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Technology marches on!
I happened to be making my rounds at some of the local electronics stores, such as Best Buy (BBY), CompUSA and Fry’s Electronics. I enjoy talking with the people there. You never know what you might pick up, especially from a knowledgeable salesperson.
Well, by using some old newspaper savvy, I was able to find out that some of the hot new items coming soon are the Blu-ray and HD-DVD disks. These new disks will be able to store some 25 gigs of data versus only 4 gigs for a DVD, using basic formats.
What I hear is that the HD-DVD disks and their recorders will be coming out first, possibly late in 2005. They will be followed by the Blu-ray disks. Many believe the Blu-ray disks will eventually be the dominant product.
eSignal subscribers should know that the new disks will probably benefit certain stocks in the market as demand for them picks up and as they displace, in time, CDs and DVDs. Some firms that could benefit are manufacturers, such as Sony Corp. (SNE), Hitachi (HIT) and Hewlett-Packard (HPQ), just to name a few.
Developers of media tools and information using the disks (for example, Apple Computer Co. [AAPL]) and movie and music firms also may do well. Finally, retailers such as Best Buy and Circuit City Store Inc. (CC) should definitely be beneficiaries. I would not be surprised to see some small cap plays with a niche in the market do well too. The recorders for the new disks are also developed and ready to be mass produced.
So, investors should be alert to any strong technical action in stocks with a potential play in the Blu-ray and HD-DVD disk market. I would think Best Buy and Circuit City could do well.
Best Buy’s stock is trending higher, having climbed from a low of 12 in late 2002 to 50. For the fiscal year ending February 30, BBY’s earnings should climb 19% to $2.22 a share from $1.86 a year ago. For fiscal 2006, net should be up 15%. Those estimates could be lifted.
Circuit City (CC) stock has rebounded from 5 in early 2003 to 17. Its profit growth will be strong. For the fiscal year ending in February 2006, earnings should rebound 35% to 61 cents a share from a loss of 45 cents a year ago. For fiscal 2007, net should be up 30% to 78 cents a share.
Blu-ray disks were developed by the Blu-ray Disc Association (BDA), a group of leading consumer electronics and computer companies that include Apple, Dell, Hitachi, Hewlett-Packard, JVC, Mitsubishi, Panasonic, Pioneer, Philips, Samsung, Sharp, Sony, TDK and Thomson.
The format was developed to enable recording, rewriting and playback of high-definition video (HD), as well as storing large amounts of data. A single-layer Blu-ray disk can hold 25 gigabytes, which can be used to record more than 2 hours of HDTV or more than 13 hours of standard-definition TV. Also, dual-layer versions of the disks can hold 50 gigabytes.
Current optical disk technologies, such as DVD, DVD±R, DVD±RW and DVD-RAM, use a red laser to read and write data. The new format uses a blue-violet laser instead, hence the name Blu-ray.
Despite the different type of laser used, Blu-ray products can be made backwards compatible through the use of a BD / DVD / CD compatible optical pickup and can allow playback of CDs and DVDs.
The benefit of using a blue-violet laser is that it has a shorter wavelength than a red laser, which makes it possible to focus the laser spot with even greater precision. This allows data to be packed more tightly and stored in less space. So it’s possible to fit more data on the disk even though it’s the same size as a CD / DVD.
With the rapid growth of HDTV, the consumer demand for the ability to record HD programming is quickly rising. Blu-ray was designed with this application in mind. This means that HDTV broadcasts can be recorded directly to the disk without any quality loss or extra processing.
Blu-ray is expected to replace VCRs and DVD recorders with the transition to HDTV over the coming years. The format is also likely to become a standard for PC data storage and HD movies in the future.
Twentieth Century Fox said it will release content on the new high-definition Blu-ray disk format through its subsidiary Twentieth Century Fox Home Entertainment. Fox said the Blu-ray system is a superior high-definition technology that is a full step forward in the evolution of consumer-packaged media.
Sony will use the Blu-ray disks in their next-generation PlayStation 3 video game console. PlayStation 3 is scheduled for release in early 2006. Recent polls suggest that Blu-ray disks are favored over the HD-DVD disks.
A poll by Penn, Schoen and Berland Associates, a nationally recognized strategic polling firm, showed that, out of 1,200 consumers surveyed, 58% preferred Blu-ray disks, 26% were undecided and only 16% preferred HD-DVD.
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