In the News...

Peter Kennedy

VANCOUVER -- Crystal Decisions Inc., a privately owned software company with major operations in British Columbia, is gearing up to go public in a rare move that is expected to be closely watched by the North American high-tech sector.

"This is the canary in the coal mine for some of the technology IPOs that are expected to follow," said Brent Holliday, a principal with Greenstone Venture Partners in Vancouver.

A registration statement filed in connection with an initial public offering expected to raise $172-million (U.S.) indicates that Crystal Decisions is getting set to test the appetite of investors for its business intelligence software.

If the offering is a success, Mr. Holliday expects to see a flurry of IPO registration statements from U.S. technology companies such as Web search engine Google Inc. and San Francisco software firm SalesForce.com Inc.

As Crystal Decisions has its roots in British Columbia, Mr. Holliday said, the offering will be closely monitored in a province that has not seen a sizable technology IPO since MacDonald Dettwiler and Associates Ltd. went public in July, 2000.

With 1,703 employees, including 800 in British Columbia, Crystal Decisions makes various software tools that let users extract, share and otherwise manage information stored in a variety of databases. Such data might include information about sales transactions, inventory and human resources.

Its products, including flagship Crystal Reports, are licensed to about seven million users worldwide and allow them to use accumulated data to make better strategic decisions.

"They are in a pocket of the market that is doing really well, so it's a good time for them to go public," said Steven Li, an analyst with Raymond James in Toronto.

Officials from Crystal Decisions, which is based in Palo Alto, Calif., but does most of its software development work in Vancouver, said they are prevented by securities laws from commenting in the period leading up to the IPO.

But documents filed with the U.S. Securities and Exchange Commission show that an underwriting syndicate led by Goldman Sachs & Co. has been hired to sell an offering of shares that will be listed on the Nasdaq Stock Market.

A syndicate source said the approximate price and the number of shares to be offered will be determined after the marketing phase begins in about two weeks.

Crystal Decisions is owned by a group of private equity investment firms led by California buyout fund Silver Lake Partners, Texas Pacific Group of Fort Worth, Tex., and August Capital, which together control 97 per cent of the company.

Mr. Holliday said the IPO is an opportunity for them to profit from an investment made in 2000 when they bought assets that are now owned by Crystal Decisions and its sister company, disk drive maker Seagate Technology Inc. Seagate went public in December at $12 a share and closed Friday at $15.96 on the New York Stock Exchange. A successful IPO will permit company insiders, including chairman Greg Kerfoot and chief executive officer Jonathan Judge, to eventually cash in millions of stock options.

Mr. Judge, a former International Business Machines Corp. executive who became president and CEO of Crystal Decisions in January, was granted options last year to acquire one million shares at an exercise price of $11 each, documents show.

Usually publicity-shy Mr. Kerfoot, who is best known in British Columbia for planning to build an outdoor hockey rink behind his monster home in Whistler and owning the Vancouver Whitecaps soccer club, has options on 1.6 million shares, which can be exercised at prices between $8 and $8.50 each.

Meanwhile, the IPO plan comes as the market for business intelligence software is expected to grow to $7.5-billion by 2006 from $4.7-billion this year, according to a study by IDC Inc., a Framingham, Mass.-based industry analyst.

Crystal Decisions' main competitors in that market include Ottawa-based Cognos Inc. and Business Objects SA of Paris.

Rupert Bonham-Carter, director of strategic alliances at Cognos, attributed recent growth projections in the industry to the fact that organizations are looking to meet demand for better visibility into information on their overall performance.

"If anyone is going to be successful right now, they would be in a good position to do that," said Grant Gisel, CEO of Sierra Systems Group Inc., one of British Columbia's oldest information technology firms and a Crystal Decisions customer.

In the nine months ended March 28, Crystal posted sales of $209.3-million compared with $155.8-million a year earlier, according to documents filed with the SEC. The company's profit jumped to $23.5-million from $9.1-million.

However, a senior investment industry official doubts that the Crystal's IPO will spark a flurry of new offerings in the province.

"One company does not make a trend," said Kathy Butler, executive director of investment banking with CIBC World Markets in Vancouver.