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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Pirah Naman who wrote (50231)	2/7/2002 12:34:50 AM
From: trilobyte	Read Replies (1) \| Respond to of 54805

Sonic Solutions, a 2nd baby gorilla from Trilobyte. A long time ago, I suggested GNSS to the "threaders" lurking here. I hope some took advantage of my recommendation. Message 15215435 Message 15217160 Today, I suggest SNIC. I see it has not been discussed on this thread. Please read below and good luck. Trilobyte. The DVD market has exploded during the last year and the future continues to look bright as this technology becomes pervasive. As more and more people enjoy the quality of DVDs, they will also want to produce their own in the same manner everyone produces home movies on VHS. I believe a future big trend in consumer electronics will be recordable DVDs. It seems worthwhile to dig a little deeper to find out companies that are well/best positioned to benefit from this revolution. My "stock for the next year" is called Sonic Solutions (SNIC). SNIC is the leading manufacturer of DVD authoring software. Historically, the company's products were directed at Hollywood studios. However, the inflection point for this company came last year when it entered the consumer market with it's award winning DVD authoring products called MyDVD and DVDit. This market is truly in its infancy. Importantly, however, the price of hardware is just now reaching the 500$ level making it affordable to everyone. And with many new hardware players entering the market (up from 3 to 9 in just a few months), the price of recordable DVDs is sure to drop much further. The strong positioning of Sonic Solutions has been strengthened by two dramatic alliances announced in the last 2 months: 1) Microsoft and 2) Adobe. Both companies have licensed Sonic Solutions AuthorScript®'s technology. These licensing agreements, and perhaps more to come from Asian companies, will contribute 2-3 million dollars/quarter upfront for the remainder of the year. It seems that Sonic Solutions technolgy is going main stream bigtime. And with it's current 90% market share of the DVD authoring market, things look promising. The investment case. Revenue growth going forward is strong. Q2 3.38M Q3 4.12 Q4E 6M Next fiscal year: 30M The eps for 2003 is 0.24cts/share. So based on future estimates, forward p.e. is 25. What is a fair value for SNIC? If the conserva- tive estimates (listed above) provided by the company are correct, I'd say around 6$. But are the too conservative? 30M revenue is based on 2.5-3 million DVDR units sold in fiscal 2003 (March 2002-March2003). Most industry analysts estimate 4 million+ units instead. So Sonic Solution is playing it very conserva- tive it would seem. If indeed 4 million units are sold (not unreasonable), then revs could come in around 45 million and earnings would likely explode to 60cts+. Cash and shares: the company currently has a low number of shares outstanding at 14.4M. Cash was a problem until recently. The company issued stock recently in private placements and preferred stock. And with the Adobe and Microsoft payments, cash on hand stands at a healthy 10.8 million. It's likely to go up now that company expects last Q to be the last quarter with a loss. Further positives at this juncture: tax loss carryovers are significant and DSO are at record low levels. Furthermore, there are virtually no institutions or analysts involved with the stock. Both very positive things in my opinion. The market punished the short term traders today but provided what I think is a good long term entry point in the low 6$ range. Good luck and please carry out your DD before considering Sonic Solutions.