Christopher Adams

The Business Herald’s markets and banking reporter.

Tech firm's closure disappoints ex-CEO

The impending closure of local touch screen maker NextWindow - which was sold to Canada's Smart Technologies for US$82 million in 2010 - is disappointing but predictable, says former chief executive Al Monro.

And Monro says he agrees with comments from technology entrepreneur Selwyn Pellett that Calgary-based Smart should now return the $5.9 million, three-year New Zealand taxpayer-funded research and development grant NextWindow was awarded in 2011.

Nasdaq-listed Smart expects the Auckland-based firm to be wound down by the end of its 2015 financial year, the company said in its third-quarter results yesterday.

Smart's chief executive, Neil Gaydon, told a conference call that NextWindow hadn't met earnings expectations and wasn't a part of the Canadian company's core business.

"We're working closely with employees, customers and suppliers to manage our commitments during the wind-down period," Gaydon said.

Smart is best-known for its development of interactive whiteboards used in schools, but is understood to have placed greater focus on software in recent years.

Before the acquisition, NextWindow - which manufactured its screens in Asia - was a poster-child for New Zealand-based technological innovation and had high hopes that its technology would be a leader in the then emerging market for touch-screen devices.

The firm employed around 80 staff at its College Hill headquarters at the time of the acquisition, but that number had been reportedly whittled down to around 11 by late last year.

While use of touch screen devices, such as the Apple iPad, has exploded it has been reported that global demand for NextWindow's products had been rapidly declining.

NextWindow, which manufactured touch screens for firms including Hewlett-Packard, Dell and Sony, reported an operating loss of US$7.2 million in the 2013 year, compared to a profit of US$478,000 a year earlier.

Revenue last year slumped 40 per cent to US$22.2 million, compared with the close to US$40 million - at yesterday's exchange rate - in sales the firm posted in 2009.

Monro, who left NextWindow in late 2011 after almost a decade at the helm, said it was tough to hear the news that the company would be wound down.

"It was my baby for a long time," he said.

"There were a lot of very, very good people there and I think most of those people have moved on into other good positions and I keep in contact with a lot of them, but it's a shame."

Monro said he still believed selling the company to Smart had been a good move. "The idea to sell it and become part of a bigger balance sheet and have a wider range of products that we could go into was always the right approach," he said.

"The ability to put the product into a much wider product range - Smart's product range - was the right strategy."

Monro said the Canadian firm's strategy changed following its acquisition of NextWindow and that change in strategy had partly driven his decision to leave the company.

Smart also undertook its stock exchange listing just a few months after its NextWindow acquisition, and since then the firm has been hit by a steadily decreasing stock price.

Smart shares were valued at around US$2.30 yesterday, down from US$17 at the time of its 2010 initial public offer.

Pellett, an outspoken critic of R&D grants being awarded to foreign-owned firms, said the Government should ask Smart to return the grant funding that NextWindow had received.

"I think they're already in a position to do that if I've read correctly some of the stuff [Minister for Economic Development] Steven Joyce has said," Pellett said.

Joyce has previously said the Government could request repayment of grants in some cases, but only within three years of a funding round's completion.

Smart did not respond to an emailed request for comment before last night's deadline.

Pellett said the impending closure of NextWindow was part of a "continuous story" of New Zealand technology companies being sold to overseas buyers and then wound down.

Data from the Technology Investment Network show more than 30 of New Zealand's most innovative companies have been acquired by overseas buyers in the past decade.

"If you take away the enthusiasms of entrepreneurship of a New Zealand entrepreneur and you allow logical, rational decisions to be made elsewhere in the world, New Zealand doesn't compete," Pellett said.

He said R&D grants that didn't force ownership of companies to stay in New Zealand would result in "a continual waste of money".

Smart's chief financial officer, Kelly Schmitt, told the conference call the NextWindow exit would impact the parent company's earnings by between US$30 million and US$35 million.

Additional reporting: BusinessDesk

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on production bpcf03 at 25 Oct 2014 17:34:21 Processing Time: 542ms