InFocus Corporation (Wilsonville, OR) (www.infocus.com) used its time slot at the conference to update investors on its recently released earnings. The company is in a tough spot as it is a "pure play" in the projection industry, but, as a public company, is measured on a quarterly basis by its performance. As the projection industry undergoes tremendous transformation, it is difficult to always stay ahead of changes, as InFocus has found out. Despite some bumps in its performance, we continue to be impressed with the company's leadership and moves to stay one step ahead.

Most telling were the market share numbers the company posted, claiming to have the number one market share in the mobile presentation market, retail channel, overall US market, worldwide market, and in the PC distribution channel. Its worldwide market share in front projection is now 12%.

In terms of growth, the company sees the front projector market growing by 6% CAGR, rear projection moving at a 20% CAGR, and the home theater front-projection market growing at 65% CAGR. Overall, unit growth will be 30-40%, but revenue growth will lag behind as ASPs are declining.

The big opportunities for the company will come in the education market, which is only one-third penetrated with projection products. The retail channel is now a well-developed channel for the company, which holds a 30% market share. In 2003, this channel didn't even carry projection products, and now, not all outlets carry them. Driving sales here for InFocus are value projectors like its X2. This is creating sales with new users.

InFocus' thin display segment, which includes its 7-inch DLP-RPTV and LCD flat panels for commercial customers, saw growth of 68% last year, and this is expected to continue to do well.

The company is also quite excited about its new strategic partnership, South Mountain Technologies (SMT). This is a new 50-50 joint venture between InFocus and TCL, the world's largest TV maker. InFocus will contribute projection technology, while TCL will focus on low-cost manufacturing.

Located n Shanghai, China, SMT will initially focus on manufacturing DLP-RPTVs, but will expand into front projectors later. These products will be sold globally under the InFocus and TCL brand name, as well to OEM customers. TCL has over 20K retail outlets in China. We are not sure how this new venture fits in with the Thomson-TCL joint venture announced last year that formed the TTE company.

Clearly, InFocus is banking on getting a reduced BOM for its projection product - a feature it needs to remain competitive in a declining ASP environment. In addition, InFocus hopes to start to get a new royalty revenue stream for the joint venture once the company can obtain some third-party sales. And, as SMT develops new technology going forward, InFocus will obtain this technology royalty free.

InFocus has seeded the SMT operation with 40 engineers, who together with TCL staff, are now busy installing and testing engine production lines. The first products should ship in 2Q'05, and InFocus hopes to begin recognizing revenue for the SMT by 3Q'05. Profits should begin in 2006. The company is basing this on a 9% operating margin and 5% operating expense.

InFocus is now 100% outsourced. Partners include SMT, Flextronics and Funai, and for high-end products, Delta and Hitachi.

Another new revenue stream the company is excited about is called CPSI (Computers, Products, Solutions, Integration). This is essentially a catch-all for all peripheral products, such as wireless connectivity, networking, etc. In 2004, CPSI products accounted for 10% of revenue with 17% margins. By 2008, the company hopes to grow this to 40% of revenue with 23% margins. This sounds like a page from the RCA playbook.