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Technology Stocks : Zenith - One and Only -- Ignore unavailable to you. Want to Upgrade?

To: Mark L. who wrote (3380)	11/11/1997 1:05:00 AM
From: Robert Utne	Read Replies (1) \| Respond to of 6570

When LGE spent $350 million to purchase 58% of ZE (November 1995), their stated objectives were to obtain Zenith technology and to gain (through Zenith) an entre into the US CE markets. They also promised to let Zenith run its own show and projected a profit for Zenith in 1997. Two years later, LGE has immensely profited from the Zenith technology transfer and will gain a real foothold in the US CE market as early as April 1998 when they will be shipping Divx players and 32" SDTV/NCTV sets to the US for Zenith to distribute. LGE also will be providing Zenith with its first decoder/encoder chip sets for use in Zenith's set-top boxes and HDTVs, allowing Zenith to be first to market. Certainly, LGE isn't pleased that Zenith continues to bleed in '97 and was forced to bail out Zenith with guarantees for additional short-term financing. However, it wasn't due to Zenith's mismanagement or lack of effort. No CE company and consumer-oriented network company operating in the US has profited this year due to: 1. downturn in VHS player sales in anticipation of DVD transition. 2. razor-thin margins in all but the highest-priced analog TVs. 3. transition from analog set-top boxes and cable modems to digital being pushed from '97 into '98. My read is that the International CES in Vegas on January 8-11 will mark the birth of digital CE, worldwide, and that LGE/ZE will be in the forefront of the revolution. It's a fact that every major TV manufacturer will be showing HDTV prototypes at the show and my read is that Zenith will be the first to market (due to its ability to obtain LGE's chips before other CE manufacturers). Cable systems, satellite companies, local broadcasting systems, CE manufacturers and content providers will all jump on the bandwagon in the mad rush to the the digital gold. LGE is two steps ahead of the rest of the world (Japan, US and the Netherlands) in terms of CE strategy and corps CE/chip technology. Thus, guaranteeing additional funding to Zenith (and receiving additional ZE shares) is a mere drop in the bucket when examined in the longer-term potential for tremendous earnings that should begin to be realized as early as second quarter 1998. Remember that Zenith has: a $1 billion plus set-top box contract with Americast, a $350 million set-top box contract with a Latin American satellite company, royalty payments of about $5/unit on every set-top box and HDTV set in the world that is capable of receiving VSBi transmissions and has the early exclusive on the expected hot Divx DVD player. LGE certainly also expects Zenith to obtain additional set-top box contracts, digital cable modem contracts, large HDTV and SDTV sales, NCTV sales throughout '98. LGE notes on their web site that the US represents 35% of the worldwide CE market and has a goal (through Zenith) of obtaining 25% of this market. To achieve this goal, LGE (with the assistance of Pete Willmott) needs to quickly select a worldclass CEO no later than the end of the year and to develop long-term partner relationships with key TV satellite, cable system and broadcasting players. When accomplished, Zenith will be a very valuable asset, to say the least.