Nimbus CD, Analysts Say Early DVD Sales Are Better Than Expected
12/09/97
Dow Jones Online News
(Copyright (c) 1997, Dow Jones & Company, Inc.)
RICHMOND, Va. -(Dow Jones)- Nimbus CD International Inc. and industry analysts Tuesday said early sales of digital versatile disc, or DVD , players and titles are well above earlier estimates.
That's good news for Nimbus, which took a gamble on DVD at a time when many were holding back because of uncertainty about the new technology's potential.
According to a research report from Davenport & Co., the Charlottesville, Va.-based maker of audio compact discs, CD-ROMs and DVDs is poised for strong growth in what the brokerage firm says is the next hot consumer product.
Nimbus Chief Financial Officer Steven Minkel said the company now estimates total DVD sales by year's end of 600,000 units - compared with an estimate last summer of 400,000. And the number of titles available on DVD at year end will be 750, he said, compared with an estimate last summer of 500.
Kenneth Gassman Jr., a retail analyst at Davenport, said the high-end consumer electronics retailers he has surveyed describe DVD as their "single strongest product category." "It's really amazing," he said. " DVD player and disc sales are exceeding everyone's expectations. The players are easily outselling VCRs and the software is selling well also."
Gassman added that while the strong numbers early in the Christmas shopping season are impressive, this isn't DVD 's breakout year. "Next year will be," he predicted.
Minkel agreed. "The bigger question is what will happen next year," he said. "While these numbers are impressive, and we think they're a sign of things to come, next year will be when we'll see the big sales growth."
N. Douglas Adams, a Davenport analyst who specifically follows Nimbus, said in a new research paper that DVD 's "technology rollout should begin in earnest in 1998 and last for several years. Combined with an established and well-run manufacturing capability in compact discs (CDs), Nimbus's strategic positioning for the DVD revolution appears to be excellent."
Fiscal 1998, which will end March 31, should be a record year for Nimbus, with 50% earnings growth, he said. The company posted fiscal 1997 earnings - before a charge - of $12.9 million, or 56 cents a share.
Adams attributed the projected earnings growth to efficiencies gained from consolidating manufacturing operations earlier this year as well as to modest but improved DVD sales.
The only speed bump he sees is DIVX, a nonstandard derivative of DVD set to be available starting early in 1998. One attraction of the technology is that its serialized discs and special player allow for pay-per-use discs. While that could help the rental industry, it could cause problems for DVD .
"Market uncertainty created by the introduction of this product could slow early consumer acceptance of DVD ," Adams said.
Today DVD is but a small part of Nimbus's operations. According to Financial Chief Minkel, 65% of the company's output is CD-ROMs, 33% audio CDs and just 1% or 2% DVDs.
But Minkel said he sees "both the pie and DVD 's share of the pie growing over the next year." Still, despite that - and despite the strong early sales of DVD players and discs - the company isn't prepared to issue any projections as to how they might affect Nimbus's near-term earnings, he said.
Minkel said Wall Street still has a lot of DVD skeptics.
"A lot of people are worried that DVD might be the next laserdisc," he said. Those investors are a little behind the curve, he added: They don't recognize that DVD is a technology that's starting to take root and receive wide - albeit early - consumer acceptance.
Copyright (c) 1997 Dow Jones & Company, Inc.
All Rights Reserved. |
