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Flip cam manufacturer Zoran rebounds in fourth quarter

By Miranda Simon | 12 Apr 2010

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SUNNYVALE, CA – Zoran Corp. (NASDAQ: ZRAN), a leading producer of integrated circuits and related products used in digital technology showed clear signs of recovery in its fourth fiscal quarter, ended Jan. 2010, as losses decreased by 86 percent from the same period last year.

Zoran reported on Jan. 25 a net loss of $2.9 million, or 6 cents per diluted share for the fiscal quarter, compared to $20 million, or 40 cents per diluted share in the fourth quarter of 2008. Analysts polled by Thomson Reuters had predicted a loss of 3 cents per share

Net revenue for the fourth quarter was reported as $93 million, compared with $115 million the previous quarter.
Net loss for the full year of 2009 was $33 million or 64 cents per share up/down from $438 million for Fiscal Year 2008
Zoran reported a gross margin of 50.3 percent compared to 48.2 percent last quarter and 51.2 percent in the fourth quarter ending 2009.

Chief executive Levy Gerzberg said losses were narrowed due to an increase in product mix and an increased focus on products like digital video recorders and the popular Flip high definition camcorder, which it produces in conjunction with Cisco.

A chip manufacturer, Zoran’s growth is tied to the performance of the electronics brands it provides for such as JVC, Panasonic, Toshiba, Cisco and others. Cisco has reported an 8 percent growth in sales this quarter.
“Our expectation is for growth throughout the year as [Cisco] moves ahead with their geographic expansion efforts,” said Gerzberg.

Gerzberg bought 10,000 shares of ZRAN on Nov. 2009 at an average price of $9.80 a share.

Analysts polled by Thompson Reuters anticipate earnings per share will continue to go up all through 2010. Earnings for 2011 are estimated to rise 15 percent, from 46 cents to 78 cents per share.

JPMorgan analyst Paul Coster said demand for Zoran products is getting stronger.

“Digital still cameras or digital cameras are recovering, which is good news.” He also said the company will continue to benefit throughout 2010 from a stronger demand for television sets and other consumer electronics.

Zoran’s revenue is divided between hardware production and software royalty and licenscing. Hardware production declined by $23 million, or 22 percent this quarter, from $105 million last quarter. The revenues for the fourth quarter ending Nov. 2009 were $59.8 million.

Software royalty and licensing fees saw a $1 million increase in revenue from last quarter, reaching $11.6 million.
Zoran’s main product lines are digital cameras, DTV technologies and DVD and printer imaging. But Gerzberg said the company was focusing more on digital camera technology as well as it’s set-up box, a digital TV processor, and frame-rate conversion device which helps mitigate motion blurring in flat screen televisions.

Digital Camera revenue made up 37 percent of total profits, taking the lead over digital TV, which in the fourth quarter accounted for 29 percent. Just the previous quarter, DTV made up 39 percent of Zoran’s profit, while Digital Cameras made up 30 percent.

Though this may have to do with the popularity of the Flip camcorder, Chief Financial Officer Karl Schneider said on the fourth quarter earnings call, the growth was seen across Zoran’s Digital Camera technology and was not tied specifically to the Flip.

Zoran said it will continue to work with Cisco to develop new models of the Flip Camcorder but the company is also focusing on it’s new COACH 12 processor, unveiled in March. COACH processors are already used in Fujifilm, Kodak, Nikon, Olympus and other brands of still cameras.

When asked by Coster, on the earnings call, whether the digital camera technology will be obliterated by mobile phones with integrated cameras Genzberg said he doesn’t believe so.

“We do not see this cannibalism that people have been talking about so far but we are getting ready for new segments in case one day it will surface,” he said. “We will have new vectors with High-Definition video and much higher quality cameras at low cost.”

The company receives only 4 percent of its revenue from the production of mobile phone processors.
Zoran also believes the television technology sector to be “a strong grower” and does not believe that market will decrease.

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