At 10:47 AM -0500 2/8/07, Manfredi, Albert E wrote:
>Let's see. What does "return to profitability" mean, then, if they had
>been profitable all along? Wouldn't you say "became even more
>profitable" rather than "return to profitability"? I would.
That's obvious Bert, but irrelevant.
Since you are so hard headed, I took the time to look at the Pace
site to determine the real reasons behind the company's return to
profitability.
Brace yourself Bert.
Pace no longer makes DVB-T receivers - they made the decision to get
out of that business in 2004.
http://www.idtv.co.uk/STBListings.php?pageNum_rsList=5&totalRows_rsList=89
The company is now focused exclusively on STBs for cable and DBS,
with an emphasis on HDTV and PVRs.
From the 2006 Annual Report:
http://www.pacemicro.com/corporate/content/webcontent.asp?nav=investors&fullid=investors_annualaccountsandreports
The global market for digital set-top boxes remains strong and Pace's
customer base within this market includes some of the world's largest
and most influential payTV operators.
However, as previously highlighted, the delays in introducing leading
edge products for the US market have impacted this year's results.
Nevertheless, the Board is confident in the strength of the
underlying business as payTV operators continue their long-term
transition to digital systems and the migration to high definition
(HD) platforms.
Since the year-end, the Group has made important progress in the US.
Pace is now shipping its first satellite product, an HD MPEG-4
personal video recorder (PVR), to DirecTV, the world's largest
satellite payTV operator. Pace's HD PVR for US cable networks has
also received approval from a number of other operators and shipments
have started to some of these, with approvals from other operators
imminent. Pace's standard definition (SD) PVR for US cable networks
is in the final stage of field trials with Comcast.
>
>> You are drawing unsupportable conclusions here. You do not
>> know whether they are making a profit on DVB STBs.
>
>You know that at least for a time, they wer not profitable. You know
>that it was for-subscription STBs that made them profitable again. So I
>agree, there is a doubt that the Freeview DVB-T STBs were turning a
>profit, which is exactly what I said to begin with.
From the 2005 Annual Report
Chairman's statement
The Board of Pace Micro Technology plc established a strategy two
years ago to broaden its customer base and to align its business to
the global payTV market. The overall aim was to broaden the
geographical spread of Pace's sales from an over dependence on a
maturing UK market, and, in particular, to obtain a much improved
position in the US market which represents an estimated 40% of the
global payTV market. In order to fulfil this strategy, we have been
investing in the US market, at the same time as focusing research and
development on more complex products, such as the Personal Video
Recorder (PVR) and products for High Definition (HD) TV.
From the 2004 Annual Report
The UK, as one of the most advanced and mature digital TV markets,
remains important to Pace. Although UK shipments fell 10% to
approximately 1 million boxes as Pace has been gradually reducing its
efforts in the low margin Freeview market, revenues improved slightly
due to changes in product mix. BSkyB has continued the promotion of
its Sky+ personal video recorder (PVR) which, combined with ongoing
deliveries of the standard Digibox, makes it our largest customer in
this region. Our UK cable customers continue to be important to us,
although they have moved to dual source supply.
Now here's the kicker Bert. pace was profitable in 2004 when they
made the decision to focus on PAY TV platforms:
Continuing from the 2004 Annual report:
Digital terrestrial (DTT) has been less successful for Pace.
Free-to-air DTT has been a great success for viewers and programme
providers and has made an important contribution to the UK's plans
for a complete switch to digital. However, as the boxes are
relatively easy to develop, the set-top box market has seen a
multitude of suppliers, leading to very low manufacturing margins.
Pace's strengths lie in the more complex engineering development
required for payTV operators, which is where our sales and
engineering efforts are now concentrated.
I guess that shoots a few holes in your theories, but it may provide
some clues as to why there is so little interest in ATSC set-top
boxes.
You can think of this as a lose-lose situation.
As long as volumes for ATSC set top boxes remain low the costs to
participate in this market are high relative to the potential
revenues. On the other hand, with 85% of U.S. homes subscribing to
cable, DBS and now IPTV services, systems that pay for more capable
STBs which provide a revenue stream for the system operators, it is
obvious that focusing on the PAY TV market makes more sense to a
company like Pace.
It is also obvious that the traditional CE manufacturers who were
mired down in low margin products for the analog TV market found the
transition to Digital TV to be an exciting prospect. Thus they have
focused on high margin displays and are now trying to figure out how
to get consumers to transition to high definition DVD formats, since
the profits in SD DVD have largely vaporized.
So here we are facing your dilemma.
You believe that it is possible to build a basic ATSC STB for fifty
bucks. But even IF this were possible, there is no margin in such a
product. Meanwhile the market for converters for legacy TVs continues
to decline, as the major benefit of going digital for most consumers
is directly tied to the display, which in most cases now has a low
profit margin ATSC receiver.
Catche 22
>What part don't you get about opinions designed to support political
>agendas rather than to reflect reality? A product that is not
>advertized, not promoted in stores, kept in low supply, and yet still
>persistently sells out, is not proof of low demand. It is only proof of
>deliberate attempts to keep a market segment down.
There MAY be a bit of truth in this. But why would any CE
manufacturer want to get into a race to the bottom, where it will be
nearly impossible to make a profit on the products that you believe
are important?
>I don't believe you, and I have done what you say. I've also asked why
>HDTV customers were always pushed immediately to cable, as also happened
>to me.
The answer should be obvious to you Bert.
Broadcasters don't give a rat's ass about fee-to-air DTV. They WANT
you to subscribe to a multi-channel TV service so that they can
collect subscriber fees. They want to be rid of you cheap bastards
that expect TV to be "free."
The multichannel services provide incentives for consumer electronics
retailers to promote their services. Broadcasters DO NOT.
Broadcasters do not have a business model built around a platform
that can generate additional revenue streams. To do that they would
need to be competitive with the multichannel services. Way too much
trouble, when they can use the force of government to make
competitors generate new revenue streams for them.
Regards
Craig
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