To: Grand Poobah who wrote (7040 ) 7/25/1999 10:32:00 AM From: ted quinn Read Replies (1) | Respond to
now that the fabs are gone, so are the restrictions that kept another company from purchasing crus without the ok of ibm or lu. now, let's take a look at sony. one of their highest margin divisions -- portable audio devices -- is shortly to be under attack from the mp3/sdmi portable device market, such as rio & nomad and others. without a competing product, sony is no longer on the cutting edge. and this weakness opens the door for computer companies -- diamond, creative, compaq, 3com -- to invade its market. products like the new rio carry high prices and fat margins, i.e. $249.00. and they can used interchangeably in every country (unlike tvs or other electronics). sony's problem is that it has a weak digital audio patent portfolio. it never saw this internet music thing coming (if it did, it never would have wasted millions on the mini-disc.) one thing sony does have is a music division -- sony music. sony's strategy is to use software (music, games) to drive sales of its hardware. by having its own mp3/sdmi player, it can take a chunk of the market. but by buying austin's crystal semiconductor, it can control the lion's share of the market. it will own crystal's rich audio patent portfolio and will be able to create digital audio devices for years and years to come. it will also keep competitors away -- they would all be forced to do business with texas instruments, the other company with an mp3 chip solution. sony and crus are already pretty tight -- sony purchases its cd and cd-rw controllers from crus. the mutual dependency has grown even stronger in the past year. in my mind, and in the minds of others, it is not a question of if, but of when sony takes a run at crus. (it also needs to do this before electronics-giant philips does). buy the company, keep crystal, sell off the rest and then find itself sitting at the top of the internet digital audio device market. i think we will very soon see this scenario accounted for in the stock price.
