Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: Maya who wrote (43385)	7/28/1999 9:49:00 AM
From: JEFF K	Read Replies (1) \| Respond to of 50808

28-29 BancBoston Robertson Stephens Conference. EOM

To: Maya who wrote (43385)	7/28/1999 3:24:00 PM
From: DiViT	Read Replies (2) \| Respond to of 50808

Transistioning from VCD has been harder on one former CUBE CEO... International Sun Rises On DVS 06/14/1999 Multimedia Week (c) 1999 Phillips Business Information, Inc. Dr. Edmund Sun is no stranger to adversity. He was honored at the DVD Summit this year as one of the founders of the industry. The Lifetime Achievement award was richly deserved because Sun was the founder of C-Cube, the company that made the first MPEG decoder chip. That battle was long and hard - Sun is a gifted scientist, not a marketing man. Profits only started to flow when his protege Alex Balkanski took the helm. Sun then formed Digital Video Systems, a publicly held company based in California which until recently had branch offices in Atlanta, Taipei, Tokyo, Hong Kong and Panyu, China. Established in 1992 this originally specialized in Video CD and CD-i systems. Losses have been horrendous since the bottom fell out of the Asian VCD market. In February the company reported a quarterly loss of $3.7m, an improvement on the previous year's quarterly loss of $4.8m But with quarterly revenues of only $5m that ain't good! DVS accelerated its program of facility closures and employee reductions during the third quarter so that one-time costs associated with the company's restructuring program were substantially higher than in the previous quarter. As of 31 December the company's working capital had declined to a negative $2.2m. The good news is that the company's order backlog increased to approximately $8.5m compared to approximately $1m for the prior year. The company has been kept alive by Oregon Power Lending Institution (OPLI). It completed additional investments of $3.5m dollars between December and March. On May 24 the company announced that the $4.5m loaned by OPLI and the $2m invested by OPLI in DVS preferred stock had now been converted into DVS common stock. As a reward, Mali Kuo was appointed co-chairman and CEO. She replaced Edward Miller who 'resigned' as president/CEO. Kuo arranged Oregon's investment with DVS, enabling DVS' turnaround efforts. She is actively working on additional strategic partnerships to augment DVS' capacity and market presence. She added, "DVS' most important goal is to optimize its shareholders' returns." About time too. Things might just be about to improve. On 24 May DVS announced that it had entered into a strategic alliance with Chinapro Capital and Investment Co., a corporation owned by Chinese government agencies. Chinapro will set up production facilities to act as subcontractors, manufacturing DVD products developed by DVS for sale in China and abroad. Chinapro will provide up to $35m in working capital, production facilities and support. DVS will provide technical supervision and support for the production lines; DVS will be in charge of worldwide sales of the products produced. Initially the production lines will manufacture the DVD loaders for DVD players. Subsequently, production lines may be added to manufacture DVD-ROM drives or other DVD products developed by DVS. Our analysis This highlights the trauma involved in trying to produce a commodity product like VCD players from a base in California. The market simply dove as Chinese manufacturers slashed prices below the cost of production. DVS has wisely switched into an arena of critical shortage: DVD players and drives. It will take many years to sate the demand for DVD hardware. At $199 and below, the demand is going to be insatiable. It is important to remember that the Chinese DVD player is backwards compatible with VCD and Super VCD software. That is why there will be explosive growth in the Asia Pacific region. The Chinese will buy DVD players to play existing Chinese discs plus Hollywood blockbusters. The good news is that it will take some time for the pirates to catch up on DVD replication. There is a golden window of opportunity for enterprising publishers. But as DVS has realized the only way to do business in China is through a joint venture with a government organisation. For them the future now looks rosier.