Herb is really amazing! Not. This is his response to yesterday's news. He is making up numbers (45% price decline last week--where the *%$!) and still using bogus sources (MPEG Associates--shit no matter how you slice it). The guy is just amazing. Apologies, in advance, for even posting this garbage here. I think I've lost my appetite for lunch.
Was Yesterday's Jump in C-Cube's Stock Just a Blip?
Herb Greenberg
From the timing-is-everything department: With its stock in a free-fall, and its executives set to speak this morning to hundreds of
money managers at the Robertson Stephens technology conference in San Francisco, C-Cube Microsystems had to do something.
So, it did what every other company trying to prop up a beaten-up stock seems to do: It issued a press release putting a positive
spin on what has become a very negative story.
In this case, C-Cube said it had launched a revolutionary new chip for use in digital video disc machines. DVDs are expected to
revolutionize the consumer-electronics industry, by offering exceptional sound and picture quality for movies, records and even
video games.
The new C-Cube chip, according to the press release, should help lower the cost of the machines by combining eight functions on a
single chip.
As a result, after tumbling 45 percent last week, C-Cube's stock yesterday bounced up $5, or 20 percent, to close at $30.38.
Investors apparently think C-Cube's early entry into the DVD market, with such a multi-functional chip, will result in a repeat of
what happened in the market for video compact disc machines -- distant cousins to the DVD, which are sold mostly in China.
C-Cube swiftly grabbed as much as 90 percent of the VCD-chip market, causing its stock to zoom to around $70, before
lower-priced chips from Fremont-based ESS Technology began stealing share. ESS now is believed to control more than half the
VCD chip market.
ESS CEO Fred Chan told me yesterday he's now working on a chip that will perform more functions, at a lower cost, than the
C-Cube chip. He says it should be ready to ship in this year's fourth quarter, and he expects to once again steal market share from
C-Cube. But he doesn't think he'll grab as big a share of the DVD market as he did in the VCD market, because there are just too
many other competitors, including LSI Logic.
Too many competitors in a price-sensitive market?
Matt Gabel of New York-based MPEG Associates International expects profit margins to eventually collapse. ``It'll be a bloodbath,'' he says. |
