Ever-mounting loses
Pinnacle, the leading maker of video editing software and hardware for consumers, is set to be rescued from its financial troubles after it agreed a buy-out by Avid.
The cash-and-stocks deal, jointly announced today by the two companies, values Pinnacle at $462 million, based on Avid’s stock price of $62.95 at the end of business on Friday, March 18, 2005.
The two companies' press releases can be read here on DVdoctor's forums
The takeover is ironic given that Pinnacle itself has been hugely acquisitive, buying technology and market share since mid-1996.
The ball started rolling with the purchase of Video Director – on whose technology the company's budget editor Studio was based.
Pinnacle's last big purchase was of the Dazzle consumer video editing business in July 2003, a move which probably bought its share of the home video editing market to 90%-plus – something which, judging by subsequent financial results and today's news, only helped pushed Pinnacle over the edge.
Since the news broke about the takeover, we've been trying to piece together the reasons behind Pinnacle's weak financial position and figure out whether Avid will be able to make a profit where Pinnacle consistently lost money.
Pinnacle has two main operating divisions – Business & Consumer addressing the lower end (and including the Studio range) and Broadcast & Professional which targets higher-end users.
However, as best as can be seen from published figures, both were losing money. These losses weren't trivial and have been going on year after year.
Looking at the patchy figures on Pinnacle's own site and at the formal listings on SEC's site it's clear that since the DV revolution got under way in 1997, Pinnacle has lost big money every year except 1999 and 2000, which together produced a total profit of just over $26 million.
However, these two glory years were sandwiched by a loss of $6m in 1998 (itself following a $15m shortfall in 1997), and by Pinnacle's worst ever result - a hit exceeding $60 million in 2001.
Every year since has produced heavy red figures - $39.9m in 2002; $21.8m in 2003; and a whopping $54.2m in 2004. Things were marginally better in the first two quarters of 2005, but losses for that half year still totalled close to $17m.
