The competition..............................
Competition
The markets in which C-Cube competes are intensely competitive and are
characterized by declining average selling prices and rapid technology
change. C-Cube believes that it competes favorably in the areas of product
definition, system cost, functionality, time-to-market, reliability and
reputation. C-Cube competes with major domestic and international
companies, most of which have substantially greater financial and other
resources than C-Cube with which to pursue engineering, manufacturing,
marketing and distribution of their products. Some of these companies own
proprietary video compression technology competitive with C-Cube's
standards-based systems. In the consumer electronics market, principal
competitors include ESS Technology, Inc., SGS-Thomson, Zoran, LSI Logic,
Oak Technology, Winbond and UMC as well as several large, integrated
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Japanese and Korean consumer electronics companies, such as Sony, MEC,
Toshiba, NEC and Samsung, which have their own semiconductor design and
manufacturing capacity. In the communications market, C-Cube's principal
competitors include SGS-Thomson, LSI Logic, Texas Instruments, VLSI
Technologies, Sony, Phillips and IBM. In the computer market, principal
C-Cube competitors include the increasingly powerful CPUs that are now
available from, among others, Intel and Motorola, as well as hardware
solutions from Zoran, Chromatic Research, LuxSonar and IBM. Graphics chip
manufacturers such as S3 Incorporated and Trident Microsystems, Inc., are
also potential competitors.
In the MPEG-2 encoder market IBM is the principal competitor in the
broadcast communications market, while Sony is the most potent competitor
in the consumer market. C-Cube expects that other companies will introduce
competing encoder products in the future.* Although the timing of the
production availability of such encoders is uncertain, their availability
could have an adverse impact on C-Cube's encoder product revenues and
margins. C-Cube may also face increased competition in the future from new
entrants into its markets. In particular, as the markets for C-Cube's
products develop, competition from large semiconductor companies, such as
SGS-Thomson, Texas Instruments and Phillips, and from vertically integrated
companies such as Sony, MEC, Toshiba and NEC, may increase significantly.
If C-Cube can offer low-cost hardware solutions, then it may continue to
compete with providers of software solutions such as National and AMD, and
manufacturers of CPUs such as Intel and Motorola. The ability of C-Cube to
compete successfully in the rapidly evolving markets for high performance
video compression technology depends on factors both within and outside of
its control, including success in designing and subcontracting the
manufacture of new products that implement new technologies, adequate
sources of raw materials, protection of Company products by effective
utilization of intellectual property laws, product quality, reliability,
price and the efficiency of production, the pace at which customers
incorporate C-Cube's integrated circuits into their products or
technologies, success of competitors' products and general economic
conditions. There can be no assurance that C-Cube will be able to compete
successfully in the future.
A variety of other approaches to digital video compression have been
introduced, including wavelets, fractal image compression, proprietary
compression algorithms and software only solutions. Competitor companies
are designing products around these and other alternative approaches. In
addition, manufacturers of general purpose microprocessors, such as Intel,
and graphics chip manufacturers, such as Chromatics, are positioning their
products as offering digital video compression capability. There can be no
assurance that system manufacturers will not use such processors for video
compression applications. While MPEG has become the accepted standard, any
of the alternative approaches, individually or collectively, could be
adopted on a widespread basis in the emerging video compression market. If
this were to happen, C-Cube's business and results of operations would be
materially and adversely affected.
In the video networking system business, DiviCom competes with
vertically integrated system suppliers including General Instrument,
Scientific Atlanta, NDS, SGS-Thomson and Philips, as well as more
specialized suppliers including the DMV division of News Corp., Nuko and
the TV/Com subsidiary of Hyundai. Many of these competitors have, or have
access to, substantially greater financial resources than does DiviCom.
DiviCom believes that it competes favorably based on its expertise and
focus in the area of digital video network systems and its constituent
components such as digital video compression, digital network and
transmission technology. In addition, DiviCom possesses the practical
knowledge and experience required to design, manufacture, integrate and
support such systems in real-world deployments. Several of these
competitors, including General Instruments, Scientific Atlanta, TV/Com, DMV
(formerly NTL), Philips and Wegener have been established in the analog
technology market for many years. Others, such as Nuko, Tadiran/Scopus and
Tiernan, have come into the market in recent years as the early stages of
digital technology emerged. The only competitor to emerge early with an
MPEG-2 product with a discrete design was DMV. |
