Les................................................
1) Is Cube's technology going to be outdated before we ever see any substantial financial growth from the company?
Depends on the market.
VCD is slowing. During the 4th Q, VCD revenue was about $10M short of Q4, 1997. This continued contraction in VCD revenue has plagued CUBE's revenue growth, since peaking in 1996. Encoder chip revenues have shrunk to around 5% of sales. This was due to the single chip, DVx. What used to cost $1,500, now costs $50 to $300. This area will grow, but not much in 1999. These 2 markets now account for 35-36% of revenue. In the beginning of 1996, they accounted for 95% of revenue.
Divicom grew 40% last year. Now at 40% of revenue.
Settops grew about 40% last year. C-Cube accounted for about 2M boxes. The world market was 10M for digital settop boxes. Cube should see a larger market share here, for the next 2 years.
DVD was $7M in sales in 1997. $24M in 1998.
C-Cube is growing, but it is also replacing the markets that fueled growth in 1996.
2) Why, when Cube met expectations last quarter, has the price of the stock lost around 40%?
The market trades on perception. Management's guidance was for no growth for 6 months. The market decided not to wait.
Do you honestly believe that the price of this stock will ever rise consistently without being shot back down to the ground?
Yes, the stock will rise, its current value is between $24 and $35. But, as with all tech stocks, it will be cut in half, from time to time. |
