In the DVD, market, on the other hand, "we are interested in maintaining our existing market share, which amounts to 30% at least," Shenberg says.
globes.co.il
Thursday , Jan 27, 2000 Sun-Thu at 18:00 (GMT+2)
Stock Market News
Zoran's Financials Explain Six-Fold Increase in Share Price in Six Months
By Avishai Ovadia
The name of the game is patience, at least as far as Zoran is concerned. In Zoran's case, patience has been amply repaid. After long years of waiting for the Digital Video Disk (DVD) market to come alive, the longed-for breakthrough, which started manifesting itself in 1999, came to pass.
On Friday two weeks ago, without any advance notice, Zoran's share soared 38% to $74.5, on a turnover that was five times higher than average. As usual in such cases, the rumor industry started churning out explanations, that ranged from speculation that Zoran was about to buy a certain company to a certain company being on the verge of acquiring Zoran. Good financial results also figured somewhere in between.
The financial results published by Zoran yesterday were better than expected. Revenues for the fourth quarter increased by 42% to $20.1 million from $14.1 million for the fourth quarter of 1998, and 25% compared with $16.1 million for the quarter ended September 30, 1999. Net income increased 280% to $3.3 million, or $0.26 per share on a diluted basis, from $873,000, or $0.08 per share on a diluted basis, for the fourth quarter of 1998 and 65% compared with $2.0 million, or $0.17 per share on a diluted basis, last quarter.
Revenues for the year increased by 39% to $61.7 million, up from $44.2 million for 1998. Net income for the year grew 617% to $6.7 million, or $0.54 per share on a diluted basis, compared with $929,000, or $0.08 per share on a diluted basis, for 1998.
It is, however, doubtful whether these results provide the whole explanation for the extraordinary share price rise that turned Zoran into a member of the billion-dollar club.
Zoran's management and its biggest shareholder, Elron, took advantage of the surge in the share price to raise capital from the public. At the end of 1999 Zoran issued 2.9 million new shares at $41 each, raising $119 million. In the same financing round, Elron sold 500,000 shares, making a $20.5 million gain.
The improvement in Zoran's results is attributable to the heating up of the DVD market, which is still in its infancy. The price of DVD products, which are destined to replace video cassettes and CD ROM, fell considerably, and, at the same time, the number of products sold rose significantly. About 6-8 million DVD units were sold in 1999, compared with only 2 million units in 1998, and this is apparently only the beginning.
According to forecasts, 53 million DVD units will be sold in 2003, as CD ROM and video cassettes fizzle out.
Zoran, a developer of integrated circuits (ICs) for compression-enabled digital audio and video applications, is considered a leading player in this sector, with a market share of at least 30%. It is therefore expected to be one of the major beneficiaries of this market's expected growth. Yitzhak Shenberg, VP for business development, today told "Globes" that Zoran's sales are expected to increase by 40-50% in 2000, compared to 1999.
Referring to the company's improved results for Q4 1999, Shenberg said that "the DVD market was strong beyond all expectations. The company earned about $0.05 above analysts' expectations. $0.02 are attributable to the reduction of the tax burden, and $0.03 to the growth of the DVD market.
Referring to the first quarter of the year, which is traditionally weak, Shenberg assessed that sales will fall by 13-15% compared to Q4 1999 - they usually declined by 25% in previous years - because demand in the Chinese market rose ahead of the Chinese New Year in February 2000.
In addition to DVD (which accounted for 68% of its sales in Q4), Zoran, whose customers include some of the world's biggest manufacturers of consumer products, is also engaged in the digital camera market, which is expected to grow at an annual rate of 50% in the coming years. This field of activity represented only 4% of Zoran's sales in Q4, yet company officials pin great hopes on it, and they intend to increase their market share. In the DVD, market, on the other hand, "we are interested in maintaining our existing market share, which amounts to 30% at least," Shenberg says.
Published by Israel's Business Arena January 26, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Created by G-Sites
Database-generated by
¸ Copyright 1999, Globes Publishers Ltd.
Disclaimer |
