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Zoran sees DVD boom starting in summer
By Brenon Daly, CBS MarketWatch
Thu Mar 05 16:55:12 1998
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SANTA CLARA, Calif. (CBS.MW) -- Broad market acceptance of digital video this summer,
after a year-and-a-half delay, will help chip maker Zoran (ZRAN) nearly double earnings this
year, the company's chief executive said Thursday.
Levy Gerzberg, head of the Israeli-based company, said he expected revenue from Zoran's
digital video disk (DVD) operation to account for more thanÿ 40 percent of the company's
total sales. That compares to 10 percent last year and 30 percent in 1996.
"The DVD market is really starting to move," Gerzberg told CBS MarketWatch. Sales of
the products for the digital video market -- including DVD drives, cameras, home theater
set-ups and other items -- is expected to grow to 103 million unit in 2001 from 25 million in
1998.
He backed analysts' projections of earnings of 6 cents per share for the current quarter,
adding the range for 1998 of 65 to 75 cents in earnings per share is "not out of reach." The
company earned 38 cents per share in 1997.
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ZRAN
NASD
Last
Chg.
14ÿ15/16
-0ÿ15/16
% Chg.
Vol.
-5.91%
N/A
Day Lo.
Day Hi.
14ÿ3/4
15ÿ5/8
Open
Prev.
15ÿ1/2
15ÿ7/8
As of
Mar 05/98 10:31 pm ET
Last Trade
Mar 05/98 4:00 pm ET
15 MIN. DELAY
Originally expected to make a splashy debut in late 1996, DVD has been slowed by a number
of legal fights and consumer confusion. DVDs are widely expected to replace CDs in the
coming years as they can store up to 28 times more information than CDs.
Wrestling cube
The huge potential of the DVD market has also attracted C-Cube (CUBE), which trades at a
lower multiple than Zoran. The market values C-Cube at 18 times earnings and 2.37 times
sales during the last four quarters, compared to Zoran's ratio of 45 times earnings and 4.29
times sales.
Zoran shares on Thursday closed off 15/16 at 14 15/16 while C-Cube fell 1 1/16 to 19 1/16.
Levy said Zoran offers both chip and software solutions for the digital video market, while
C-Cube uses only a chip solution.
"The combination gives us a lot of flexibility," Levy said. He estimated chips generate about
two-thirds of Zoran's total revenue with the remaining sales coming from software.
Sealed boxes
In an interview, Levy also said he expected the rise of the sub-$1,000 PC to spur Zoran chip
sales. "The opportunity stems from the fact that most of the low-cost PCs are sealed boxes,"
he said, meaning chips can't be added internally to increase functionality.
Instead, users who want to be able to watch digital films or edit images from a digital camera
on their PC will add on a external peripheral.
"Once you don't have to open your PC, it becomes very simple," Levy said. "We're moving
out from the PC to peripherals."
Levy also said he is looking for a boost this year from sales of digital audio chips, which go
in speakers used for computers and televisions. They are expected to account for 20 percent of
Zoran's sales, twice the level last year.
Brenon Daly is an online reporter for CBS MarketWatch.
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