Scitex DV Looks like a digital video casualty...........................
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Scitex DV Looks to Sphere to Ease Doldrums
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Lackluster sales and increased pressure from its parent company to improve the bottom line is causing Scitex Digital Video [SCIXF] to turn to its new Sphere desktop production system, plus tried and true technology from Abekas, to significantly boost revenue in the coming year.
Speculation on Wall Street is that parent company Scitex Corp. will look to sell the unit if profitability does not improve, although top executives were not available for comment,
Company insiders report that Yoav S. Chelouche, president and CEO of Scitex Corp., based in Israel, left the California subsidiary in good spirits earlier this year after a meeting with top executives. But with second quarter sales of only $16 million, down 12 percent from the previous quarter, Scitex DV is clearly not the cash cow the company bargained for when it created the unit out of ImMix and Abekas in 1995.
Waiting for Results
Wall Street is growing impatient as well. Although Scitex DV is a minor player compared to Scitex's graphics arts and printing units (company-wide first-half revenues were $330 million this year), some analysts are wondering why the company is hanging on to the video market.
"Either fix it or get rid of it," said Peter Enderlin, who tracks the Scitex for Smith Barney. "I don't think they've been shopping it around just yet. They want to get the product line set and see if they can get some good revenue growth with it."
"We never fully understood (the expansion into video)," said Ted Kunz of Lehman Brothers. "They though it would have good growth potential. Now, I think they're just basically deciding what to do with it."
Other analysts contacted by VTN say the break-even point for Scitex DV is about $20 million per quarter, a mark the company has yet to hit this year.
"I'm cautiously optimistic," said Phillip Rueppel, an analyst at Alex Brown. "What remains to be seen is how quickly the Sphere product penetrates the market. If it's as successful as some of their earlier projections indicate, they should exit the year at a $25 million per quarter rate."
Rapid Development
Scitex DV's reliance on the Sphere as a financial savior was highlighted by a high-gear development effort designed to get the system ready for the fall selling season. Helen Shortal, spokesman for the company, said the stepped up product development schedule allowed the company to add a number of features that weren't included on the original design.
"We've added things like drop shadows, a DVE titler with extrusion and color transparency," she said. "In the MicroSphere, we didn't have provisions for an internal titler, so we developed a real-time titler."
In its last financial statement, Scitex hinted at "corrective measures" to improve results. However, Shortal said she is not aware of any cost-cutting at the company.
The Sphere line consists of four versions: The StrataSphere, designed to compete against the likes of Avid Technology's [AVID] Media Composer; the mid-level VideoSphere; the lower-end MicroSphere that will go up against systems like the Media100 SX; and the DigiSphere, aimed at workgroups.
All of the Spheres incorporate the Abekas DVEous effects unit. As well, StrataSphere is the only desktop system on the market to deliver real-time alpha keying.
Scitex is drwing some high profile customers, although most are drawn to the Abekas technology rather than the Sphere. So far, Sphere's top customer is Canada's Headline Sports, which has acquired 16 VideoSpheres.
Former Abekas products continue to sell in numbers as well. ESPN recently picked up 3 DVEous units, while CBS acquired 11 systems for its coverage of the coming Winter Olympics. ABC recently snapped up five DVEous units and two Abekas Brutus systems for its network facilities.
New Research
Worldwide demand for DBS receiver equipment will grow to $4 billion in 2000 from the current $3.2 billion as new services launch around the globe, according to a new study from In-Stat.
However, price reductions due to volume shipments will pull the market back down to about $3.5 billion by 2001. (In-Stat, 602/483-4456)
Still, industry-wide sales of production equipment could be in for a rough ride in the coming year or more, particularly in the U.S. where the majority of broadcasters are devoting most of their capital budgets to transmission equipment in preparation for advanced television. ATV products like high-definition film scanners and encoding equipment are also likely to be top priority at post houses that are StrataSphere's target market. The lower end VideoSphere and MicroSphere have a much better outlook because they are targeted to markets that are not likely to embrace ATV in the near future.
Same Formula, New Market
Also unproven is Scitex's overall corporate strategy, which attempts to duplicate the company's successful approach to the printing industry.
"Scitex took the entire fragmented printing and prepress process and unified it with a solution that offered high performence and high functionality," said Alex Brown's Rueppel. "The video marketplace has similar workflow issues and a fragmented product space, but the jury is still out." (Scitex DV, 415/599-5111) |
