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ZVUE finally ditches money-losing hardware biz, to focus on other money-losing operations
Topics: news and viewsEagle-eyed reader and fellow blogger Davis Freeberg pointed out that ZVUE Entertainment (Nasdaq:ZVUE) finally has decided to exit its money-losing MP3/Video player hardware business. According to the 8-K:
The Board of Directors of the Company has determined that this line of business is too capital intensive, and that competition for high and low end players were not favorable markets for the Company. As the Company has determined that it should focus on its web related business, the Company will henceforth cease all activity related to players.
As a consequence to this action, the Company will no longer generate income from the sale of players to Wal-Mart. Wal-Mart has been the Company’s primary customer and as a result, revenues will be materially adversely affected for the remainder of 2008 and beyond.
In February 2007, I wrote “Can there be any doubt that a price war is underway in the low end flash video players? Or that prices will drop further over the next four to six months . . . In a decaying price environment, I don’t see how ZVUE can gain any ground on these better-equipped, higher volume competitors, much less achieve its goal of sustainable positive cash flow from the hardware biz. My guess is that ZVUE will exit the hardware business by this time next year, having nothing to show but losses.” Looks like I was nine months early.
The $64,000 question, or should I say the $1.46 million question (ZVUE’s market cap. per Yahoo!), is whether the remaining internet businesses are worth the current $.039/share market price? With advertising revenues last quarter of $1.044 million and losses even after charges several times as large, the slimmed down ZVUE doesn’t look like it will be profitable. However, if the company can cut cash burn and modestly increase revenues, it could be an interesting speculative bet. That’s a big if, so I’ll probably sit this one out.
Get trend analysis for ZVUE from Ino.com.
DISCLOSURE: No position.
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And how would you interpret the today’s +52% game? People like myself who accumulated ZVUE from 3c up feel quite upbeat. There is, after all, floor price for any stock. Could 3c price be the one for ZVUE? After all, all the websites they have are worth a bit more than that…
@Vitaly: I dont attribute any meaning to an outsized move the Friday after Thanksgiving. That said, I have always maintained that if ZVUE has a future its in the websites. The domains themselves have value, as do the sites and their users. How much is anyone’s guess, but $.03 is definitely a better entry point than $7, when I first voiced doubts.