REVISED GENERAL DESCRIPTION OF AMPEX.
Those of you in the paternal mode who do the valuable service to us all of helping new investors in Ampex, please copy and use this new revised version of Hals post so that he does not have to post a correction every time.
Best to all.
This is Hal Campbell's REVISED (AS OF 4/9/99) Short Summary of Ampex (AXC) for new investors. Hal is one of the “Elders” of the Silicon Investor Ampex Thread.
AMPEX (AXC)
HISTORY
Oldest Silicon Valley company still left standing. Storied (too long a story) and turbulent history. For Gus' excellent overview ...
Message 6886524
THE LAST TWO YEARS- PRICE DECLINE TO BELOW A DOLLAR
Hit on three fronts. Failed to sell keepered media to the hard drive industry. Ended the development program. Lost an important patent infringement against Mitsubishi (actually won trial but judge overturned and AXC lost appeal). Recently settled with Mitsubishi for an unspecified lump sum on 2 other patent disputes. DCR sales plummeted primarily due to a curtailing of government spending. Thus falling revenues.
That -added to index fund and tax loss selling - spawned a decline in share price to a low 69 cents per share in the fall.
CORE PRODUCTS
Royalty Stream
About 10 million per year. Ongoing stream ( as opposed to one time settlements) grew by 26% last year. Over a thousand active patents in digital processing and many other areas. Still receive royalties related to Ampex's invention of the helical scan head. Sony, for instance, licenses a bundle of their patents for use in a variety of products from 8 millimeter camcorders to feedback joysticks.
19mm tape drives and libraries.
DST and DIS.
+ Finest commercially available in the world for storage of mammoth amounts of data. Cheapest by the gig ...fastest...far and away the most space efficient. And the best most particularly for visual storage. I am not exaggerating in the least.
- Very expensive in up front costs. And up to now a limited number of prestigious customers have both needed and been able to afford their systems. The market for terabyte storage on several fronts seems to be growing rapidly - and they have the product to best meet that new demand...but a selling job looms. Price cuts of these very high margin (45% and up) products a likely part of new attempt to gain market share.
DCR Instrumentation Recorders
+Also excellent. Prestigious customers. For flight testing and collecting satellite data. Very high margin (over 50%)
- DCR sales highly dependent on large government contracts. Sales fell precipitously in the last 18 months with budget cuts on defense spending. Classified , so export restricted.
PRESENT STRATEGY
Both growth of core products and growth by acquisition....with the intent of primarily being involved as a holding company in video delivery on the internet. In storage. In production. In content and delivery. Added 44 million in cash, borrowed at 12%, to their own cash balance a little over a year ago. Four acquisitions in that time.
MICRONET - Raid and Datadock storage products primarily aimed at the SAN markets. Got the troubled company for a few million shares and a few million in cash. Revamping its product line entirely. Little revenues now( 5 million). Potential explosive growth.
TVONTHEWEB - bought a 20% ownership stake ( with a 3 year option for a 51% stake) in this rapidly growing DC area startup which narrowcasts to special interest groups - underwriters pay costs and share revenues. Includes Grady Mgrath production company that had 4 million in revenues last year. Adding new channels by the week. Tight federal government connections. Potential IPO.
AENTV Bought 20% stake..again with majority option ..in private west coast video delivery company company. recently voted by magazine as one of ten best video sites on the web. Also potential IPO.
REITERS Purchased 51 % stake in this web hosting company.
If they exercise the majority option on TVon web and AENTV ..the total price paid for the last 3 acquisitions will be 12.7 million.
Also is opening production facilities, in Hollywood and NY city, which will be used by these companies and others. Intend to produce content. Hired a seasoned advertising exec to re establish the Ampex brand name ( sill revered in many circles) in these efforts. Hired Imagio to help publicize their storage products.
Addenda
Manufacturing had a net negative cash flow last year ( nominally perhaps - a fair portion of their R&D spending is discretionary). Due to intense cost control and high margin products their break even point is extremely low ...but they fell below it.
If they achieve sales growth, the return of profitability is likely to be rapid. High...very high...degree of insider ownership. Also Credit Suisse took a position in excess of 5% recently. FMR has had a 5% position for quite awhile.
Potentials
Sales growth in core products due to increasing markets for massive storage and the makeover to digital broadcasting. Potential IPOs of majority stakes in the web host and two net TV companies.( Yahoo's purchase of Broadcast.com for 5.7 billion raised the value of, and interest in, this entire sector).In addition, the production and content business they are entering ( and are well equipped to do so) has very high margins. More acquisitions if the balance sheet justifies the attempt. Growth in royalty stream.
Risks
Negative cash flow and the customary market uncertainties seem the main 3 year risk. An inability by MicroNet to get a sales growth foothold would be one possible risk. The likely continued decline of TV aftermarket sales from 11.8 million dollar levels ( in 98) another. Profits will vanish for awhile with their new investments , but probably not to a drastic degree. If they exercise their majority options , they will still have ample cash as a safety net + whatever millions Mitsubishi will pay on the infringement settlement. So no icebergs on the immediate horizon and, in my opinion, many potentials. The holding company structure is a flexible platform to maneuver through any perils.
Links:
ampex.com
aentv.com
tvontheweb.com
|
