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Technology Stocks : ESST-the new beginning. -- Ignore unavailable to you. Want to Upgrade?

To: Ram Seetharaman who wrote (2330)	2/1/1999 4:38:00 PM
From: Steve Reinhardt	Read Replies (2) \| Respond to of 3493

Ram, Contrary to what people might led to believe, ESS actually enjoyed better than average profit margins on its video product line. The SVCD portion of the sales increased rapidly since Q4, 1998. And SVCD has a very healthy margin and enjoys very good volume growth. DVD will be a little better in margin, but volume is STILL disappointing for everyone in China right now. Even you lower the ASP of DVD to that of SVCD, it won't help the DVD now because of other issues: (1) The government is backing the SVCD (spec released just last 4Q, 1998), they don't want to loose face; (2) The BOM cost gap of DVD and SVCD is still too high; (3) Some other non-technical issues such as the government want DVD patent holders to lower their demand on royalties, etc... I will say SVCD will carry ESS this year with the transition to PCI audio finally. Steve