Alberta Tech Sector on the Rebound Despite Ongoing Challenge to Raise Investment Capital: Ernst & Young Report

(Calgary, AB) - Alberta's technology companies are faring well - and expect to do even better - despite the ongoing challenge of raising sufficient growth capital, according to the 2001 Alberta Technology Report released today by Ernst & Young LLP, Donahue LLP and Ipsos-Reid. Findings of the report will be presented at 6:15 p.m. this evening to members of the Calgary Council of Advanced Technology.

Fully 58 per cent of the technology companies polled reported increased revenues in 2001 and 80 per cent forecast higher revenues over the next year. However, the number one issue among Alberta technology executives continues to be the difficulty of raising investment capital.

"As a province, Alberta generates 14 per cent of the Gross Domestic Product and yet we receive a mere 2 per cent of the venture capital money being invested in Canada," said Ian Robinson, an Ernst & Young partner who leads the firm's Technology, Communications & Entertainment industry team in Calgary. "As a result, tech executives are telling us that they may look to alternative strategies such as mergers, strategic alliances or the outright sale of their businesses to achieve future growth. Clearly, the use of such strategies will affect the long-term viability of the technology sector in our province."

Only half (49 per cent) of the respondents said that their companies were adequately capitalized - and 68 per cent said that access to capital was significant to the future of their companies. The challenge of attracting investment capital may be tied to the inability of many Alberta-based technology companies to achieve significant globalization. Survey respondents said that 54 per cent of their revenues currently come from within Alberta and Internet revenues represent less than 20 per cent of total annual sales.

"If Alberta technology companies want to become world-class leaders, they need to increase their reach outside the province," says Russel Matichuk, Founder, Vice-Chair and Chief Financial Officer of Celcorp, Inc. and President of the Information, Communications and Electronic Technologies Alliance (ICET). "Collectively, we have to do a better job of raising the visibility of our products and services outside of Western Canada."

Overall, the news is good: the third annual Alberta Technology Report portrays the sector as mature, confident and moving purposely into the future. Despite the horrific events of September 11 and a general fourth quarter downturn in the sector, technology firms reported steady growth, improved profitability, and continued plans for expansion.

Other report findings include:

• 60 per cent of companies expect to have more employees than last year
• 70 per cent anticipate higher profits than last year
• approximately 60 per cent of tech executives say that the pool of highly qualified staff is limited and that attracting and retaining employees remains a challenge
• 34 per cent say they have increased R&D spending in the last year
• 81 per cent rate Alberta's economy as good or very good, and 59 per cent believe it will improve over the next 12 months.

The 2001 report marks the second year that Ernst & Young has partnered with Ipsos-Reid to administer the survey among top-tier CEOs and senior executives in Alberta's information technology sector to identify and report the trends, challenges and issues facing the industry. The survey was conducted in November and December of 2001 and involved 191 companies from a cross section of the Alberta technology sector. Roughly 80 per cent of the respondents were the President, CEO or owner of their organizations. More than half of the Alberta technology companies polled (56 per cent) have been in business for seven or more years. The full report is available at www.albertatechreport.com.

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For more information, please contact:



Ian Robinson Ernst & Young (413) 206-5176 [email protected]

Rick Cormier Ernst & Young (780) 441-4668 [email protected]