Algo reaps rewards from China
Article Date: Jun 16 2000Investors welcomed news of Algo Vision's significant inroads into the Chinese market today, as the Easdaq-listed data compression technology company unveiled a four-year distribution contract with China's Shenzhen Central Trust Investment Industry, writes Roxanna Mohseni.
The Shenzhen trust, a conglomerate with $1 billion turnover and strong ties with national industry, gains exclusive rights to distribute certain Algo products. The agreement has already generated a $5.6 million order for 3,000 codecs (microchips that compress data) and 3,000 ISDN interface boards.
Chief executive Viktor Vogt suggested that this tie-up could bring in sales of over $60.8 million over its full term. These figures dwarf Algo's existing revenue streams. Even though first quarter results showed encouraging improvements, turnover was still a mere $1 million, with palatable pre-tax losses of $2.2 million.
Algo Vision's technology offers a method of data compression and decompression that enables users to send high-resolution images swiftly and cheaply across all networks - a service which is expected to be much in demand with the growth of the internet economy. Its hardware and software products, widely regarded as market leaders, are also targeted at the security and medical data markets. Following on from the success of a recent prototype developed with Nokia for wireless video conferencing, Algo is confident that this opens the way for expansion from professional to consumer markets.
Algo has sought to increase its exposure to this wider market with the May acquisition of 25 per cent of TCP Connect, a German manufacturer of set-top boxes that are capable of integrating Algo's products.
This was the latest step in a highly acquisitive strategy, which included the purchase of a 22 per cent stake in Swiss Sensil Systems, a developer of audio-visual security products for CCTV and admission control. This followed Algo's acquisition of an 80 per cent stake in Germany's Fleischhauer, offering greater exposure to the visual communications market for industrial surveillance purposes. As well as profits of $2.5 million on turnover of $50 million, Fleishhauer's activities as a reseller of original equipment manufacture products complements Algo's strategy of growing this side of the business.Vogt intends to sustain this buying spree, targeting minority stakes in technology companies that possess non-PC platforms for Algo's products. At the same time, it is looking for companies with profits that can be channelled into Algo. Vogt hopes for group profitability in the next financial year. With just under $11.5 million in cash, and much of this earmarked for further investments, Vogt admits that 'we are certainly looking for further funds'.
Even after today's 12 per cent rise to $8.13, giving a market capitalisation of $111.5 million, shares languish at less than a quarter of the February high. But watch out for further news from this company as it strives to increase its sales avenues and expand its portfolio of interesting technologies.
Algo Vision will be covered in future editions of The Easdaq Guide.
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