C-Cube DVD customers, Sony and Philips. Charlie Glavin report......................................
equity.csfb.com
We believe CUBE will report in-line with our $0.15 EPS estimate for the
December quarter, despite the tougher-than-expected economic environment that
CUBE noted during its 2001 update.
CUBE's Expansion platforms (DVD, STBs) have been the main drivers to the
company's growth, and we expect this quarter to continue to reflect this trend.
As well, we believe CUBE's legacy VCD business may provide incremental upside
to revenues, given the strong seasonality from the Chinese New Year.
There have been recent misguided concerns surrounding CUBE's DVD business,
with speculation about order cancellations. During our Asia trip, while we
did hear Toshiba cancelled some DVD-related memory orders from Macronix, we
believe these cancellations were Zoran-related -not CUBE. Moreover, our
checks indicate CUBE's Sony and Philips DVD orders remained solid; therefore,
we believe CUBE's DVD business continues to track in-line, keeping in mind
that CUBE has virtually no exposure to PC-related DVDs.
During its 2001 update, CUBE essentially reaffirmed 2001 guidance, with
growth driven by Expansion platforms. With the move toward products such as
DVD-recordable players and personal video recorders as drivers to 2001, we
believe CUBE stands at the forefront to win a significant number of design
wins, given there are few truly competitive codec solutions.
We reiterate our Buy recommendation and advocate accumulating the shares
ahead of these expected design win announcements. |
