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

To: J Fieb who wrote (39086)	3/1/1999 7:09:00 PM
From: John Rieman	Respond to of 50808

C-Cube, more to it than DVD.............................. investhelp.com C-Cube Microsystems More To This Story Than DVD November 27, 1998 - Since we are all consumers as well as investors, it's easy to develop a distorted view of a company based on its most visible consumer products. In the case of C-Cube Microsystems (Nasdaq:CUBE), the stock seems to be alternately loved or despised for its DVD chip business. As it turns out, DVD is a rather small part of C-Cube's overall business, and other segments (which we discuss below) are expected to be much more crucial to the future of the company. DVD, short for Digital Video Disc, is heralded as the next generation of consumer home entertainment to replace videotapes. Yet sales of DVD chips account for just 10% of C-Cube's sales currently. These silicon integrated circuits encode and decode the digital signals in DVD players as well as VideoCD systems. VideoCD, which accounts for about 30% of C-Cube's revenues, is largely an Asian phenomenon with the largest market in China for karaoke systems. C-Cube's silicon division has struggled for several quarters due to a combination of a softening sales in the VideoCD market and a slower-than-expected adoption rate for DVD. While these markets are expected to stabilize or return to growth in the coming year, the company can look for the bulk of its growth from its DiviCom division. Divicom makes systems that compress, transmit and receive large quantities of digital audio and video data. These systems are sold to satellite (DBS), broadcast and cable customers such as DirectTV, EchoStar, BellSouth and US West. Divicom accounts for roughly 40% of revenues currently, and the division is expected to grow at a 35%-40% clip for the next several years. Another area that is small but growing quickly is set-top decoders for DBS, cable and phone company services. This segment should account for another 10% of C-Cube's sales this year, more than the DVD chip business. All this is not to suggest DVD is insignificant to the fortunes of C-Cube. Indeed, it holds promise as a major new force in home entertainment and could contribute significantly to C-Cube's growth a few years down the road. But investors should realize that there is much more to C-Cube's business than DVD, and the near-term fortunes of the company are likely to be driven more by C-Cube's DiviCom division than anything else.