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Technology Stocks : Ampex Corporation (AEXCA) -- Ignore unavailable to you. Want to Upgrade?

To: digger who wrote (6946)	4/9/1999 7:38:00 PM
From: Michael Olds	Respond to of 17679

NEW 2 ND REVISED SHORT DESCRIPTION OF AMPEX BY HAL CAMPBELL. My apologies for any inconvenience a second revision of this important post so soon after the first revision may cause any of you. There were two small, but important changes that I felt were advantageous to incorporate and publish as soon as possible: (The inclusion of a link to the Reiter site, and the deletion of the mention of classified restrictions on the DCR Instrumentation Recorder). Once again many thanks to those of you who copy and post this when it is needed for the edification of new investors in Ampex. This is Hal Campbell's 2 nd REVISED (AS OF LATE 4/9/99) Short Summary of Ampex (AXC) for new investors. Hal is one of the “Elders” of the Silicon Investor Ampex Thread. AMPEX (AXC) HISTORY Oldest Silicon Valley company still left standing. Storied (too long a story) and turbulent history. For Gus' excellent overview, see: Message 6886524 THE LAST TWO YEARS -- PRICE DECLINE TO BELOW A DOLLAR Hit on three fronts. Failed to sell keepered media to the hard drive industry. Ended the development program. Lost an important patent infringement against Mitsubishi (actually won trial but judge overturned and AXC lost appeal). Recently settled with Mitsubishi for an unspecified lump sum on 2 other patent disputes. DCR sales plummeted primarily due to a curtailing of government spending. Thus falling revenues. That, added to index fund and tax loss selling, spawned a decline in share price to a low 69 cents per share in the fall of 1998. CORE PRODUCTS Royalty Stream About 10 million per year. Ongoing stream ( as opposed to one time settlements) grew by 26% last year. Over a thousand active patents in digital processing and many other areas. Still receive royalties related to Ampex's invention of the helical scan head. Sony, for instance, licenses a bundle of their patents for use in a variety of products from 8 millimeter camcorders to feedback joysticks. 19mm tape drives and libraries. DST and DIS. + Finest commercially available in the world for storage of mammoth amounts of data. Cheapest by the gig ...fastest...far and away the most space efficient. And the best most particularly for visual storage. I am not exaggerating in the least. - Very expensive in up front costs. And up to now a limited number of prestigious customers have both needed and been able to afford their systems. The market for terabyte storage on several fronts seems to be growing rapidly - and they have the product to best meet that new demand...but a selling job looms. Price cuts of these very high margin (45% and up) products a likely part of new attempt to gain market share. DCR Instrumentation Recorders +Also excellent. Prestigious customers. For flight testing and collecting satellite data. Very high margin (over 50%) - DCR sales highly dependent on large government contracts. Sales fell precipitously in the last 18 months with budget cuts on defense spending. PRESENT STRATEGY Both growth of core products and growth by acquisition....with the intent of primarily being involved as a holding company in video delivery on the internet: in storage, in production, in content, and delivery. Added 44 million in cash, borrowed at 12%, to their own cash balance a little over a year ago. Four acquisitions since that time. MICRONET -- Raid and Datadock storage products primarily aimed at the SAN markets. Got the troubled company for a few million shares and a few million in cash. Revamping its product line entirely. Little revenues now (5 million). Potential explosive growth. TVontheWEB -- bought a 20% ownership stake ( with a 3 year option for a 51% stake) in this rapidly growing DC area startup which narrowcasts to special interest groups - underwriters pay costs and share revenues. Includes GradyMcGrath production company that had 4 million in revenues last year. Adding new channels by the week. Tight federal government connections. Potential IPO. AENTV -- bought 20% stake. (again with majority option) Private west coast video delivery company. Company recently voted one of ten best video sites on the web. Also potential IPO. REITERS -- Purchased 51% stake in this web hosting company. >>If they exercise the majority options on TVontheWeb and AENTV, the total price paid for the last three acquisitions will be 12.7 million. >>Also opening production facilities in Hollywood and NYC, which will be used by these companies and others. Intend to produce content. Hired a seasoned advertising exec to re-establish the Ampex brand name (still revered in many circles) in these efforts. Hired Imagio to help publicize their storage products. Addenda >>Manufacturing had a net negative cash flow last year (nominally perhaps -- a fair portion of their R&D spending is discretionary). Due to intense cost control and high margin products their breakeven point is extremely low -- but they fell below it. >>If they achieve sales growth, the return to profitability is likely to be rapid. >>High...very high...degree of insider ownership. Also Credit Suisse took a position in excess of 5% recently. FMR has had a 5% position for quite awhile. Potentials >>Sales growth in core products due to increasing markets for massive storage and the makeover to digital broadcasting. >>Potential IPOs of majority stakes in the web host and two net TV companies.( Yahoo's purchase of Broadcast.com for 5.7 billion raised the value of, and interest in, this entire sector). >>In addition, the production and content business they are entering (and are well equipped for) has very high margins. >>More acquisitions if the balance sheet justifies the attempt. >>Growth in royalty stream. Risks >>Negative cash flow and the customary market uncertainties seem the main three-year risk. >>An inability by MicroNet to get a sales growth foothold would be one possible risk. >>The likely continued decline of TV aftermarket sales from 11.8 million dollar levels (in 98) another. >>Profits will vanish for awhile with their new investments, but probably not to a drastic degree. >>If they exercise their majority options they will still have ample cash as a safety net + whatever millions Mitsubishi will pay on the infringement settlement. So no icebergs on the immediate horizon and, in my opinion, many potentials. The holding company structure is a flexible platform to maneuver through any perils. Links: ampex.com aentv.com tvontheweb.com reiterassoc.com

To: digger who wrote (6946)	4/9/1999 8:21:00 PM
From: Carl R.	Respond to of 17679

Looks like the juggernaut ran out of gas, and we left it parked in the doorway. <G> Maybe AXC will provide us with some more fuel next week so we can finish moving through the 4 barrier once and for all. Otherwise we'll probably get nudged back to 3 7/8 until we're ready for another move up. I thought it was very positive that we remained over 4 even with light volume in the afternoon. Those with convertibles could have sold today, but didn't, so I think we may have easier going from here on out. Go juggernaut! Carl