Avid would like you to focus on its year-over-year revenue comparison, which they admit was flat, and not sequential quarter-to-quarter performance. Sequentially, sales were down about 12% from the last quarter. True, AVID has a history of weaker 1st quarter numbers (down 12% also last year, and down 16% the year before), but you should be focusing on the revenues over the past year or so, which really haven't been going anywhere.
Longtime readers of this thread may remember my comments a while back. I was one of the early investors in AVID when they were the only game in town. I made out quite well back then. But when AVID hit $46 in the fall of 1995, and a PE of 48, I bailed. I saw the PCI conversion problems and competition heating up. Avid crashed shortly thereafter, and I bought back in the teens, but gave up and got out when I didn't think its prospects were that hot anymore.
You can go here to read one of my arguments back in 1996: techstocks.com These comments still apply, only now the competitive landscape for Avid is even tougher, IMO.
Today, the competition is better and cheaper than it was 6 months ago or 1 year ago. Avid's products have only gotten more expensive (good for margins as you'll note from this quarter's results, though) while most everyone else has been getting less expensive and more powerful. After all, we're talking about generic computer hardware which Avid puts together as an OEM, adds their proprietary NLE software and puts their label on. BTW, their proprietary NLE software still adds tens of thousands of dollars to the cost of the Media Composer system. Everyone knows that the price of computer hardware has dropped drastically even while its power and speed have improved. Many Avid owners are very unhappy with the cost of maintaining and upgrading their proprietary systems (another $6,000 per year on average, I believe). All this while the competition is getting cheaper and closer to Avid in features. Pinnacle (Avid's former video board supplier) has their own card out now that offers real-time transitions, component input/output and lots more, all for under $5,000. There are literally dozens of other competitors at all prices points, many significantly below anything that Avid has to offer.
Avid is a great company with the best products in my profession, but not everyone who edits video needs the extensive feature set of Avid's Media Composer line or even their entry level Avid Xpress. They'll continue to be the system of choice for broadcast television studios, and higher-end post production facilities. And there will be another transition to new NLE products as broadcasters move into high-definition TV production. But Avid's high-end strengths are in a high-end niche market which is limited compared to the overall video production industry or the entry-level communication professionals who are learning to edit their own videos on their desktops. Many corporate communicators, independent producers and production companies like myself are very happy with some of these lower cost open systems. Premiere 5.0 from Adobe will be out in a few weeks and its NLE interface is very close to what you get on an Avid. It sells for $895 and will be bundled with many video cards starting at $999 or so. Add computer hardware and you've got a great NLE system for $7,500-$10,000 dollars.
I'm happy for those investors that stuck with AVID or got in as it struggled back from the teens over the past year. But its current value and prospects in the marketplace for future growth are like Deja Vu all over again. Avid's climb to $46 in 1995 was built on explosive quarter-to-quarter sequential revenue increases sometimes measured over 100%. To me, the revenue history at Avid over the past 5 quarters has been unimpressive, and certainly not the kind of growth that would warrant a PE of 40, much less 30.
As always, do your own research,
D. Kuspa |
