Tom, I agree with you that at the very least, investing in Avid will be dead money. However, I still believe there is considerable risk given that management is new, and even the old team couldn't make a dime with their market leading sytems. New competitors are entering their market constantly with products at significantly lower price points. I don't see how they are going to both cut costs and maintain their premium pricing on the bulk of their systems, which weren't profitable at these high price points to begin with.
I believe Avid is suffering from a fundamental problem, potentially a fatal one, similar to the demise of another market leader in the digital audio revolution years ago, New England Digital. They had the best professional digital audio workstations on the market and they went out of business. Competitors hacked them to pieces not by matching them feature by feature, but with flexible, non-closed systems and software applications that offered 90% of the performance and features for 1-10% of the cost of a closed New England Digital system. My best analogy is this: how many graphic designers do you think you could find that would pay $20-30K (my estimate for Avid's software premium included in the price of a Media Composer system) for Adobe Photoshop? Sure, you'll be able to sell to ad agencies, publishers, etc., but you'll run out of customers in this niche market who can justify spending that kind of money on a tool. Ok, Photoshop is the undisputed best program out there for professionals, but wouldn't you rather spend just the money you need to get the best computer hardware, and use a couple of other smaller, less capable applications that cost $500?
This market is moving ever more rapidly towards all digital acquistion and post production (DVC, etc.) Avid's paradigm of digitizing analog video and compressing it for editing is now a mature one, due for replacement by a better and higher quality nonlinear editing system. More on strategic/market considerations in my old post here: techstocks.com
D. Kuspa |
