Monday March 25, 8:18 pm Eastern Time
ESS Tech To Raise 1st Quarter EPS, Revenue Targets; Cites DVD Demand
By: Donna Fuscaldo, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- For the second time this quarter, ESS Technology Inc. ( ESST) will raise its earnings and revenue targets.
Robert Blair, president and chief executive of the Fremont, Calif. , chip maker, told Dow Jones Newswires late Monday that ESS now expects to report first-quarter revenue of more than $75 million. The company also plans to raise its earnings per share target, althouADVERTISEMENT
gh Blair couldn't provide an exact figure.
In February, ESS raised its first-quarter earnings estimate to between 22 cents and 25 cents a share and raised its revenue projection to between $68 million and $70 million.
Analysts, according to Thomson Financial/First Call, expect the maker of semiconductors for the digital entertainment market to post earnings of 23 cents a share and revenue of $69 million in its first quarter.
As for the company's second quarter targets, which ESS also raised in February, Blair said he will be increasing the company's outlook when it reports first quarter earnings April 24 .
Currently, ESS is targeting second quarter earnings between 18 cents and 22 cents and revenue of between $66 million and $70 million. Prior to raising its views, ESS had forecast earnings of 14 cents to 17 cents a share and revenue between $62 and $66 million.
So what's behind ESS's strong performance this year?
According to Blair, it's due to the "unbelievable strength" in the DVD market.
ESS, said the executive, has seen demand for its chips, which are used in DVD players, rise on a weekly basis since the beginning of the quarter, a first for the company whose roots are in the personal-computer market.
According to Blair, household penetration of DVD players was at 25% at the end of 2001. With prices continuing to come down and video rental stores like Hollywood Entertainment Corp.'s (HLYW) Hollywood Video and Blockbuster Inc. ( BBI) embracing DVDs more, Blair said 2002 and 2003 will be "huge growth years."
And while Blair declined to provide forecasts for the third and fourth quarters, he said business looks strong for those quarters as well. "If the first and second quarters are big, then as we start heading into Christmas I doubt it gets smaller," he said.
ESS Technology, which went public in October 1995 , started out making audio chips for personal computers, but early on the company's founder, Fred Chan, realized that PCs would eventually become commodities, said Blair.
So four years ago, ESS started producing semiconductors for the video CD market and the DVD market. Video CDs are compact discs that hold full-length VHS videos and carry CD-quality sound. They are used mainly in emerging markets like China and Korea.
Today, more than 85% of ESS's sales come from the DVD and video CD market. That will rise to 95% by the end of the year, Blair said.
While the company has enjoyed success in the DVD chip market, it faces intense competition from the likes of Zoran Corp. (ZRAN), LSI Logic (NYSE: LSI - news) Corp. (LSI), and others.
Shares of ESS finished the regular trading session Monday at $19.65, down 1%, or 20 cents, on volume of 1.7 million shares. Average daily volume is 2 million shares.
-Donna Fuscaldo; Dow Jones Newswires; 201-938-5253; donna.fuscaldo@ dowjones.com |
