Sunday, January 24, 2016

Did the Government Let COM DEV Go Because They Have Bigger Fish to Fry?

          By Glen Strom

The Canadian government is being criticized for not reviewing the sale of COM DEV International one of Canada’s biggest space companies, to American giant Honeywell International.

Screen shot of the COM DEV website taken on January 24th, 2016. As outlined in the January 21st, 2016 CNW press release, "COM DEV shareholders approve Arrangement with Honeywell," shareholder approval for the purchase was given at a special meeting of COM DEV shareholders held in Cambridge, Ontario on Thursday. For background on how the deal was structured, it's worth checking out the November 7th, 2015 post, "Should the proposed COM DEV sale to US based Honeywell trigger the Investment Canada Act." Graphic c/o COM DEV

A January 11th, 2016 blog post at Canadian Space, “Trudeau Government Fails First Big Space Test,” said that the government failed taxpayers who have invested tax dollars in COM DEV and workers in the aerospace industry who might lose jobs.

A January 21st, 2016 article at the Toronto Star, “The troubling shrinking of Canada’s space industry,” said the sale could affect the economy, as well as being a national security issue.

Although the sale didn’t trigger an automatic review under the Investment Canada Act because it fell below the $600Mln CDN cutoff point, the government could have launched a review within a 45-day period, but didn’t.

You’ll hear plenty of theories about why the feds did nothing. Here’s one more: the government is fine with the COM DEV sale because the company isn’t critical to Canada’s long-term economic development.

Times change. This photo shows exactEarth president Peter Mabson, with then COM DEV CEO John Keating,  FedDev  Southern Ontario minister Gary Goodyear, conservative MP Stephen Woodworth and  COM DEV COO Mike Pley (who would replace Keating as company CEO in 2010) at an event celebrating the $5.2Mln CDN FedDev funding awarded to COM DEV by FedDev Ontario in 2009  As outlined in the November 29th, 2009 FedDev Ontario post, "Announcement will strengthen Ontario's position as a world leader in micro-satellite technology," the award was "funded under the Southern Ontario Development Program (SODP), which will allow COM DEV to launch the first generation of its micro-satellites and establish Ontario as a world leader in this emerging industry." the Photo c/o Canadian Press.

COM DEV generates significant money and jobs in Canada. But they’re a first generation space company.

First-gen companies make hardware. COM DEV is a leader in making hardware for satellites. It’s a good market and will continue to be so. The 2015 State of the Satellite Industry Report, a 32-page PDF document produced by the Satellite Industry Association (SIA), showed 4% revenue growth for the satellite business between 2013-2014. The report also noted that the satellite services category (which includes TV, broadband, mobile, Earth-observation) is growing faster than satellite manufacturing.

On top of that, satellite services has a wild card: the Internet of Things (IoT). As noted in the November 20, 2015 post “exactEarth’s Big Bet on The Internet of Things:” 2020 approximately 250,000 vehicles will be on our roads and also connected to the internet; by 2020 the food and beverage industry could annually save up to 15% of their current costs through the adaption of IoT methodologies and the IoT will add between $15 - 20 trillion USD's to global GDP over the next twenty years.
If the predictions come true, the need for satellite data and onnectivity will be huge. It’s the second generation space companies like UrtheCast and exactEarth that will benefit the most from that demand.

The government’s economic strategy has been clear from the start. Minister of Innovation, Science and Economic Development (ISED) Navdeep Bains outlined that strategy in the November 27th, 2015 Globe and Mail article, “Trudeau cabinet’s voice of business aims to bridge needs of old and new economies.”

Minister Bains said that, as part of his “innovation agenda,” his goals included encouraging research and development and helping businesses scale up and go global. He stressed that manufacturing was still important, but innovation was key even to old-economy industries.

Innovation is front and centre globally. The theme of the 2016 World Economic Forum (WEF), which ran from January 20th - 23rd in Davos, Switzerland, was the Fourth Industrial Revolution. As the January 14th, 2016 article at the WEF website, “The Fourth Industrial Revolution: what it means, how to respond,” explained:
The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. 
Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
Canadian futurist Don Tapscott, a Forum attendee, drove home this outlook in a January 23rd, 2016 article at the Toronto Star, “Canada must focus on innovation economy to thrive in digital age.”

Tapscott was at a lunch for about 60 people in Davos discussing Canada’s future. The talk among business and government leaders was all about innovation, stimulating entrepreneurship, research and development, and job creation in the digital age.

Emerging technologies powering companies that are built for the digital revolution will drive the government’s economic plans.

COM DEV isn’t one of those new economy companies although exactEarth, soon to be spun off as part of the Honeywell deal, and UrtheCast are.

The question remains, how much might the COM DEV sale hurt Canada’s economy?

In the January 21st, 2016 article at, “Com Dev shareholders approve sale to Honeywell,” COM DEV CEO Mike Pley said that Honeywell will invest in its space business in Canada.

Time will tell if they do.

Glen Strom.
Maybe, just maybe, the government is fine with letting go of COM DEV because their interest has gone from nuts and bolts space companies to those dealing with big data, the new big fish to fry.

Glen Strom is a freelance writer and editor with a background in business and technical writing. Follow him on Twitter @stromspace for the latest on Canadian space stories.

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