The advent of high definition video has surely been a boon to electronics retailers like Best Buy and CompUSA. But HD is also creating a “transition” in the marketplace for players in the internet TV and video streaming businesses. That’s a message from Dave Stoner, President and CEO of Plano, TX-based ViewCast * (OTCBB: VCST, http://www.viewcast.com), during his Aug. 16 results conference call. “We are seeing a demand shift…the transformation and migration to high definition we have been expecting for more than a year now seems to be happening…”
That has to be good news for a group of small caps focused on various areas in the digital media space. For the moment, the overall market segment is dragging many small caps down, but perhaps this HD transition may serve as a catalyst to help prop them back up.
For instance, Prague-based KIT digital (Nasdaq: KITD, http://www.kitd.com), which provides internet protocol-based video asset management solutions, reported record second quarter results on Aug. 16 with revenue up 120 percent year-over-year to $23.1 million. No doubt some of that growth came through acquisitions, but it seems to show that the HD transition could be helping them as well. The stock price was dragged down last week like many small caps, from $9.49 mid-week all the way down to $8.49 mid-day Aug. 23, which could indicate an opportunity if the market rights itself sometime soon.
San Diego-based DiVX, Inc. (Nasdaq: DIVX, http://www.divxnetworks.com) also reported a strong second quarter Aug. 4, only to have its stock price weakened shortly afterward. The company, which provides video compression-decompression software and digital video technologies for digital televisions, Blu-ray players, set top boxes , recently announced it would be acquired by Novato, CA-based Sonic Solutions (Nasdaq: SNIC, http://www.sonic.com), which develops products and services to manage digital media content. Its stock is trading at about $7.67, down from its 52-week high last spring of $9.02. Sonic’s stock has been on the rebound since dropping to $7 July 20. On Aug. 23 it was trading at $7.86.
Pompano Beach, FL-based Onstream Media (Nasdaq: ONSM, http://www.onstreammedia.com) reported sequential growth of 7.2 percent over its fiscal year second quarter on Aug. 16 but relatively flat numbers compared to the same period in 2009. Onstream, an online service provider of Internet broadcasting, corporate web communications and virtual marketplace technology, recently debuted its MarketPlace 365 platform for virtual tradeshows, which President and CEO Randy Selman called a “game-changing technology” because virtual tradeshows could become a growth driver as companies want to extend existing physical shows. Subway is the first customer.
As for ViewCast, CEO Stoner reported 26 percent top line growth year-over-year and the third consecutive quarter of sequential improvement. Highlights of the second quarter included the debut of its ViewCast Media Platform (VMp) at the National Association of Broadcasters tradeshow.
* Denotes Allen & Caron client