Every year in the Nevada desert the Consumer Electronics Show
gives companies a chance to display their hot new technologies.
At the same time, the film industry is in the midst of its big
awards season - so companies that make hardware and software for
the big screen have a chance to gain recognition for their role in
Truthfully, it's a misnomer to say that Hollywood is making
'films' these days. Most productions are completed digitally. It's
a far more convenient and quicker way to edit and enhance the
images and sound than traditional film.
Since its birth two decades ago,
Avid Technology (Nasdaq: AVID)
has delivered the gold standard in video and audio production
hardware and software. The company has been a technology leader in
delivering box-office smash hits.
For many involved in production in the entertainment industry,
it's been a no-brainer: do it right by using Avid's software and
Despite the stock's strong performance, the company still faces
challenges. Right now it's difficult to tell potential customers
that they need the Cadillac of production equipment when the
economic morass limits budgets to a Hyundai. Some existing
customers who have curtailed spending are trying to make do with
Still, tech spending looks to be increasing in 2011. Just
recently, research firm Gartner raised its estimate for information
technology spending to $3.6 trillion worldwide, a 5.1 percent
improvement over 2010, and an increase from its previous 3.5
percent growth estimate.
Avid's competition is particularly fierce on the software side.
Professional users can select from the likes of Premiere, by
Adobe (Nasdaq: ADBE)
and Final Cut Pro, from
Apple (Nasdaq: AAPL).
The recent announcement of its new Pro Tools software suite
shows that Avid is keeping its product line fresh.
Avid said in a December 2010 regulatory filing that it was going
to undergo a restructuring in the first half of this year. The
company will close some facilities, and cut an unspecified number
of jobs, which it estimated would result in charges of $10 to $16
The restructuring effort comes from a new management team that's
hoping to return the company to profitability after four losing
years. With a number of recent awards, the company is well poised
to grow market share, and investors could be increasingly bullish
if Avid can get back in the black. Just recently, Avid won an Emmy
Award, its 13th, and it counts two Oscars and a Grammy to its
credit. In 2009, Avid products were used in producing the 10
Analysts who follow Avid Technology are somewhat neutral about
the stock: one buy, four holds and one sell. The consensus estimate
in 2010 is for a loss of $0.05 per share - but in 2011 analysts
expect to see profitability of $0.37 a share.
Revenue is expected to grow 5 percent to $663 million in 2010
and the company issued 2011 guidance forecasting additional 5
percent revenue growth.
After a December meeting with management, JPMorgan noted that
"...is entering a recovery phase under the new management
team...and we think a new-product cycle positions the company to
maintain market share in a modest cyclical recovery..."
After a nice bounce in 2010, and with signs of increased tech
spending by companies and an updated product line, Avid could
reward investors in the year ahead.
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