A Few Modest Proposals: prevent disaster and maximize delight in 2006

In which the author suggests ways for tech CEOs to prevent disaster and maximize delight in 2006

'Tis the season for New Year's resolutions, and who am I to quibble with tradition? I have drafted my long list of personal changes for 2006. Like most years, it didn't take much time–many items are making repeat appearances. (A sampling: Go easy on the M&M's; run virus software and back up hard drive regularly; call Mom more; etc.) [Ed: Don't forget “File early, and to length.”]

I've also put some thought into the big stories of Canada's tech industry in 2005, and come up with a few kindly resolutions for other people.

To Rob Ashe, CEO of Cognos: Sell more–or else. A year ago, you were just getting comfortable in the pilot seat vacated by Ron Zambonini, and Canada's biggest software company was flying high. But isn't it amazing how missed quarterly estimates (twice) and disappointing financials (thrice), and lacklustre sales of a new product can knock down your stock? As this goes to press mid-December, your company's stock (TSX: CSN) is down a third from its 52-week high of $58.69 in March. How cruelly the tides can turn.

But you can understand why there's angst out there. You did a big, glitzy launch for Cognos 8, the revamped version of your flagship product, but then your sales guys bring home only three of the 34 $1-million-plus deals you'd expected during its first quarter on the market. That sends a very bad signal.

I don't think I need remind you of the potential consequences of failure. It's not just your job on the line, but maybe the existence of your company. Learn from the experiences of Geac Computer Corp. and Leitch Technology Corp., two longtime Canadian tech companies that were bought this year. Some very big sharks–namely Oracle and Microsoft–are swimming toward the warm waters of the business intelligence software market, and your company looks a tasty morsel. It would be easier to swallow than, say, your chief rival, Business Objects, whose stock (Nasdaq: BOBJ) nearly doubled in 2005 and has a price-to-earnings ratio of about 35 or so. Your P/E is more like 20.

Sure, Cognos wouldn't come cheap. At $38.50 per share, you have a $3.5-billion market cap, and then tack on another 30% to 35% takeover premium. Nevertheless, count your blessings that Oracle, the hungriest carnivore in this part of the ocean, is still digesting the some US$14-billion worth of 13 acquisitions it's devoured in the past 12 months. That buys you some time, but maybe not a lot.

To Mike Zafirovski, CEO of Nortel: Be a man of action. Reading a book on Canadian history gets chuckles at a press conference, but your company's investors–especially those that regard Nortel as the only big-time tech company this country's got–have been through an incredibly bad five years. They need reasons to hope.

Your predecessor, Bill Owens, seemed intent on stabilizing the company into stasis. It's not enough to get the financial results (finally) right; they have to have pep. But you know this. That's why the company's paying you the big bucks, and even threw in an extra US$11.5 million to Motorola to erase that pesky non-compete agreement.

The good news, though, is that everyone is ready for a new Nortel. A great start: do a few key things Owens couldn't. Chisel your senior management team into stone (some 30-odd executives have held a shifting set of about 20 top positions in the past two years). Define, in clear language, what it is that Nortel does now, and what it will do in the future. Then do it, and soon.

To Peter Storm, CEO of March Networks and Strath Goodship, CEO of Miranda Technologies: Don't look back, and don't look down. As leaders of the two tech companies of significance to complete IPOs this year–and in the case of March Networks, quite successfully–your presences on the TSX are welcome. Many wonder whether running a publicly traded high-tech company in Canada is really something sane people ought to do anymore, and there will be times when you wonder this, too. But have faith. This is your chance to prove that Canadian technology companies do still have the wherewithal to go forth and prosper. Indeed, may we all prosper in 2006.