From SG Cowen:
Zoran (ZRAN: $30)
A Play On DVD Players, Digital Cameras, & Multimedia
Zoran is a major fabless supplier of semiconductors for a variety of digital audio and video products. Currently, however, its business is being driven by the rapid growth in the DVD player market. DVD players have finally reached mainstream consumer price points, offer significant advantages over VCRs, and are one of the fastest growing consumer products. Zoran has a highly integrated solution (Vaddis) that combines much of the DVD player functionality in a single chip. The Vaddis is designed into the DVD players made by Toshiba and Sharp, and we believe that additional design wins are forthcoming. The company is also making a strong push into the huge Chinese market for digital video. As China transitions from older Video CD (VCD) technology to Super VCD and eventually DVD, we expect Zoran to gain significant share. Zoran also has a highly integrated solution (COACH) for digital cameras, another consumer market that is expected to grow rapidly, as digital cameras offer numerous advantages over traditional film-based cameras. With expertise in both audio and video technologies, Zoran should also be well positioned to take advantages of growth in emerging multimedia applications such as DVD-Audio, Internet Audio players, and HDTV. Given the rapid growth of Zoran's target markets and its earnings (from $0.07 in 1998 to $1.07E in 2000), we believe that Zoran is undervalued and are initiating coverage with a Buy rating.
-Mark Grossman/Drew Peck/Rick Billy, 11/8
SG Cowen Securities Corporation makes a market in ZRAN securities.
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