NextWindow's Canadian owner sees its shares crash 25% in a day

UPDATE May 19: North America's Smart Technologies reported a weak result after the market closed Thursday (Friday NZ time) and was punished in Friday Nasdaq trading - a situation that is sure to further fray nerves at the company's Auckland office, home to its $60 million NextWindow touchscreen business. One insider has relayed staff fears that the recently acquired NZ outpost will be shuttered (see below).

Smart had warned earlier this month (below). But the result was worse than investors had expected. Many headed for the doors, and the stock fell 25.6% - making it the second-biggest decliner for the day.

Shares [NAS:SMT] - which have a 52-week high of $US7.28 - fell to $US1.45.

Smart lost $US2.7 million dring its fourth quarter. In the year-ago quarter it made a $US7.6 million net profit.

Revenue fell 11.5% to $148 million. The company said it sold 81,716 interactive display units, down from last year's 86,717.

Nervousness at $65m tech company’s Auckland office as McKinsey circles

May 2: It’s a familiar tech story (think Navman or The Hyperfactory). An overseas owner moves in to take over an NZ company (often built up, in part, with tax breaks or government grants) and pledges to keep jobs local. But as soon as the wind changes, the promise evaporates.

Now, staff at Auckland-based NextWindow (2010 revenue: $65 million) are worried it could be happening to them.

Canada’s Smart Technologies bought NextWindow in April 2010. The New Zealand touchscreen company succumbed to a takeover offer, with chief executive Al Monro telling NBR NextWindow could not afford to defend a patent suit brought by Smart.

In December, NBR revealed that Mr Monro was quitting the company he helped found.

Smart Technologies CEO Nancy Knowlton flew over to reassure NextWindow’s Auckland-based staff as Mr Monro’s departure was announced.

Mr Monro told NBR his departure coincided with his 10th anniversary as CEO; it was time to move on.

Auckland staff numbers had increased slightly since Smart bought NextWindow, and would likely rise again over 2012 (as taxpayers might well expect. The government recently gave Smart a $6 million R&D grant).

Revenue and profit for the were up, with HP, Sony, Lenovo and Asus among the big PC makers buying NextWindow’s touchscreen components. Microsoft’s pending Windows 8 upgrade – which has a strong focus on touchscreen features – had potential to boost business further.

Now, Ms Knowlton is gone too.

While its NextWindow touchscreen business may be chipper, Smart Technologies' core interactive whiteboard business has been struggling. According to a Calgary Herald report, Smart was once the only game in town - but now it faces a raft of commodity competition.

Ms Knowlton - and her husband and company co-founder David Martin - stepped down on April 26.

The company is due to report on May 17. Investors appear to have assumed the worst. Smart's shares (dual listed on the Nasdaq and Toronto exchanges) have dropped from a 52-week high of $US10.09 to $US2.69.

NBR understands that on April 10, McKinsey was brought in to undertake a "undertake a deep strategic review" of Smart.

"There's some worry in the Auckland office that McKinsey may recommend shutting them down in favour of development in Calgary," a reliable source close to the company told NBR.

After Mr Monro's Christmas departure, Smart brought in a Canadian, Richard Turski, to run NextWindow and its Auckland office.

Mr Turski has been shuttling back and fourth between Auckland and Calgary, but NBR understands he is in the process of moving his family to New Zealand.

This week he is in Canada, and could not immediately be reached for comment.

Well positioned for Windows 8
If NextWindow does get restructured by new owner Smart, it will come at a time when, ironically, it's on the brink of another great leap forward - at least according to a recent post by former employee Geoff Walker. 

Another NextWindow alumni summarised for NBR: 

"Because Microsoft has significantly increased the touchscreen requirements for Windows 8 [due later this year], most manufacturers can't meet them.

"In fact, there are only three companies still doing logo testing - two are high-end capacitive screens and the other is NextWindow.

"PC manufactures who make All-In-One models have complained to Microsoft because if only the high-end capacitive screens pass then they can't afford to keep putting touchscreens in their units, effectively removing touch from Windows 8.

"NextWindow is the only one doing a cost-effective solution so if it gets Windows 8-certification it's a huge opportunity - it'll be the only supplier [to PC manufacturers who want to add Windows 8-compatible touchscreens].

"Optical touch competitors like Qisda license the patent from Smart but it only allowed up to three cameras [NextWindow's latest design uses six].

"NextWindow has announced the technology, but Microsoft will only grant the Windows 8 logo to a specific screen, so it needs to get a contract with a manufacturer."