UPDATE: SMART to close Kanata assembly operations

The firm has been outsourcing part of the work for the past two years and will fully complete the transfer by the end of fiscal 2012, SMART officials said in a conference call with analysts Tuesday.

"We've been very satisfied with the volume and the quality of the product that has come over the last 16 years out of our Ottawa operations ... but over the last four years, with the Canadian dollar strengthening as it has, it's a cost for us that keeps going up," said Nancy Knowlton, SMART's founding chief executive, in an OBJ interview Wednesday.

"It's up to the point where it really does make us concerned about being competitive and retaining our cost structure in an appropriate way."

Sixty-nine employees will be affected in the first phase of the restructuring in September, with likely other phases to come.

Ms. Knowlton said current employee numbers in Ottawa are in the "low 300s" and although the situation is still preliminary, SMART expects to have around 100 people locally remaining when the restructuring finishes at the end of the fiscal year.

Remaining people will work in product development, software, supply chain and operations, she added.

The move will cost the company around $6 million to $7 million in fiscal 2012 in one-time charges that include severance pay and write-down of assets. Assembly will likely be outsourced to Mexico, although SMART is finalizing the decision, Ms. Knowlton said.

SMART has a custom-built, 260,000 square-foot warehouse and assembly facility on Palladium Drive.

First-quarter revenues fell eight per cent annually to $202.4 million while earnings more than quadrupled to $23 million from $5 million. 

In May, SMART revealed its fourth-quarter profits plunged 80 per cent.

The company acknowledged a challenging education funding situation for its smartboards, particularly in the cash-restricted environment in the United States, but added it is gaining traction in emerging markets as well as in business applications.

Alcatel-Lucent and Microsoft Corp. have already bought hundreds of white boards between them and companies such as Ernst & Young and Cisco Systems Inc. are in the early stages of agreements, Ms. Knowlton said.

Because SMART sells through channel partners, it does not have exact breakouts of how much money it generates through education versus business, chief financial officer Drew Fitch said.

SMART sold 97,737 interactive whiteboards and displays in the quarter compared with 115,922 during the same quarter last year. The average selling price was $1,437, up nine per cent from last year's $1,315.

The company picked up more than 20 new channel partners "focused solely on business solutions" in the past quarter, Ms. Knowlton added.

Since announcing a US$660-million initial public offering last July - then the biggest Canadian tech IPO in a decade - shares of SMART have dropped approximately 66 per cent on the TSX.

From an initial price of around $14 at the time of the IPO, shares were trading at $4.74 each as of the market close Tuesday.

SMART has around 1,600 employees across all operations.