A Toronto company — Tucows — recently bought a big chunk of a former Silicon Valley high flier — Critical Path — which once upon a time bought up another Toronto company — DocSpace Co. — in what was, at the the time, the biggest ever dot-come windfall to date in Canadian business history. Let me give you some interesting backstory on this.
In 1999, while working at the National Post, I reported on a group of young people, led by Edmonton’s Evan Chrapko, a good guy who I was happy to see get filthy rich by selling a software company he and some friends had struggled to build. Chrapko, his brother and some associates were so broke at one point they slept on their desks in their downtown Toronto office and mooched meals off their benevolent venture capitalist backers while trying to build their software company. Eventually everyone’s ship came in and Critical Path Inc. of San Francisco, Calif. bought The DocSpace Co. for more than $500–million U.S. in stock.
Chrapko and many DocSpace insiders promptly cashed in their Critical Path stock as soon as they were able. Good thing they did, too, because shortly after that, Critical Path ended up in a financial accounting scandal that torpedoed the company’s shares and caused a head-office bloodbath. (One of the DocSpace originals — the really smart Mike Serbinis of Hamilton, Ont. — survived that bloodbath and is still an executive with Critical Path today.)
Now comes the news that my good friends at Tucows Inc. of Toronto (these are the guys that wrote Blogware, the publishing platform behind this blog. Please see my disclosure) have just acquired a big chunk of Critical Path’s business — Critical Path’s Memova messaging services. Now I haven’t been a full-time technology reporter for a while now, but Memova revenue, so far as I can tell from the company’s most recent financials, accounted for the lion’s share of the company’s $17–million (U.S.) in revenue for the quarter ending Sept. 30. You read that right, by the way — a company that less than six years ago paid nearly half-a-billion dollars to acquire another software company is now doing less than $20–million a quarter. And now, of course, it will be doing less than that since Tucows has popped in and picked up for just $8–million one of Critical Path’s most significant assets and about 50 of its employees.
Strange world, this technology thing, isn’t it?
Maybe not so much of a bargain! While I wish it was so as an avid shareholder of Tucows, your comments concerning the
“”Now I haven’t been a full-time technology reporter for a while now, but Memova revenue, so far as I can tell from the company’s most recent financials, accounted for the lion’s share of the company’s $17–million (U.S.) in revenue for the quarter ending Sept. 30. You read that right, by the way — a company that less than six years ago paid nearly half-a-billion dollars to acquire another software company is now doing less than $20–million a quarter. And now, of course, it will be doing less than that since Tucows has popped in and picked up for just $8–million one of Critical Path’s most significant assets and about 50 of its employees.””
seem off base. As far as I can tell the bulk of the Memova revenue will remain with Critical Path as the Memova business (the cream of Critical Path) has only been licensed for Tucows to use (the cost to Tucows not disclosed) what Tucows got for their $8 Million was the Hosted Messaging business plus 50 additional salaries to pay. This Hosted Messaging business may well turn out to be a “dog” as Critical path was only able to grow it to 200 accounts over the past 5 years. I just wish Tucows woukl take the time to better explain to shareholders just how they expect this to fit in and generate earnings.
the Internet shakeout has created and continues to present plenty of opportunities for companies on the prowl for acquisition bargains, with companies and assets going at mere fractions of their prior lofty valuations. “It's not a return to healthy M&A as usual,” states Miller. “Things are starting to get back to normal, but much of the volume is due to asset sales and divestitures.” Take a look at Credit Suisse First Boston's sale of its online trading unit, CSFBdirect, to Bank of Montreal for about $520 million last month. Not only are Corporations divesting assets in these harsh economic times, but the buyers are getting great bargains.