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

To: Terry Berg who wrote (4415)	2/14/1998 1:20:00 AM
From: Dennis W	Read Replies (1) \| Respond to of 6570

I just got back from the local Barnes and Nobles where I picked up a copy of Al Dunlap's book, "Mean Business. How I Save Bad Companies and Make Good Companies Great." Chapter 17 covers the Sunbeam turnaround. According to Mr. Dunlap, Sunbeam was turned around in seven months. At the time of Mr. Dunlap's ascension to CEO, Sunbeam was a $1.2 billion company, roughly the same as Zenith's annual volume. According to the book, Mr. Dunlap believed that the Sunbeam and Oster brand names were two of the company's most valuable assets. Fortune Magazine's February 16 issue contains the "1998 American Customer Satisfaction Survey" in which Zenith ranked Number 13, suggesting that Zenith's brand name also has substantial value. Interesting to note, Zenith had the same Number 13 position in the last annual survey. The most recent issue of Crain's Chicago Business contained an article discussing stocks that took a jump after the first of the year. The first stock mentioned was Zenith. An analyst was quoted as saying that the jump was probably related to market reaction to the appointment of Jeffrey Gannon as CEO. This thread is unusually quiet at this time. I know I am awaiting the announcement of Zenith's 1997 fourth quarter results. But I am awaiting with even greater anticipation Jeffrey Gannon's announcement of Zenith's turnaround strategy.

To: Terry Berg who wrote (4415)	2/14/1998 1:30:00 AM
From: Robert Utne	Respond to of 6570

On the VSB royalties.... Zenith will need to disclose its revenue estimates for its VSB royalties in its next 10-K since this will be a critical element of full public disclosure, as required by the SEC. What is known: 1. the FCC, in the last days of 1996, approved Zenith's patented vertical-side-band (VSB) transmissions as the official terrestrial, digital-transmission standard for the 1600-2400 local broadcasters in the US. 2. Canada and Korea have adopted the VSB standard (one portion of the US/ATSC, digital-TV standard). 3. Mexico and Brazil are close to adopting the ATSC standard and the rest of the Western Hemisphere is expected to shortly follow. 4. Americans purchase about 24 million TVs each year and the world figures are about 120 million TVs per year. Also, the European digital standard, PAL, is a poor second to the US/ATSC standard and the Asian CE manufacturers have a much greater self-interest in putting their marbles with the US digital-TV standard than the European standard. 5. Intel has joined the CE industry to help make future PCs compatible in order to display Zenith's patented VSB transmissions. 6. Zenith's VSB patents will be in force until approximately 2012. 7. Every major CE manufacturer and scores of broadcasters have announced plans to implement VSB-compatible, digital products/services by late 1998. What is not publicly known: 1. the amount of royalties Zenith will charge broadcasters and DTV, PC and STB (set-top boxes/digital to analog converters) manufacturers to make their units VSP compatible. 2. the actual time table of the majority of broadcasters and manufacturers to introduce digital TV services/products to the American consumer. 3. the very real intentions of local broadcasters (with the cooperation of DBS companies) to possibly offer 50 or more digital stations, via VSB transmissions, in every major metro area in order to grab a large revenue stream from the cable companies. 4. the NFL and, possibly, HBO will require its programming to be also shown in HDTV quality as soon as DTV becomes available to local broadcasters (and DBS companies and cable systems). The bottom line is that Zenith, positively, will earn a huge amount of royalties due to its VSB patents unless the FCC does an about face to change the US, digital-TV standards. How huge? Assuming Zenith sets a royalty of $10 per 'box'(DTV, PC, STB, converter) capable of displaying VSB transmissions and $50,000 per broadcaster for VSB transmissions, let's look at the possible numbers (in $ millions): Year DTV PCs Converters Broadcasters Rest of World Total 1998 5 0 0 2 0 7 1999 10 5 10 25 10 60 2000 50 50 100 50 50 300 2001 100 100 150 20 100 470 2002 150 150 50 10 200 560 2003 200 200 25 400 825 2004 250 250 10 600 1110 The above numbers assume that DTV will follow the normal cycle of 'commoditization' of consumer electronics products- driving prices to near analog-like pricing within five years of DTV introduction. Looking forward to reviewing the Gannon/Dangremond/LGE estimates, to be provided in the 1997 10-K.