CREO was featured in yesterday's IBD:
<<This year, the Lake County Press in Waukegan, Ill., breezed through the yearly rush of churning out annual reports while its rivals trudged through.
Why? In January, the Lake Coun- ty paper replaced nearly all its pre- press printing equipment with an au- tomated computer-to-plate operation. It eliminates several steps - increas- ing production time and output con- $iderably - with 10 fewer employ- ees. And the reports were sharper.
'We were standing around waiting for the rush to hit us," said pre-press foreman Thomas Semerau.
Lake County benefited from equip- ment made by Creo Products Inc. The products enable digitized con- tent from desktop systems to be transferred directly to printing plates.
Creo decided to focus all its ef- forts on making and selling automat- ed computer-to-plate imaging equip- ment within the last five years. There are other companies that sell computer-to-plate products. But Creo leads the market with a 35% share of the installed base, more than three times its nearest competi- tor, analysts, say.
'Right now, the competition is in catch-up mode," said Robert Stern, analyst with Merrill Lynch.
Computer-to-plate equipment is the biggest thing to hit the printing industry in recent years. Even though early versions of computer-to- plate have been around for over a quarter of a century, it only started taking off in the last'five years in tandem with the digital evolution.
By most accounts, the computer-to- plate segment is a good place to be. "It's the sweet spot in the graphic arts industry,' said Jonathan Rosenz- weig, analyst with Salomon Smith Barney. Rosenzweig says the computer-to- plate market should grow at least 25% to 30% a year for the foresee- able future. And there likely won't be a wall to hit anytime soon. The computer-to-plate segment makes up only about 10% of the $3 billion pre- press hardware market.
Creo, which went public in July under the symbol CREO and trades near 30, is expected to be a big bene- ficiary. First Call estimates five-year annual growth rates of 30%. Next year, earnings are, expected to in- crease 27% to 79 cents a share and by 37% in 2001 to $1.08.
Creo already has reaped rewards. The company reported revenue for the fiscal year ended Sept. 30 grew 38% to $178 million. Earnings rose 63% to 62 cents from 38 cents a year earlier.
For the fourth quarter, revenue jumped 57% to $56 million, 'while earnings leapt 100% to 18 cents. There's a reason, though, that not all printers are using computer-to- plate equipment, analysts say.
"It's expensive," said John Zarwan, principal with State Street Consultants Inc. 'A lot of people be- lieve they just need to go to digital to get the most savings.' Before printers can use computer- to-plate, they must have a pre-press digital production process in place. A typical computer-to-plate system Creo sells to large-scale web printers runs $400,000 to $1 million. For smaller, sheet-fed printers, the cost is $150,000 to $400,000.
Although Creo recently launched new software workflow products to better manage the pre-press process, most of its revenue still comes from the sale and servicing of thermal- based computer-to-plate equipment. Creo last year inked a joint,,venture agreement with German-based Heidelberger Druckmaschinen AG, the world's largest press manufactur- er. The deal opened the door to addi- tional business in the small to mid- size market. Creo had played mostly in the large printer market.
"We gained access worldwide to over 160 countries where it (Heidel- berger) has existing sales and sup- port capabilities," said Dave Brown, Creo business strategy vice president. Product revenue from the joint venture was 32.3% of the company's total revenue for 1999, up from 27.6% in 1998, the company report- ed. Brown says the small to midsize market accounts for half of its more than 1,300 installed computer-to- plate machines.
Some analysts say Scitex Corp. Ltd. and Agfa, although small play- ers in the computer-to-plate market now, could provide Creo with tough competition in the future. Both companies are ramping up the computer-to-plate business and have consid- erable resources to do so.
Still, plenty of new products and software should keep Creo busy for the next five years. One, called Pri-nergy, is a new-generation workflow management system developed with Heidelberger. Sales are said to be brisk since its introduction two months ago.
Creo is already looking past computer-to-plate technology to some- thing even newer called press imaging, says Dan Gelbart, company co- founder and president. Still in its early stages, the technique takes one more step out of the pre-press print- ing process. He figures it will be the next big thing.
'The less steps you have, the fewer surprises or changes you can get. Predictability is very important in printing," Gelbart said.>>
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