Massive decline in Blackberry R&D pushes Top 100 company total into negative territory

Mark Henderson
November 16, 2015

A dramatic decline in R&D spending by Blackberry Ltd in 2014 was all it took to push outlays from Canada's Top 100 Corporate R&D spenders downward for the first time since 2010. R&D expenditures by the Waterloo ON-based provider of communications products and services plummeted $537 million or 40.7% between 2013 and 2014 to $785 million but remains in the #2 spot as the firm works to reverse a stunning decline in sales of its once ubiquitous smart phones.

Top ranked Bombardier Inc also registered a $172-million, 7.8% decline as the financially distressed aerospace firm is turning to government to grapple with massive cost overruns on its C Series aircraft.

In fact, seven of this year's Top 10 registered declines, although R&D spending of the Top 100 was up for 69 firms, down for 30 and flat at one. Revenue increased 7.3% for the 87 companies that provided revenue data.

"I'd hardly say it's been a banner year. We look at the largest spenders but there are about 25,000 companies in Canada that spend on R&D," says Ron Freedman, CEO of Research Infosource Inc. "The situation is not as dire as many people think. Not all business innovation spending is R&D so there's a lot of innovation-related spending that doesn't appear in the data."

The lackluster year's Top 100 total of just $12.3 billion represents a 1.6% drop from year before , underlining the impact of slumping R&D performance across a range of sectors from communications and telecommunications equipment (-21%) and energy/oil and gas (-12.1%) to aerospace (-5.5%).

In the positive column, software and computer services firms collectively increased their R&D spending by 11.3% while pharmaceutical and biotechnology firms boosted their outlays by an impressive 23.4%.

Several firms in the Top 100 achieved remarkable R&D increases — six in the life sciences — and the majority with low revenues. Exceptions are stalwart Mitel Networks Corp, a 43-year old communications equipment manufacturer. It posted a year-over-year R&D increase of 127.8% to $130.7 million, vaulting the Kanata ON-based company to #24. The majority of the increase is accounted for by its 2014 acquisition of Concord ON-based Astra Technologies Ltd which recorded $56.6 million in R&D in 2012 (R$, November 26/13).

High-tech darling Shopify Inc doubled R&D outlays from $15 million to $30 million to nail down the #51 position.

While there is debate over whether Canada's relatively low business R&D expenditures are actually a problem, the majority of policymakers tend to regard increased spending positively. The problem therefore is diagnosed as either a failure in government policy or a problem of business owners and managers not placing enough importance on R&D- and innovation-related activities as a means to boost competitiveness and the bottom line.

Freedman says the new Liberal government would be wise to examine the effectiveness of the Scientific Research & Experimental Development (SR&ED) tax credit program and take steps to either improve it or scrap it for a new approach.

"SR&ED is our biggest support program so look at that if you think business R&D is weak," he says. "More spending is not necessarily a good thing. There's good R&D and bad R&D (R$, November 12/14).

R$

Canada's Top 100 Corporate R&D Performers

($ 000s)
2014   2013   CompanyFY2014   FY2013    %      
Change   
2014   
Revenue   
R&D as %   
Revenue   
Industry Sector
1   1   Bombardier Inc.*$2,022,340   $2,193,719   -7.8   $22,212,600   9.1   Aerospace
2   2   BlackBerry Ltd*++$785,300   $1,324,470   -40.7   $3,683,508   21.3   Comm/Telecom Equipment
3   3   Magna International Inc.*$585,385   $576,752   1.5   $40,469,985   1.4   Automotive
4   4   BCE Inc.$546,000   $575,400   -5.1   $21,000,000   2.6   Telecommunications Services
5   5   Pratt & Whitney Canada Corp. (fs)$542,000   $544,782   -0.5   nd   --   Aerospace
6   6   IBM Canada Ltd. (fs)$466,000   $492,000   -5.3   nd   --   Software & Computer Services
7   8   Canadian Natural Resources Ltd$450,000   $390,000   15.4   $18,863,000   2.4   Energy/Oil & Gas
8   7   Rogers Communications Inc.$418,000   $394,000   6.1   $12,850,000   3.3   Telecommunications Services
9   9   Atomic Energy of Canada Ltd+$346,900   $353,600   -1.9   $129,977   266.9   Engineering Services
10   10   Ericsson Canada Inc. (fs)$315,000   $318,000   -0.9   nd   --   Comm/Telecom Equipment
11   12   Apotex Inc.$311,105   $222,439   39.9   $1,924,956   16.2   Pharmaceuticals/Biotechnology
12   16   Constellation Software Inc.*$287,518   $190,554   50.9   $1,843,790   15.6   Software & Computer Services
13   20   Valeant Pharmaceuticals International, Inc.*$271,707   $161,473   68.3   $9,127,036   3.0   Pharmaceuticals/Biotechnology
14   11   CGI Group Inc.$262,492   $252,116   4.1   $10,499,692   2.5   Software & Computer Services
15   14   AMD Canada (fs)$206,000   $211,000   -2.4   $432,000   47.7   Electronic Systems & Parts
16   19   Open Text Corp*$195,313   $168,916   15.6   $1,794,480   10.9   Software & Computer Services
17   21   TELUS Corp$194,000   $161,000   20.5   $12,002,000   1.6   Telecommunications Services
18   18   General Motors of Canada Ltd (fs)$190,000   $182,089   4.3   nd   --   Automotive
19   15   Imperial Oil Ltd$175,000   $199,000   -12.1   $36,231,000   0.5   Energy/Oil & Gas
20   22   BRP Inc.++$158,200   $144,900   9.2   $3,524,700   4.5   Transportation
21      Suncor Energy Inc.$150,000   $150,000   0.0   $41,516,000   0.4   Energy/Oil & Gas
22   23   CAE Inc.$149,000   $144,096   3.4   $2,114,900   7.0   Aerospace
23   27   MDA$138,951   $116,602   19.2   $2,098,837   6.6   Software & Computer Services
24   37   Mitel Networks Corp*$130,662   $57,366   127.8   $1,219,368   10.7   Comm/Telecom Equipment
25   24   Sanofi (fs) (a)$130,471   $129,100   1.1   $677,946   19.2   Pharmaceuticals/Biotechnology
*Converted to CDN$ at annual average 2014 = 1.1045, 2013 = 1.0299 (Bank of Canada); (fs) foreign subsidiary; (nd) not disclosed
Source: Research Infosource Inc 2015



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