. This past summer, the Waterloo company suffered the indignity of being passed by both CGI Group and Catamaran Corp. in terms of market valuation for Canadian techs.
9. Dragonwave (TSX:DWI) 55.6%
Market Cap $75.9-million
Cash and Short Term Investments: $42.2-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. Since that time, the company’s stock struggled as revenue fell from $173-million in 2010 to just $45.6-million in 2012.
10. Sierra Wireless (TSX:SW) 53.5%
Market Cap: $234-million
Cash and Short Term Investments: $125.3-million
Since its halcyon days, before the dot-com bubble burst, it’s been a long bumpy ride for Sierra Wireless, which builds and markets wireless modems and machine to machine devices. The company appeared to be gaining real traction midway through the last decade, when revenue rose from $221 million in fiscal 2006 to $650 million in fiscal 2010, but its fortunes have since tailed off; fiscal 2011 revenue was down to $578.2-million, and the company lost $29.9-million.
11. Aastra Technologies (TSX:AAH) 50.3%
Market Cap: $189.7-million
Cash and Short Term Investments: $95.4-million
Concord, Ontario based Aastra, which markets a range of telephony solutions for large businesses, has suffered badly from exposure to Europe, where 80% of its revenue comes from. The company, however, is consistently profitable and routinely delivers this success back to shareholders in the form of share buybacks and ever-increasing dividends.