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Technology Stocks : ZORAN jpeg/dvd moguls -- Ignore unavailable to you. Want to Upgrade?

To: coopie who wrote (1090)	1/5/1998 11:17:00 AM
From: slob	Read Replies (1) \| Respond to of 1486

Coopie : I agree DVD mergers will be the name of the game for 98. However, In some ways, having so many small players in DVD makes it an unattractive market. I say this because DVD is an OEM product for chip makers, this means a very quick production ramp and only a few major sockets. In this type of market the big mixed signal semi players like TXN, STM and NEC don't have much of a price advantage over the smaller players. Basically the big players need to see margins above 40% but the small "design houses" can exist on margins around 25 to 30%. In the past this all worked out in favor of the big players because they had their own manufacturing. Today companies like TSMC and UMC can supply "all commers" with the most advanced processes often at less than the big boys are paying for internally sourced silicon. In the end the lower margins favor the small players. When it comes to M&A talks the big players are very wary of taking over companies with low margins (it makes their books look bad). So what does all this mean. If I wanted a DVD take-over play, I'd concentrate on the smaller companies that have the technology and a small market share. Slob