'07 Forecast: technology
IPOs and venture funding bring local innovation to market
A predicted slowing global market for information technology purchases and an increase in domestic demands in the sectors of record security and defense-related technology provide a mixed picture for the region’s multifaceted technology sector. Predictions are for moderate growth in 2007 - except in certain hot-spot sectors such as health care-related software (Who knew that health care might be the next "killer ap?"). But information security systems and consumer-driven technology are also high on the list.
Regionally, defense-driven technology with long-range potential for consumer markets received continued investment this year. With such a diverse technology sector, Central Mass. isn’t putting all its technology eggs in one basket.
Symbolic of the increased interest in technology are two IPOs launched in the second half of the year by two very different types of technology companies. Laser-maker IPG Photonics’ IPO, which netted the firm $102 million, came after years of re-strategizing after the telecom bust of 2000 - when telecom constituted 86 percent of its revenues. The firm’s resurgence in the years is due to its repositioning from telecom into industrial applications. IPG vaulted to a market capitalization value of $1.1 billion in its first day of trading.
Fiber laser sales are projected to grow an average of 35 percent a year through 2010, compared to 9 percent for the overall industry, according to Strategies Unlimited, a Silicon Valley research firm as cited in The Boston Globe last May. Fiber lasers’ market share is also projected to grow, to 24 percent from the current 7 percent.
Southboro-based data protection developer DoubleTake Software filed for its IPO earlier this month, offering 7.5 million shares at $11 per share. In its federal filing for the IPO, Double-Take cites research by International Data Corp. which predicts growth of the data protection sector from $2.1 billion in 2005 to $4.2 billion by 2010; the market segment occupied by DoubleTake is cited as growing from $310 million in 2005 to $940 million in 2010.
Taking different routes to growth
Southboro-based Protonex Energy Corp. took a different IPO route, joining the London Stock Exchange and raising about $16.2 million in an IPO of 10.4 million shares. The fuel-cell development company joined the LSE’s Alternative Investment Market, citing lower listing and regulatory costs.
Marlboro-based Egenera raised $26 million in Series E financing this fall, bringing its total investment to more than $150 million since its inception in 2000. Egenera makes datacenter infrastructure systems and is contemplating an IPO, its new CEO Michael Thompson told MassHighTech last fall..
Acton-based Azimuth raised $7.5 million in venture capital funding this month. The company makes testing equipment for mobile communicaitons, including Motorola and T-Mobile. Its customers account for more than 95 percent of the Wi-Fi products shipped worldwide, according to market research firm ABI Research.
RemoteReality Corp. in Westboro raised $7.3 million in venture capital funding, helping the developer move closer to mass marketing its products, which include video systems capable of providing full perimeter protection. The ThermalVision360 device can be used to protect stationary objects, as well as to provide full visual surveillance for manned and unmanned vehicles.
Electronic medical records: Good for fiscal health
The expansion of electronic medical records has proven to be a growth area for Westboro-based eClinicalWorks, a privately-held company. The company develops electronic medical records and practice management software for medical group practices.
The growth in medical record technology is being pushed by the federal and state governments, and by insurance providers. Blue Cross-Blue Shield of Massachusetts has invested $50 million into a pilot program for electronic medical records. That program is overseen by the Massachusetts e-Health Collaborative. While it doesn’t reveal revenues, eClinicalWorks states that it is profitable and that its five-year compounded growth rate is more than 100 percent year-to-year. It has more than 2,200 customers across all 50 states.
For information technology sector, Forrester Research Inc. predicts a slowdown – but not a slump – in the growth of IT purchases of goods and services in 2007. That’s a better prognosis than Forrester’s prediction of a year ago that the sector would have little or no growth. Because a predicted U.S. downturn has been milder than expected, Forrester raised its sights.
Earlier this month, it predicted $1.55 trillion in global sales, a growth of 5 percent, compared to 8 percent in 2005. Global spending will rise 6 percent to $2.02 trillion, compared with 8 percent growth in 2006. U.S. sales growth at $527 billion will also stand at 5 percent, down from 6 percent in 2006, and spending growth will rise to $761 billion, also down from 6 percent growth in 2006, Forrester predicts
Forrester credits the U.S. slowdown to delays and reductions in IT purchases by chief information officers, as they watch the state of the U.S. economy.
Defense projects hold civilian promise
This year saw the national budget for defense-related projects rise, although the slice of the pie for New England states has grown smaller with each passing year. In this environment, several area tech firms have made considerable ground in developing new products for the defense industry. If past history of military-driven technology is any indication, what they develop may one day become part and parcel of non-military technology.
In Natick, the U.S. Army Soldier Systems Center furthered development of its Future Force Warrior System, while RemoteReality in Westboro completed $7.3 million in venture funding for its defense programs. Worcester Polytechnic Institute won new grants for projects within its Bioengineering Institute, while DRS Technologies won major contracts throughout the year to develop new products for the U.S. Navy.
The U.S. Army Soldier Systems Center’s flagship project, the Future Force Warrior system, is designed to improve communication and movement on the battlefield. It interfaces with lightweight weapons and fire control built for urban combat situations, and feature sensors built into uniforms to create a head-to-toe body armor system. The Soldier Systems Center also has been involved with developing enhanced prosthetic devices, allowing soldiers who lose limbs on the battlefield to better integrate with artificial limbs. Working closely with the Walter Reed Medical Center in Washington, the progress made in Natick will help soldiers return to active lives while wearing prosthetic attachments.
In Worcester, a combat-oriented program developed in an academic setting, which has been receiving federal funding for several years, received $2 million federal grant funded through the U.S. Senate Defense Applications bill this year. WPI’s Bioengineering Institute, which houses the Center for Untethered Healthcare and the Center for Neuroprosthetics and BioMEMS.
The Center for Untethered Healthcare is actively developing remote sensor systems, ad hoc wireless networks, and a portable ultrasound device to increase mobility and safety on the battlefield. The system will help soldiers find wounded comrades on the battlefield, and then remotely scan injuries and transfer the results back to medical facilities in advance preparation for treatment. The Center for Neuroprosthetics and BioMEMS, in the early stages of development, is developing a terminal by which brain waves can communicate directly with an artificial limb.
A strong defense presence in Massachusetts
DRS Technologies, though headquartered in Parsippany, New Jersey, has fed its operations in Fitchburg and Hudson several contracts through the years. In November, the firm won an additional $6 million for a high-speed generator contract, bringing the total contract value to $12 million. The contract was awarded by the Office of Naval Research in Arlington VA.
By creating a 7,000 RPM Permanent Magnet Generator, the project aims to achieve a three-time reduction in the size and weight of current generators, and will be targeted for use in U.S. Navy multi-mission surface combatants, submarines, and advanced Naval propulsion system applications. Additionally, DRS is engaged with the U.S. shipbuilding industry for next generation DDG-1000 destroyer programs, a good sign for continued investments in the Massachusetts defense industry.
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