It's been said that baseball is America's greatest pastime. I am willing to wager a bet over a bowl of buttery popcorn that it is movies, Hollywood, and the entertainment industries that have taken over the screens of U.S. households. Beyond my personal love of movies, this is one of the reasons I have been so intrigued with Avid Technology
Since my first mention of the company during an investigation of the burgeoning digital video revolution, to my most recent inspection of its latest fourth-quarter results, I have had the pleasure of following it through blockbuster times (when it blew past analyst expectations with 38.7% growth), and in those periods when it was hit by product delays and panned by Wall Street. In total, though, there is a lot to like about what Avid Technology has achieved since its 25% revenue growth in 2004, which was just topped by 31.5% growth in 2005.
While you have had the opportunity to track the company with me, what gets talked about most often with Avid Technology is its dominant presence in the digital video and audio editing markets. No doubt, these products will remain a core part of its business strategy. As it should be -- in the 2005 Academy Awards, every film nominated in the categories for Best Picture, Directing, Film Editing, Sound Editing, Sound Mixing, Visual Effects, and Animated Feature used at least one of Avid's products to bring the work to the big screen.
This time, however, I want to take a closer look at a couple of products that may not get all of the press but appear to be important parts of Avid Technology's plans to capture a piece of related markets. In particular, the company's recent acquisition of Pinnacle is timely, considering the handheld craze that is being fostered by Apple's
Apple's Video iPod and Sony's PSP are hot-ticket items among consumers. What expectations do you have for Pinnacle's Dazzle and Mobile Media to piggyback off the handheld enthusiasm?
The growing popularity of mobile devices with video capabilities represents a great opportunity for Pinnacle, because consumers want an easy way to transfer video files to these devices, and our Studio, PCTV, Dazzle, and Mobile Media lines do just that. For example, our products allow people to capture their favorite shows -- right from their TVs or even from old VHS tapes -- directly in PSP or iPod file formats. Once the files have been captured, they can just copy the media to their mobile devices without having to re-encode the files later. Plus, consumers who use our PCTV products to record their favorite programs don't have to pay for the content twice. Most already pay for television service through a satellite or cable provider, and they shouldn't have to purchase this content a second time, which is what happens when they use an online service to download TV shows.
What excites you about the possibilities for these new Pinnacle products?
Viewing media on the go is a completely different experience than sitting in a living room in front of a TV to watch shows that are delivered on a schedule -- and it's exciting to be at the center of such a significant cultural change. Our Pinnacle products allow us to tap an entirely new market of media-savvy customers who have an "anytime, anywhere" mindset. People are now capturing media in new ways -- with cell phones, with digital cameras, and off the airwaves. But once they have the media, it can be confusing to know how to organize and enjoy it whenever and wherever they want. There are tremendous opportunities to help consumers manage all of this content -- while also delivering a satisfying viewing experience -- and we believe Pinnacle's products are hitting the market at the perfect time to capitalize on these opportunities.
These new Pinnacle products are targeted to consumers. Among professionals, it looks like Avid Technology has come up with more amazing software, enabling it to strengthen its hold among its core market. What kind of impact do you see Softimage's Face Robot Software having on the industry?
Face Robot is a key "enabling" technology. For the first time, the CG industry is standing on the edge of an entirely new world where lifelike facial animation is now within reach of 3D animators. Animating the human face has been one of most difficult challenges -- not only because there is complex interaction between hard and soft tissues on the face, but also because every human being is actually an "expert" in facial perception. In other words, when looking at a human face, our minds will subconsciously process the image and separate the things that look real from what appears to be "synthetic." Face Robot allows animators to cross that divide. Artists no longer need to create a series of shapes for each facial expression, because the software simulates how facial tissue slides and deforms as expressions occur. The technology can be applied to create digital film actors, video games, Internet avatars, and medical simulations, and it is enabling the industry to evolve to where it will soon be virtually impossible for people to know whether the face they see on a television or a PC is real or generated by a computer.
Face Robot sounds like yet another powerful tool for professional animators. Given that your products are already so widely used in the industry, can you comment on what the Academy Award exposure does for your company?
We think the strongest statement it makes is about Avid's longstanding relationship with the film industry. We are proud of the fact that, year after year, our tools remain the standard for filmmaking. We know that we help make things possible that weren't possible just a few years ago. But we're also humble enough to recognize that while we do our part, the Academy Awards are really about recognizing the talent of our customers. Our tools merely play a supporting role in bringing their magic to the screen.
Concluding remarks
On behalf of The Motley Fool, I want to thank David Krall for taking time out with investors. The Motley Fool is about investors writing for fellow investors, and opportunities like these give us another way to do just that. As an investor, Avid Technology was already high on my watch list. Now we will want to see whether these new products, particularly those from Pinnacle, will help it to gain an increasing presence among consumers. Considering that in 2005, only 7.6% of its revenues were derived from the consumer video segment, this is obviously an area that the company will want to create a larger presence in. The consumer end of the market is a tough one, however, and it includes the aforementioned players and others like Adobe Systems
Microsoft is a Motley Fool Inside Value pick.
Fool contributor Jeremy MacNealy owns shares of Apple Computer but does not have financial interest in any of the other companies mentioned. The Motley Fool has a disclosure policy.
