Canada's perennial top corporate R&D spenders post more big declines

TOP 100 company ranking

The state of Canadian corporate R&D entered a precarious stage in FY07, posting a second consecutive year of aggregate losses that will likely grow in FY08 and beyond as the full extent of the global financial meltdown is realized. The outlays of Canada's two largest R&D spenders — Nortel Networks Corp and BCE Inc — continued their downward trajectory while mainstays such as Pratt & Whitney Canada and Bombardier posted significant declines.

The pending reductions by Canada's biggest R&D players coincided with a time of robust economic growth. Both FY06 and FY07 were good years for business and the economy, yet Nortel and BCE cut R&D expenditures significantly in both years (Nortel's R&D spending has been declining since FY01, from an all-time FY00 high of $5.9 billion).

Only the performance of firms like Magna International, Alcatel Lucent and especially Research In Motion prevented an even bleaker scenario, according to the latest Canada's Top 100 Corporate R&D Spenders ranking. Compiled by Research Infosource — a sister firm to RE$EARCH MONEY — the ranking shows that while 61 firms increased R&D spending, only half of the 25 largest R&D companies spent more than the previous year.

Firms spending more than $100 million a year dropped sharply (10%) while those spending less than $100 million increased R&D outlays by 15.3%.

"It's very troubling. The large companies are cutting back R&D spending especially as a portion of their revenues," says Ron Freeman, CEO of Research Infosource and co-publisher of RE$EARCH MONEY. "The data are already a year old and the world has changed dramatically since then. Companies will be spending less next year."

Even in natural resources the performance of firms was uneven at best with some of the largest — EnCana, Suncor, Nexen and Syncrude — posting substantial decreases. Among the biggest gainers in this sector were Petro-Canada, Teck Cominco and Penn West Energy.

FY07 also witnessed the disappearance of two major Canadian R&D performers . ATI Technologies placed #5 in last year's ranking and has since been acquired by Advanced Micro Devices (R$, December 11/06). The venerable Alcan spent $249.5 million in FY06 to place #7 but was acquired by Rio Tinto, which reports R&D expenditures of just $58.3 million in FY07.

If Nortel and BCE are removed from the ranking, the remaining firms actually posted a collective increase of 3.3%, indicating that many still value the contribution of R&D to their innovative and competitive capacity. For the complete Top 100 list and additional analysis go to www.researchinfosource.com.

R$