Can DiVX Build Consumer Awareness?

JP Morgan notes DiVX (NASDAQ:DIVX) demonstrated its HD product at CES, which they believe will resonate with CE OEMs focused on price-sensitive end-markets. However, the key to the DIVX story remains consumer awareness and viral demand, which appears to be forcing CE OEMs to adopt the Codec. DivX Connected technology is maturing, pointing to DIVX's potential as the enabler of the "connected home' but success hangs in the balance.

DivX HD was demonstrated using 1080p playback from both a PC and a DIVX-certified I-O Data DVD. Expect Tier OEMs to target emerging markets with this product, currently certified by just three OEMs. DIVX demonstrated Ultra and Connected applications, though no licensees were announced.

At CES DIVX announced that its Codec is certified for use on an HP MediaSmart TV, expanding reach to a new product category. JPM learned that Toshiba is committing to certify all US DVD players in 2007, and Samsung released plans for a DIVX-certified mobile phone. DIVX management stated they are in dialog with OEMs spanning handsets, Game consoles, STBs and DVRs. Firm continues to believe that 1Q07 royalties are trending ahead of expectations owing to faster than expected U.S. adoption of DIVX on DVDs.

Reiterates Overweight Rating.

Notablecalls: Not actionable but 'good to know' category. As I noted yesterday, JPM covers stuff with passion.

Comments

[Frank Z:]

Their only hope is hardware because the customer service for their software is horrible!

2007 Jan 25 09:56 AM