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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: Peter V who wrote (33779)	6/11/1998 5:54:00 PM
From: John Rieman	Read Replies (1) \| Respond to of 50808

Hagedorn says if China devalues, it won't effect C-Cube sales........................................ c-cube.com Q: What is the potential impact of the Asian economic crisis on C-Cube? A: While 55% of C-Cube's 1997 sales were in Asia, the crisis has had little impact on our business. Nearly 70% of our business in Asia is in China, where we sell MPEG-1 decoders into VideoCD players. VideoCD players in China sell for the equivalent of between $90 and $200 U.S. dollars. At these prices, Chinese consumers are not as likely to defer VideoCD purchases in an economic slowdown, as they are purchases of more expensive durable goods. It is the slowdown in U.S. exports of expensive durable goods into Asia that have received the most attention in the press coverage of the crisis. There is some risk that China will devalue its currency to make it exports more competitive with those of other Asian countries who have devalued. However, a devaluation in China is not likely to have a significant impact on the retail prices of VideoCD players. The only high value component in the player not produced in China is the decoder chip, which in the first quarter of 1998 is selling for between $10 and $11. Thus, a 35% devaluation, such as occurred in 1994, would drive up the cost of the chip by about $6 and the cost of the player by about $10. Thus, far Korea and Singapore are the only countries whose economic problems have impacted our sales. In 1997, we did less than 9% of our total business in those countries. Q: What steps has C-Cube taken to prevent collection risk from Asian customers? A: C-Cube requires that its customers obtain letters of credit from the largest banks in their countries for substantially all sales into Asia. However, there can be no assurance that the largest banks in these countries will not fail, potentially causing defaults against letters of credit.