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

To: JEFF K who wrote (38550)	1/24/1999 1:46:00 PM
From: Jacques Chitte	Read Replies (1) \| Respond to of 50808

> and let the big guys (Philips, Sony, Etc) create consumer demand ?< Just my $.02, but this would be a no-winner. Cube would try to gain/regain market share during the low-margin "commodity chip" portion of the silicon's life cycle. For a chip they still need to design. I'd rather see them establish a stranglehold on the 'Net video hardware mkt which will emerge and be big.

To: JEFF K who wrote (38550)	1/25/1999 4:26:00 PM
From: John Rieman	Respond to of 50808

Jeff: Your questions, I'll do my best: 1. Did I mis-hear Walt when he gave guidance to 99 by saying that he still expects Cube to at least meet analysts projections ? You heard right. They thought they would still make the year, but the first 1/2 is a problem with flat revenue and higher expenses. Lower earnings per share then expected in Q1 and Q2. 2. When we say Cube goal is a 50% gross margin, is that so that they can buy market share? C-Cube's business plan is for 50% gross margins, in the long term. They keep stating this to warn us that someday, 54% gross margins will be to high. Without a surprise, this year may still be above 53%. 3. It sounded to me that AB is planning his bottom line (if possible). Which I am assuming means he will pass up investing in certain revenue generating opportunities (ie PC-DVD playback) if he believes that a certain gross margin is not attainable, or that the long term growth prospects of the product is not there. With that said, I believe that he has committed Cube to the digital communications side believing that it has the best potential for a ROI. Do you agree ? C-Cube is passing up opportunities. It's because the R&D investment would not be earned back the R&D investment, in low volume markets. In DVD, C-Cube never released a 1st generation chip. They entered the market with a second gen chip. Sales of early DVD's were very low, they would not have made back their investment. The same is true of HDTV encoding and DTV decoders. A market needs to reach the size that makes it profitable. 4. I'm not sure of whether AB's strategy for consumer digital products is to spend on R&D, maintain a technological advantage, and let the big guys (Philips, Sony, Etc) create consumer demand ?( by waiting for them release products sooner, spend on advertising , and then send products through the pipeline once the demand is there ) or do they have a choice in the matter ? Since C-Cube is a componet supplier to CE companies, it is dependent on them to win consumer sales. Alex does plan on spending on R&D and to stay in the lead on performance.