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Re: SCRI Avid's Official Report

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Craig Seeman
Re: SCRI Avid's Official Report
on Apr 30, 2012 at 3:03:58 pm

[Franz Bieberkopf] "Now that the info is published, have you done your comparisons?"

The 30% drop is year over year as opposed to quarter to quarter. A year over year drop is very bad news. One would expect a quarter over quarter drop given the big cross grade push. The very serious problem is that they're doing worse then they were the same time last year, when FCP7 was still alive.

Units are up, which mean the cross grade is working as far a market share is concerned. The problem is (as I had read from a couple of analysts) that the price is unsustainably low for them. I can't help but think Avid's looking to make it up on the upgrade pricing. My own guess is you're going to see Avid force a paid upgrade to Symphony as MC is EOLd.

Also interesting is the comment on over 50% software. I'm inferring a change in business model away from the dependency on Isis sales. Maybe the software tied to it becomes more open? Just wild speculation.

It's bluntly clear Avid's going to "trim" something and, given the Symphony cross grade price, I suspect that's one component. I wonder where DS goes especially given Autodesk Smoke's new price.

"While revenues were down from last year primarily related to the creative enthusiast portion of our business, we see positive signs in the post and professional and our media enterprise markets as customers seek to become more competitive by moving to more seamless workflows," said Gary Greenfield, chairman and CEO of Avid. "Our balance sheet is solid, ending the quarter with $50 million of cash and we remain committed to delivering sustained profitability."

BTW it's still not clear to me how important "creative enthusiast" are to Avid. If it's really that big of a sink hole, I'd think they'd just drop it if they want to get back to core business. Maybe they think there's a way to turn that around.

I can see Avid's positive spin on post given units sold are up but what they do to turn units (volume" into profit is going to impact Pro Post in some fashion. Lower price isn't going to work for software IMHO. I think the bigger question is where they go with Isis that MC/Symphony/DS. It seems to me that MC/Symphony will become one with revenue from upgrade costs. Maybe DS goes away? Maybe Isis management tools open up?

Avid is very much a debt free company so that and the cash means they're not going to fold up an go away. I'll add that minimize debt is often a key factor in making a company an attractive sale. Not that that's going to happen but I still think that's a real possibility. I should also mention that "sale" can also mean to an investment firm as opposed to a competitor or a company looking to enter the field. A sale to an investment firm can happen because there's belief that with an influx of capital, they can turn it around and make significant acquisitions. I know I've speculated wildly on Blackmagic but on the other hand an investment firm would give Avid the chance to become more like Blackmagic (capital to make lots of good acquisitions).

In any case I'd anticipate some significant changes at Avid this year. Although it's interesting that
Ken Sexton, Avid’s CFO, stated in the call that the company expects 2012 revenue to be “relatively flat”
That doesn't sound like a turn around is expected so much as just a leveling off of losses financially. Of course that wouldn't be unusual for a turnaround year (transition to a new/improved business model).

It's interesting that SCRI thought it was significant to include this snide comment.

A comment from the analyst at JP Morgan questioned the company saying that “the stock (Avid) is not showing anything over the last ten years or so and that he is surprised that the company (Avid) is not doing more to get sustainable profitability rather than to just aspire to it”

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