Dalsa's Dream Fades to Black

Dalsa Corp.'s Hollywood dream is over. The company is discontinuing its digital-cinema division, which it launched in 2000 to develop and build the world's sharpest-resolution digital movie camera. The Origin camera, launched in 2004, won many accolades but may have been ahead of its time, as it was never used to film the entirety of a major studio's feature-length film.

Yesterday, Dalsa announced that it will no longer make cinema cameras. If a letter of intent turns into a final agreement, it will instead license its camera technology to German camera maker Arnold & Richter Cine Technik GmbH, which will use the technology in its own products. Dalsa would continue to develop image sensors for digital cameras and supply the sensors to ARRI. Fifteen to 20 of Dalsa's 350 employees in Waterloo, and an equal number of people in Los Angeles, will lose their jobs, according to company spokesperson Patrick Myles.

"It's bittersweet to make these kind of dramatic changes," Myles said. "We believe the industry will move to digital, and we have the best technology for it.

"But at the same time, we can't really continue to spend the money on that initiative. It's taken a long time to develop, it's fantastic underlying technology, but we had to make a difficult decision, and we've really focused all of our energy on the core business."

Early on, Dalsa had expected digital cinema to become a $100-million-per-year business. But as quarters dragged on without a feature-film deal from a major studio, questions from analysts about the viability of the division became more frequent. The camera was used to film advertisements and short films, as well as a skydiving scene in the James Bond movie Quantum of Solace.

Dalsa did not release the financial terms of the deal with ARRI, which Myles said the company expects to be finalized by the end of the year. The company expects to find a buyer for its Los Angeles camera-rental shop by New Year's as well, Myles said.

Dalsa took a charge of $24.9 million against its third-quarter earnings to reflect a writedown of assets and other provisions related to the discontinuation of the digital-cinema division. The charge sent Dalsa to a quarterly loss of $20.6 million, or $1.10 per share. Counting only continuing operations, the company recorded record earnings of $6 million, or 32 cents per share. Last year, the company lost $780,000, or four cents per share, in the third quarter. Revenue increased 34.1 per cent to $52.6 million last quarter.

By Matt Walcoff, The Record