Graphics equipment and routers aren't the most natural synergy when it comes to product categories, and that's one of the reasons Chyron's sale of Pro-Bel to Pro-Bel's management team for $15.6 million last week is hoped to be a quick and painless transition to profitability for each entity
Chyron acquired Pro-Bel in 1996, with the pair each bringing in about $20 million in sales on an annual basis. But both companies were saddled with Chyron's overall debt, hurting the stock price and also profitability.
The sale of Pro-Bel gives Chyron a big head start on clearing up most of its debt, something Chyron CEO Michael Wellesley-Wesley says could be done by the end of 2004.
He expects that, while overall sales in 2004 will drop from around $40 million to $25 million, the new Chryon will be profitable for the entire year. And, instead of making interest payments, he expects the company to earn about $500,000 per quarter in interest.
Chyron gained a leadership position in graphics with its character-generator products, like its Duet CG, but slipped in recent years as new competitors came into the industry, and the company looked to diversify. Acquiring router manufacturer Pro-Bel was one of those steps.
"On an EBIT basis, the graphics side has been doing quite well, but the profitability was masked by the large interest payments we've had to make," explains Wellesley-Wesley. "Now cash generated can be put back into product development and hiring additional engineers instead of paying interest charges."
Though Pro-Bel is based in the UK, Managing Director Graham Pitman predicts that its relationship with U.S. customers will deepen now that it is a standalone enterprise. Ian Croft will continue to head up the U.S.-based Pro-Bel team and will add new personnel to expand sales.
"Our new products, particularly the Sirius [multiformat routing switcher], have been outstandingly successful," he says, "and now we'll be able to recruit additional design engineers."
Chyron and Pro-Bel will have separate booths at NAB. Chyron Vice President of Sales and Marketing Rich Hajdu says his company will exhibit some of its second-generation HD products, all of which will benefit from the refocused Chyron. "We had two cultures with Chyron and Pro-Bel, and now both will do their own thing."