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Sunday, 18 September 2005 12:01

Another sad Aussie sellout

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The imminent sale of promising Australian technology company Innovonics for what must seem to its US buyers a bargain basement price is a sad indictment on the local technology scene.

To many shareholders of Innovonics stock, the imminent acquisition of their company for almost double the recent share price will no doubt be very welcome news. However, a few years down the track, the smiles of some may fade ever so slightly when they see the buyer, US company Integrian, go from strength to strength on the back of wonderfully innovative Australian technology.

The US$25 million that Integrian paid is chicken feed, when you consider that Innovonics won just about every tender in the US, EU, UK and Australia that it has entered in the past year. The company has a working system installed in a London Tube line and is the clear favourite to win a contract to fit out the entire London transport system. In a market, where just about the entire developed world will need its products installed, Innovonics potential to grow was huge.

Also not smiling will be the innovator engineers, software developers and hardware specialists who helped build the company. While Integrian has not revealed its plans after it acquires Innovonics, the chances are development will eventually be moved offshore. Perhaps some of the development team will be packed up and moved to the US, as was the case when BMC Software bought Patrol more than a decade ago. If so, many may not want to leave their lives in Australia. Another strong possibility is that development might be moved to a cheap labour market, such as Mexico or The Philippines. Whatever the case, the likely scenario is excellent local technology will be lost to our shores forever.

The pity of this is that nobody can blame the shareholders of Innovonics for wanting to make a profit and to take the money and run. INO shares were tightly held and lacked liquidity. The real culprits is the Australian investment industry - the analysts, brokers, investment bankers and venture capitalists, who so grossly undervalued the company. This is the same crowd that five years ago were advising people to pay ridiculous prices for dot com ventures that were floated on the strength of a domain name and a business plan. It is quite obvious that very few Australian financial market makers have a clue how to identify and value good Australian technology companies correctly. If they did, many fewer would get bought out because they would be fairly priced.

Companies like Innovonics don't come along every day. They are a testament to Australian ingenuity. Hopefully, some of the excellent technologists who helped make the company what it is stick around after the buyout and build other great Australian technology companies. Most of all, however, it is to be hoped that the market one day soon will learn to sort the wheat from the chaff and recognise the true value of our best technology companies.

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Stan Beer

 

Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

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