Hi Scott,
I am a freelance producer/director of commmercial, industrial and feature video productions. I've been editing on an AVID Media Composer 1000 for about 2 years. It is a great system, which I have grown to love because it has given me flexibility and more creative choices over the old, linear post production methods. AVID, as you probably know, pretty much invented this industry and continues to lead it today, with about an 80% market share. Most ad agencies, post houses, feature film productions companies, etc., ask for AVID by name and many won't mess with anything else.
I sold all of my AVID shares last summer at 46, when the PE went well over 40. I was worried about AVID's prospects because of their delay in making the PCI bus transition, and because there actually were signs of some serious competition by then, mainly from Data Translation and Immix. By December, when there still was no sign of the new PCI-based systems and buyers were deferring purchases because of this delay, AVID's sales had begun to drop dramatically and so did the stock price. There were other problems relating to inventory, accounts receivable, etc. You may well remember the day AVID preannounced with a warning about 4th quarter results and the stock slid to 16. This crash was covered all day on CNBC.
On the day of the crash, I called up an associate of mine who owns 2 Avids and explained the situation to him. We both felt that everyone had overreacted, that AVID still had the best product on the market, and that it was a strong company. We bought in at 17 and watched it rise into the low 20's over the next few weeks. I expected it go back up much more quickly, but I talked to one of the execs at the company and was disappointed in some of his comments. I would have held on to the stock if I hadn't learned that the 4th quarter results were not only going to be worse than the 3rd quarter, but that they would also be lower than the 4th quarter in 1994. This convinced me to get back out and wait until AVID released its PCI-bus based systems at NAB and proved it could recover its sales momentum.
On April 31, AVID announced 1st quarter 1996 results, which were much worse than everyone, especially the analysts expected ($1.08 loss per share). I'm surprised the stock didn't slip back into the teens today.
I know AVID has a great product. I still think AVID is a good company. However, I'm not willing to gamble on them again until I see a definite turnaround. At the 1996 NAB in April, there were dozens of nonlinear video competitors, many of whom were showing systems that actually seemed to work pretty well without crashing, unlike in 1995. AVID's booth was busy, but the attitude among attendees to me seemed to be ho-hum, same old thing. Avid even introduced a lower-end (15k), very capable system (MCXpress) which I expected to draw crowds, but there were only a dozen people at the demo I attended. Pricing on their Media Composer systems are about the same, so they're still in the $50-100k range, a premium too rich for many smaller post houses and independent producers, who are forced to look at lower-cost alternatives.
Data Translation (DATX) is probably AVID's closest competitor, with a product that has been on the PCI bus since last fall, and with undisputed superior video signal quality. They also introduced a lower-end product for only $5k, the Media 100QX, which is software upgradable all the way up to their most expensive turnkey system. Their booths were humming with excitement, the kind of energy I saw at AVID's booth in 1995. I've followed DATX closely, but am still more comfortable with AVID's software interface, which is refined and very feature-laden. But DATX appears to be catching up. BTW, its stock is up over 100% in the past month alone.
The incredible pace of development/obsolecence in this industry seems to accelerate daily. I can hardly keep up with all the new announcements, updates, introductions, etc. However, it is a maturing industry, not merely in its infancy. Nonlinear editing has become commonplace in this business. If you are interested in a nonlinear video editing systems play, be careful if you do not closely monitor the industry or have a connection who does. This market is undergoing tremendous change right now, especially with the coming introduction of DVC and DVD.
If AVID made a decent number of sales at NAB, the results should start coming in this spring and into the summer, typically AVID's best quarters. Then the stock price should begin to move back up. I do believe that AVID's worst quarter is behind it. But I'm not so confident of your expectation that it will be back up in the 40's in a year. I'll wait until I see clearer signs of a turnaround. |
