March 27, 1997 11:00 AM ET
Avidly interested: Why Intel didn't let this sleeping dog lie
By Steve Hamm

  On the surface, Avid Technology Inc. looks like a dog. The company is on its third president in 15 months, it's lost $38.1 million in the past four quarters, and revenue is nearly flat. Growth last year crawled along at less than 6 percent. So why did Intel Corp. just pay nearly $15 million for a 7 percent chunk of this sorry-looking company?

One word: video. Intel needs the world to need more processing power. And Avid, of Tewksbury, Mass., commands more than a 60 percent share of the high-end digital video production software market. More significantly for Intel, Avid has just launched a foray into the virtually untapped corporate, education, small-business and home markets. And it's expanding from Macintosh and Silicon Graphics to Intel-based machines. Intel's investment, announced earlier this week, allows Avid to accelerate its plans.

"We want to help Avid fulfill their vision of putting video editing tools in the hands of every PC user," says Ron Whittier, general manager of Intel's Content Group, in Santa Clara, Calif.

So, if Avid is so visionary, why isn't it rich? Well, it used to be. The 10-year-old company is accustomed to doubling its revenues each year. But, in late 1995, Avid stumbled when growth tailed off in its core markets of motion-picture editing, commercials and broadcast television. To make matters worse, it ended up spiking a high-end editing product that it had counted on to accelerate growth.

A gradual turnaround began last April when Avid hired Quantum boss William Miller as chairman and CEO. Miller quickly set a course for the high-volume corporate and education markets. The fruits of his labors are just now becoming apparent. Apple Computer Inc. recently began shipping consumer-targeted Performa 6400s equipped with Avid editing software. The editing package sells for just a $400 premium and allows people, for instance, to post video clips on their home pages. Now Avid is selling its first Intel-based product, aimed at corporate users, through a new network of 100 resellers. "This is a statement that we see much broader markets for our technology," says Cliff Jenks, Avid's vice president of sales and marketing.

Avid still faces a host of competitors in each of its niches, including giants Sony, Kodak and Microsoft. So far, there's very little competition in the small-business and home markets. But don't expect a quick explosion of sales. "This isn't a one-quarter story," says Avid's Jenks. "It's going to unfold over the next two to three years."

Fortunately for Jenks and his cohorts, Avid probably won't have to wait that long to see its financial turnaround begin in earnest. Prudential Securities, for one, expects Avid to make a profit in the second quarter and for its revenues to jump 9 percent this year--based largely on the Intel deal. So Intel may need Avid a little bit, but Avid needs Intel a lot.

Copyright(c) 1997 Ziff-Davis Publishing Company. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of Ziff-Davis Publishing Company is prohibited. PC Week and the PC Week logo are trademarks of Ziff-Davis Publishing Company. PC Week Online and the PC Week Online logo are trademarks of Ziff-Davis Publishing Company.

Send mail to PC Week