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

To: Bob Strickland who wrote (39730)	4/9/1999 4:12:00 PM
From: Manuel Vizcaya	Respond to of 50808

From the Yahoo boards. Part 1 Alex Brown report... C-Cube's recent stock decline from the low 30s to the low 20s presents a great buying opportunity in our opinion. The company recently reported fourth quarter earnings that were in line with our and Street expectations but guidance for increased research and development expense led investors to include that the opportunity for upside earnings surprises is limited for the next two quarters. In our opinion, many momentum investors concluded that it would be better to wait on the sidelines until sequential earnings growth reaccelerates, presumably in the second half of 1999. However, we believe the stock has reacted too dramatically to the back end loaded nature of C-Cube's business. Meanwhile, revenue estimates are very much on track to meet the estimates we have been carrying for the last quarter. Our view on C-Cube remains very positive due to an anticipated turnaround in the Company's silicon business and continued strength in the Company's DiviCom Division. The silicon division (approximately 60% of total sales), after suffering revenue declines in the past few quarters due to slower than expected adoption rates of DVD and due to a shift to a new enhanced format in the VideoCD market, appears to be stabilizing. While there is still uncertainty about C-Cube's opportunities in China, semiconductor demand from the set top box and DVD markets is strong. In 1999, we anticipate the silicon division to grow approximately 10%. In addition, the Company's DiviCom division (approximately 40% of sales)continues its robust growth. Orders remain strong and we anticipate the division's revenues to grow 35-40% in 1999 to approximately $190 million from $145 million in 1998. In our opinion, these estimates may prove to be conservative. We believe that investors should establish a position in the Company's shares at current price levels as we believe that the stock will trade higher as the Company's revenues gain momentum. We are establishing a 12-month stock price target of $30, based on about a 20x multiple of our 2000 EPS estimate.

To: Bob Strickland who wrote (39730)	4/9/1999 4:16:00 PM
From: Manuel Vizcaya	Read Replies (1) \| Respond to of 50808

Part 2 DVD We have begun to see meaningful signs that the DVD market is improving. To date, adoption rates have been slow due to several factors including the prohibitively high cost of buying a DVD player. Moreover, competing standards confused consumers, and as a result, adversely impacted sales. Additionally, title availability has been limited, as movie studios have been hesitant to release titles on DVD due to fears of illegal copying. Today, DVD players are now finally in a more affordable price range of $250 to $300, which we believe makes the product more attractive. Movie studios, which now realize that DVD is here to stay, are becoming more comfortable with releasing titles on DVD. We are finally seeing simultaneous availability of new titles in DVD and videocassette formats. In our opinion, these factors should enable robust growth in the sales of DVD systems over the next few years. One other interesting factor to consider is the advantage for video stores to rent DVD titles rather than videotapes. Since videotapes tend to wear out after 5-10 uses, the video stores like Blockbuster must buy new tapes. However, since DVD does not wear out, the need for replacement is small. We expect the next big factor to watch for is aggressive move by video stores to have new move titles available for rent in DVD and video tape form at the same time. This could provide a further boost to the recently stabilized DVD business. Currently, DVD silicon sales account for approximately 10% of C-Cube total sales. 1998 was a year of less than expected growth for DVD but in 1999, we expect a much more robust growth year. We estimate that DVD related sales could rise from approximately $25 million in 1998 to $35 million in 1999. Margins on this business division are quite healthy at an estimated 56%. We should also mention that we believe C-Cube's technology to address this market is the most competitive, as evidenced by the company's recent product announcement. C-Cube's new DVxploreT codec (encoder/decoder) makes DVD-quality recording - as well as DVD-quality playback, editing, and storage - a reality in the consumer PC market for the first time. With DVxplore, manufacturers can turn conventional PCs into complete recording and content creation stations. PC/TV designers can enhance their products with features that allow TV viewers to manipulate live broadcasts and simplify recording through "smart" electronic program guides. C-Cube has the first semiconductor vendor to introduce a consumer DVD PC codec solution for recordable DVD, which in our opinion shows the company's strong leadership and product innovation.

To: Bob Strickland who wrote (39730)	4/9/1999 4:19:00 PM
From: Manuel Vizcaya	Read Replies (1) \| Respond to of 50808

Part 3 DiviCom The Company's DiviCom division continues to see strong demand. Unlike the company's silicon division which focuses on designing and marketing silicon encoding and decoding solutions, DiviCom manufactures systems designed to compress, transmit and receive large quantities of digital audio and video information. In other words, DiviCom is a systems vendor, not semiconductors. DiviCom sells its products into several market segments within the video communications market, including DBS, broadcast, wireless cable systems and wired digital video networks, such as switched digital video, HFC and twisted pair. DiviCom's customers include DirecTV, EchoStar, U.S. West and BellSouth. DiviCom continues to penetrate its core markets such as DBS Satellite, local loop and wireless cable service providers. However, we note increasing focus on newer markets such as digital terrestrial, cable and program distribution providers. This could enhance overall revenue growth over the next several years. We expect the entire DiviCom division to grow at a 35-40% annual rate over the new few years. In 1998, we estimate that DiviCom revenues were $146 million, and in 1999 we anticipate sales of $190-195 million. Valuation The big question is how to value C-Cube in the context of its very valuable DiviCom division. Given that both Scientific Atlanta and General Instruments (DiviCom's principal competitors) trade at an average of 25 times 1999 earnings and we expect DiviCom to contribute $0.55 to overall earnings per share in 1999, we believe that DiviCom is currently worth at least $14 per share. We would also note that if DiviCom traded as a separate entity, we would expect the company to command a superior multiple given the company's higher growth and profitability relative to its competitors. The remaining piece of C-Cube's 1999 earnings then is derived from semiconductors and should equal about $0.73. The average fabless semiconductor company is currently trading at about 35 times 1999 earnings per share estimates which then implies a $25 value. Summing these two parts then, we get a $40 target based on today's multiples. This is fairly consistent with the more traditional way of valuing C-Cube on projected earnings. Given our projected 20% CAGR (though this may prove to be conservative) we believe that C-Cube should trade on a multiple of 25 times our 2000 earnings per share estimate of $1.60. This implies a stock price target of $40. Based on these two inputs, we have assigned a 12-month stock price target to C-Cube of $40. Our investment rating on the shares remains "strong buy" and we believe that investors with a 6-12 month time horizon could see near doubling in the stock price.

To: Bob Strickland who wrote (39730)	4/9/1999 4:36:00 PM
From: Stoctrash	Read Replies (1) \| Respond to of 50808

Come on Bob, growth the second half will be terrific.... - - - - - - ....for the R&D budget that is!!! ========================================== Chart talk: from looking at all the tech indicators and chart patterns I'm seeing an EXPLOSIVE move coming in the next few weeks,.... one way or the other.

To: Bob Strickland who wrote (39730)	4/9/1999 4:42:00 PM
From: John Rieman	Respond to of 50808

Some say C-Cube needs a Prophet. Here's one....................... invhot.com Financial Information Visit The Profit Prophet archives for reports that you may have missed. If you like The Profit Prophet, click here for a FREE subscription to The Investment Hotline, our timely newsletter featuring The Profit Prophet. And, don't forget to register for a chance to WIN FREE STOCK! Financial Flash: Second Chance for C-Cube June 23, 1998 C-Cube Microsystems is ready to make another run as a high flyer in the Tech sector. It's first run, when it had the Codec (Video Conferencing Code-Decode chipsets) market locked up, every tech jockey was drooling over it's then skyrocketing value. I knew it was time to get out when the brokers started calling me! By that time, it had reached a peak in its momentum, and companies like IBM were entering the market and poised to steal market share. In fact, I remember having a conversation with my editor, whose good friend (a broker) was very high on C-Cube ( I felt he WAS high!) I told him then that the big mo was over and that C-CUBE couldn't maintain it's momentum without a significant new product development. The eventual slide in it's stock price was proof of that prediction. C-CUBE is ready for another run. As the leader in DVD chip technology, C-CUBE has again established itself in a new, growth market which I believe is ready for an explosion. DVD systems are being incorporated in Computers, Home theaters are being heralded as the successor to VCR's. Much of that latter is being driven by the huge entertainment industry, which is intent on stifling the consumers ability to copy tapes and programs. The digital nature of the DVD systems allows for a codec-type system which would make copying very difficult. This, according the the entertainment moguls, would prevent illegal copying and distribution and help drive sales. C-CUBE has been selected by SONY, Hitachi and several other leading home electronics manufacturers as the supplier of DVD chip sets. C-Cube's ZiVA(tm) single-chip DVD decoder can achieve theater-quality digital video playback, which makes it hot stuff in the booming consumer electronic marketplace. Hitachi, a recognized leader in global electronics, selected C-Cube's ZiVA to provide the high level of audio, video and system integration necessary to bring this feature-rich solution to market. C-CUBE has also made a significant investment in the Chinese electronics market, betting that as this economic Goliath continues it modernization, the increases in it's potentially enormous market will drive profits for years to come. CUBE recently introduced CVDx1, the world's first production silicon solution to enable the new China Video Disc platform (CVD). CVD is a high image quality audio/video entertainment format developed specifically for the world's largest consumer market -- China. The CVD format was launched today by China's leading consumer electronics manufacturers to improve the picture quality and audio performance of the existing Video CD platform. CVD extends Video CD to MPEG-2 video quality and offers advanced audio performance as well as other consumer features, such as user-selectable overlay graphics for subtitles and karaoke lyrics. C-Cube's new single-chip CVDx1 decoder is the enabling technology that is allowing China's leading consumer electronics to easily deliver low-cost players based on this enhanced digital video platform. Clearly CUBE has a vision and a formula for future success. It seems to be sitting at historical support levels now. I believe that, while in the range below $17 it is an aggressive accumulation play. Target for year end is in the mid to high $20's, and possibly the $30's by this time next year. NOTE: As always, the Profit Prophet believes that you must do your own research and not necessarily gamble away the mortgage money on selections you read about in this column. As an investment philosophy, it is highly recommended that if an investment loses 20%, sell it. You can always buy it back later if you think the momentum has changed. Sell your losers, ride your winners. It sounds easy, but it takes discipline and and an understanding that successful investing is a lot like hitting a baseball. You only have to be right a percentage of the time to be extremely successful.