Hello Grobnette,
I've conversed with John Rieman over the private threads. He, IMO, is the most knowledgeable individual on SI about DVD-Rom decoders if not more. My questions are in italics, his answers are below my questions in order.
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To: Grant Cain (who wrote...)
From: John Rieman
Friday, Jun 19 1998 4:43PM ET
Thanks Grant. You can copy this to the Sigma Thread.
1. I saw a recent estimate (made on June 15) that 6 million DVD-Roms will be sold this year. Does that estimate sit well with you?
That estimate is down from over 15M units before the year started. I think it's safe to count on at least 6M this year.
2. I'm trying to find out how much revenue SIGM or CUBE get from these decoder chips per unit. Basically, how much do they sell them to OEM's for? Also, do you know how much decoder boards go for (CUBE doesn't make them, but SIGM does)?
ASPs for ZiVA(C-Cube's chip) are below $20. Sigma's chip puts the AC-3 decoding burden on the CPU. They have to be lower in price by $2 to $3.
Decoder Boards need to sell for under $70, and daughter cards below $25. Sigma has a daughter card for Intel's i740 graphics cards, they are bound to get some sales.
3. You estimated to me that SIGM had 10% of the market for DVD-Rom decoder boards last time I wrote to you. Can you give me another estimate for their current market shares of chips and boards (may be different market shares)? It seems that it would be greater with SIGM's recent wins of Hi-Val and Panasonic as well as smaller companies.
The Panasonic win was for DVD-RAM(recordable), and part of Hi-Val was as well. The recordable DVD market will need a Codec. Sigma used to be a C-Cube customer. Maybe they can buy a codec, and keep these customers. Panasonic is big.
The Hi-Val win is more than just the DVD-RAM product. They replace the Quadrant card in the DVD-ROM up-grade kits. The last report on that card was that it had an SGS Thomson MPEG-2 decoder and a Zoran AC-3 chip. When the inventory of these boards was gone, I thought they would use the Quadrant card based on C-Cube's chip. That's Sigma's win.
4. You're currently an investor in CUBE, right? Can you give me your reasoning for investing in CUBE over SIGM? The relative valuation of SIGM right now, considering their product acceptance and taking of CUBE's market share (Hi-Val for example), leads me to believe it is much more undervalued than CUBE. I believe CUBE is undervalued also relative to its future potential because of its leader status in the market and Wall Street's lack of knowledge of the soon-to-be explosive growth of DVD, but I think SIGM looks like a potentil 5-bagger in a year if things go reasonably well.
C-Cube has very little exposure to the PC market. Sigma has all it's eggs that basket. They are really two very different companies. Sigma is at break even on profits, C-Cube is at a $1 annual rate-of-run. C-Cube has many more markets.
I will say this, Sigma looks like they are positioned well in DVD. To me, their market share potential is over 10% at this point. It may be reaching 20%. In a 6M unit market, they could come close to 1M units(boards with their own chip).
Next year would be bigger, but they will need to up-grade their products.
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Post to follow...
Grant |
