Avid Reports Soft First Quarter

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Tewksbury, Mass.-based editing and storage supplier Avid Technology reported lower income and earnings per share for first quarter 2006 compared to the same period in 2005, citing lower-than-expected sales of broadcast products including playout servers and on-air graphics, add-on and local storage, and European consumer products.

On a conference call, Avid CEO David Krall noted that results for the quarter were in line with preliminary results announced April 11, and said that a strong showing at the NAB convention in Las Vegas should lead to improved results in the second half of the year.

Avid reported revenues of $218.1 million for the three months ended March 31, 2006 compared to $166.0 million for the same period in 2005. Net income for the quarter was $3.3 million, or $.08 per diluted share, compared to net income of $19.7 million, or $.53 per diluted share, in the first quarter of 2005.

Krall added that revenues from Avid’s new Interplay product, which it bills as a “nonlinear workflow engine,” won’t start hitting until Q3, when Interplay starts shipping. He also noted that some of the broadcast products that Avid acquired when it bought Pinnacle Systems last year for $462 million in cash and stock, such as the MediaStream server and Deko character generator, have not yet been integrated with other Avid products and have been vulnerable to competitors as a result.

On the call, Krall also dismissed analyst concerns over the increasing percentage of Avid revenues that are coming from storage products, as opposed to its popular nonlinear editing software. Krall said that Avid’s “value add” through specialized software distinguishes Avid storage products from generic, off-the-shelf systems.

Krall conceded that the cost of storage continues to drop, but said, “Our margins in storage are still very good.”

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