iiNet brings development in-house as new R&D legislation stalls in Senate

iiNet, the country’s third-largest telecommunications company will establish an in-house research and development division to create new products and “future-proof” the business, managing director Michael Malone announced yesterday.

The move comes as the Government is set to vote on new R&D legislation, but proposed amendments from the Greens and continued opposition from business groups may delay the bill.

At iiNet’s annual general meeting yesterday, at which it confirmed guidance for the current financial year, Malone said it will now bring development in-house, spurred by the success of products like the FetchTV box and the BoB modem/router.

Malone said the change will “quickly address gaps in the market identified by our consumer research… iiNet Labs will future-proof the business by controlling our product innovation”.

“Operating in an extremely fast moving and competitive industry means we need to continuously evolve our offer. It is only natural that we developed our own in?house R&D capability to give us more control of our development and let us quickly respond to changing customer demands and trends,” he said.

Malone said the development labs will also bring substantial financial benefits, including the ability to save costs by removing third-party suppliers.

Further clarification from the company has indicated the lab will exist as a separate business group and focus on customer equipment. As reported by ZDNet, the lab will hold up to 10 employees and will be based in Perth, with some other employees in other states.

Chief technology officer Greg Bader has said the department will have a heavy focus on working with manufacturers, rather than working on projects with partners like the company did with Belkin for the BoB router.

“Going forward, we would intend to have more direct relationships with people who design chips and circuit boards,” he said.

The company also announced revenue for the 2010 financial year was up 13% to $474 million, while EBITDA was up 20% to $80.7 million.

The announcement comes as debate continues in the Senate today over the Government’s amended R&D legislation. While the laws have now passed the house, they require the approval of Family First senator Steve Fielding, who is still undecided, and the Greens, who have proposed some amendments.

A spokesperson for innovation minister Kim Carr confirmed some amendments had been proposed and were being considered.

Meanwhile, business groups are still concerned over some elements in the bill, with some saying they still believe the “dominant purpose test” should be scrapped. Yesterday, the Australian Industry Group called on the Government to submit the R&D incentives to the Board of Taxation and said that in its current form, the bill should not be passed.

“Business expenditure on R&D is fundamental to national efforts to raise productivity and international competiveness. On any measure the tax incentive supporting business R&D is high quality public investment. The Bill should not be passed in its current form.”

“The Board of Taxation should examine the clear risk that the new proposals will unduly constrain legitimate business expenditure on R&D and consider alternative ways to address any misuse of the current tax arrangements. Any changes that are warranted could be legislated in time for operation from July 1, 2011,” she said.

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