Thomas Streater's  Instablog

An interesting note on competition in the tech sector. There are parallels between ARM (ARMH) and Intel (INTC) in semiconductors, and Forbidden Technologies and Avid Technology (AVID) in video software.

Intel uses its world leading manufacturing technology to make "industry standard" CPUs. But the market is moving on, with volume shifting from desktops and laptops to tablets and smartphones. The new devices generally use CPU designs from the UK company ARM. By CPUs shipped, the ARM design vastly outsells Intel.

So why doesn't Intel just makes chips like ARM? Apart from the technology issues about making power efficient chips, the problem for Intel is that the ARM chips simply don't cost very much. If Intel made chips like ARM, and charged similarly, they simply wouldn't be the size of Intel.

I mention Intel vs ARM because there are many parallels in Forbidden's world. FORscene has an extremely efficient architecture, has a low price and a high gross margin (typically 85-90%). If the large traditional suppliers of Forbidden's broadcast markets made and sold what Forbidden does, at Forbidden's prices, they could destroy their business models.

But just as ARM are designing faster chips, Forbidden is transforming the video market by making better cloud post-production software. Just as with ARM, the new technology is seeding new markets.

Although low cost, Forbidden does not compete on price. Instead, through continual Innovation based on a strong and flexible technology base, Forbidden strives for ever higher performance.

Forbidden has maintained FORscene's pricing power over the last eight years by encouraging demand too. Building FORscene's reputation and customer awareness of the platform has taken time, marketing and user experience. Several new markets value FORscene's advantages highly. Specialist partners eager to add the benefits of FORscene to their existing offerings provide new and more efficient routes to market.

Source: Chief Executive's 2012 Review, Forbidden Technologies plc