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Leitch Purchase of ASC Could Hurt Matrox
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Leitch Technology Corp.'s [LTV.TO] purchase of ASC Audio Video Corp. this month could deprive Matrox of a major buyer of video processing boards, at least in the long term.
But for the immediate future, ASC is expected to continue operating as an independent company with all existing supplier relationships remaining intact.
Leitch paid US$20.1 million for ASC, which reportedly had sales of about US$13 million last year.
ASC is one of Matrox's biggest customers for JPEG processing cards. Matrox's Digimix JPEG card is a standard item on ASC's VR 300 server, and all indications are that ASC will use the upgraded Digivid card for the next release of the VR 300. Matrox's Digimotion JPEG card is widely used across a range of ASC products.
Board Swap?
Leitch clearly has a vested interest in seeing its technology, particularly MPEG 2 cards, in ASC products. But how soon that will happen and whether ASC will continue to use Matrox cards on certain products are unclear.
"We don't want to imply that we are out to replace the Matrox boards," said David Strachan, director of marketing at Leitch. "For the moment, we are taking a hands-off approach."
Still, Strachan added that product mergers between ASC and Leitch will take place.
"It's way too early to say what will happen in the future," said ASC head Mark Chatinsky. "As it stands now, ASC is still ASC and we don't expect any changes in our suppliers."
Matrox officials would not comment on the deal.
Strachan said the acquisition is designed to deliver software knowledge to complement Leitch's hardware strengths.
"Leitch is very strong in hardware, but we're not strong in customer-oriented software," he said. "ASC is a successful server supplier in the U.S., and we see a good future in servers."
Earlier this year, Leitch issued 1.6 million new common shares to the tune of $50 million to fund R&D and acquisition efforts. Strachan said it is unlikely Leitch will see any major acquisitions in 1997, although he held the door open for 1998.
"Next year, we want to able to provide a total technology solution to bring compressed video to the telco industry," he said. "Leitch is in a strong position for their contribution quality services. A lot of people are doing 4:2:0. We're the only ones doing 4:2:2."
Telcos in the U.S. and Canada are actively pursuing the commercial backhaul market by rolling out D1 transmission services in their local loop architectures, and 45 Mbps for the long haul.
With a server product in hand, Leitch can offer a turnkey video platform for telco delivery. However, it is taking on a number of well-funded manufacturers, such as Tektronix [TEK], Hewlett-Packard [HWP] and Philips BTS, who are also zeroed in on the market.
Strachan said Leitch's international sales channels should help spur sales of ASC products outside the U.S.
"The association of the Leitch name should stimulate ASC sales," he said.
Crowded House
Leitch is tapping into a lucrative market for video servers by buying up ASC. What's still uncertain, however, is whether that growth market will have enough activity to support the numerous manufacturers, both large and small, that are also moving aggressively into the area. Aside from major industry players like Sony, Oracl [ORCL] and Hewlett-Packard, Leitch will have to contend with smaller players like Sierra Design Labs, Storage Technology and others. (Leitch, 416/445-9640; ASC, 818/843-7004) |
