Saturday, February 20, 2016

Part 3: A Short History of COM DEV International

From Strength to Strength. At Least for Awhile

By Robert Godwin 
The COM DEV website on February 8th, 2016.
As outlined most recently in the January 24th,2016 post, "Did the Government Let COM DEV Go Because They Have Bigger Fish to Fry?" iconic Canadian space company COM DEV International has been purchased by US based Honeywell International.
But while we were happy enough to acquiesce to the COM DEV sale, there are limits to the types of sales we allow. 
For example, we don't allow foreign ownership of our chartered banks and in exchange for that quasi-monopoly our banks have acceded to some relatively stringent regulations which were certainly useful for cushioning our economy from the worst vicissitudes of the global meltdown of 2008.
And, in 2009, we also refused to allow BC based MacDonald Dettwiler (MDA) to be purchased by US based Alliant Techsystems (ATK).
In this new age of mega-data, information and incessant global security fears, it would simply seem prudent to establish safeguards to protect our high tech industry...
The next two years would see COM DEV move from strength to strength in large part thanks to a string of work from the Canadian government. They began 1992 with a $3Mln CDN grant to develop signal processors; they also purchased equity in two satellite companies, Orion and Iridium with $15Mln CDN in financing from the government Export Development Corporation (EDC).

The ESA ENVISAT, which was launched on 1 March 2002 aboard an Ariane 5 rocket from the Guyana Space Centre into a Sun synchronous polar orbit. Envisat was put into orbit to support a variety of European remote-sensing satellite missions. As outlined in the January 24th, 2001 post "Technical briefing on the design and construction of ENVISAT," a number of Canadian companies, including EMS Technologies,  ABB-BomenMacDonald Detwiller (MDA) and COM DEV each contributed components to the satellite. Graphic c/o ESA.

By September they had won a $7Mln CDN contract with the European Space Agency (ESA) and they ended the year with another Federal grant for $8.7Mln CDN. Four months later the CSA awarded them a $3.7Mln CDN contract. In the space of a few weeks in the fall of 1993 they were awarded a $6Mln CDN contract with the ESA, thanks to the Canadian government investing $58Mln in the Environmental Satellite (ENVISAT) program, followed by a $13M contract to do work for the DND on ships.

They were also now a partner in the massive Canadian based RADARSAT consortium: 1992 and 1993 would be unsurpassed years for Ottawa's generosity to COM DEV.

However, 1993 would end with a serious jolt to the company when a lawsuit was dropped on them by Loral Corporation, which claimed that COM DEV had breached one of their patents. The details of the claim are unknown but way back in the early 1970s one of COM DEV's first customers was Ford Aerospace Corporation, which was then purchased by Loral in 1990.

The patent being contested was awarded to Ford in 1984, by which time COM DEV had been dealing with the company for the better part of a decade. O'Donovan had spent a lot of time in the early 80s pursuing improvements on Ford technology. The work had evidently not caused any consternation south of the border until Loral took over. By April the court had ruled twice against COM DEV and some important orders were in jeopardy of being delayed, or worse. By the end of the year 8% of the 683 staff had to be laid off.

As outlined in the September 4th, 2014 Space News post, "Loral Agrees To Pay ViaSat $100M To Settle Patent Suit," Loral has been involved with at least one other patent case against a Canadian aerospace company.  Screenshot c/o Space News.

The following summer, the Toronto Dominion (TD) bank stepped in with $20Mln CDN to assist and help the company work on joint ventures with the Research in Motion (RIM) Group. At this point, COM DEV had purchased 22% equity in RIM and, over the following month COM DEV split into two companies, one to deal with personal communication devices the other to continue the main business.

In 1996 things were looking up again and a joint venture with the Xian Institute in China for comm-sats was announced, along with a new facility in Shaanxi province. Over 1000 people now worked for COM DEV and O'Donovan started making noises about going public. On December 10th 1996 the company offered up about eight million shares for an initial IPO of $8.25 per share. O'Donovan was apparently not happy with the price, thinking it was too low. He was soon shown to be correct, albeit briefly.

Within eight weeks COM DEV shares were trading at $16.75 and by August they were sky-high at over $40. If you were one of the people who paid that price you were destined to wait a long time to make your money back. But business in 1997 was brisk. Several multi-million dollar contracts, an investment in Bill Gates' proposed Teledesic "internet in the sky" (remember that?) and the construction of a third facility in China all brought more jobs. Sales for the year were $187Mln CDN.

Early in 1998 they bought Skybridge of Maryland (with no complaints or obstruction from south of the border) and also formed a joint venture with Ball Aerospace to develop laser communication for satellites. First quarter sales were up 50% from the previous year and yet the company share price dropped to $15.50 because it was starting to lose market share on its involvement with PCS phones, touted at the time as "an all-in-one wireless phone, paging, messaging, and data service."

An early version of the "internet of things" was Teledesic, a company founded in the 1990s specifically to build a low Earth orbiting commercial broadband satellite constellation for internet services. Supported by cellular pioneer Craig McCaw, Microsoft co-founder Bill Gates, and Saudi prince Alwaleed bin Talal, and often referred to as the "internet in the sky" project, the original $9Bln USD ($12.4Bln CDN) 1994 proposal was scaled back in 1997 and suspended in 2002. Graphic c/o Wikipedia.

By June things got worse when Motorola became involved in Gates' "Internet in the sky" project, delaying a line of subsystems needed by COM DEV.  Layoffs ensued in England. The following month things turned especially ugly when one of the company directors sold off two-thirds of his shares just ten days before the shareholders were made aware that earnings were going to be extremely low. What had been a market cap of $746Mln CDN a year earlier was now down to $284Mln CDN.

To the company's credit, the rogue director was ordered to resign and make amends by returning most of his "winnings;" an unprecedented move at the time, which was roundly applauded by the market.

Adding to the problems was the bankruptcy of Iridium, the owner of the wildly optimistic proposed global satellite phone service. Lured by the image of entire constellations of satellites COM DEV had invested heavily in the company.  The same year they purchased 3dbm, another American company, for $17Mln only to close it down a year later.

But despite these bruises O'Donovan was bullish. He still believed in the future of his company.

The share price was down to $4 and in the summer of 1999, 200 employees were laid off with a loss on the year of $68Mln. Once again TD bank stepped in with $30Mln CDN in financing. A contract for $44Mln CDN was issued by an unnamed customer, and later the contract was said to be worth $50Mln CDN causing the shares to shoot up 36%, back to $7.75.

This was followed swiftly by a Canadian Space Agency (CSA) grant for $20Mln CDN in April 2000.

Robert Godwin.
Once again the government helped save the day.

Robert Godwin is the owner and founder of Apogee Space Books. He is also the former space curator at the Canadian Air & Space Museum and the curator of the The Space Library, an online repository of 30,000+ pages of space information and papers. 

Please consider subscribing to the library for only $5. Your contributions help to support new research and the maintenance of the existing repository.

Last Week: O'Donovan Grows His Team (and his Company) as part 2 of "A Short History of COM DEV International" continues!

Next Week: Into the 21st Century as part 4 of "A Short History of COM DEV International" continues!

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