Big Buzz All About 3D: Who Will Benefit?

Includes: MRVL, ORBK, ZRAN
by: Shlomi Cohen

At the forefront of new inventions and new product launches for 2010, the world's largest electronics show, the Consumer Electronics Show in Las Vegas, ended this week. If going in everyone was talking about advanced telephones, on the way out the big buzz was all about 3D.

With or without connection to the dizzying success of the movie Avatar, the first televisions with 3D processors will hit the market this year already. Together with the special glasses that will be included, we will be able to watch three dimensional content at home. Hollywood is now beginning to develop the special broadcasting channels for them.

The television market has not begun to scratch the great potential of HD (high definition) and "green" LED lighting, and already an additional growth engine is bursting onto the scene.

3D will bring early adapters - those who don't care about paying huge prices as long as they get the most advanced equipment - running to stores.

When investing in various technology niches, until today the focus was telephones and computers, but it seems that the Consumer Electronics Show [CES] put a third platform that provides content strongly on the map - the television. It’s a platform that until recently was considered not "sexy" and boring, that besides the width and depth of the screen did not undergo major revolutions.

Today, more than ever, we are near to the convergence of the three platforms, with connection to broadband Internet, the glue that holds them all together.

Among public Israeli companies, there are several which will benefit directly from the new age, which will apparently arrive in the next few years to the digital TV niche. Among chip companies, there are Marvell Technology Group (Nasdaq: MRVL), Sigma Designs, and Zoran Corp. (Nasdaq: ZRAN). They all provide HD processors and other solutions to TV manufacturers, and Orbotech Ltd. (Nasdaq: ORBK) provides the inspection systems for various LCD screen production lines.

Shares in Orbotech, which I hold in my portfolio tracked at "Globes", frustrate me because since the summer they have stuck in a very narrow band, more or less around $10, despite the fact that Orbotech's main niche, LCD screen inspection, has never been as hot as it is now. It is clear to me as well that the acquisition of major US competitor Photon Dynamics, for $290 million at the end of 2008- timed at the eve of the major crisis seeming almost suicidal, will very soon prove to be a brilliant move.

With the TV industry going through major technological revolutions, there is no doubt that the inspections niche is gaining in importance daily , and Orbotech controls about 80% of this market. It's been known for a while that huge investment is planned in existing and new lines. This is not just because of the technological revolutions which became the story of the day in Las Vegas, but because of demographic revolution. Hundreds of millions of households, mainly in China and India, will switch in the coming decade from "ancient" CRT televisions to thin LCD screens.

I assume that if Orbotech published a shelf prospectus for raising up to $150 million, nearly half its current market cap, then it has in its pipeline many good things to tell potential investors in an offering that will take place in the coming months. I expect to hear some of them today at the Needham & Company growth conference in New York.

Disclosure: Author holds shares as part of his portfolio tracked by "Globes".

Published by Globes [online], Israel business news - - on November 17, 2009; Reprinted on Seeking Alpha with permission

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009