InFocus Corporation (Wilsonville, OR) (www.infocus.com) CFO Mike Yonker spoke at the USDC-Needham Investors Conference in March where he predicted no meaningful recovery for the company in 2003. "We see continued softness in the market for projection systems as spending will remain flat for 2003, " said Yonker. "Add to that 5% to 10% ASP declines per quarter and emerging competition from Dell and HP, and things will be tough in 2003."

He notes that InFocus remains perhaps the most dominant projection system player with a 16% market share worldwide. But 80% of its revenue comes from the US and Europe, where economic activity is weak.

Nevertheless, there remains a huge opportunity to sell projectors to business users. "The notebook-projector attach rate remains in the 3-5% range, so even a few percentage points increase can mean a lot of projectors sold," said Yonker.

He said InFocus has a wireless projector coming to serve this market that will be very fast - not the current 4-8 second update rates most wireless systems have today. "That is just impractical for giving a PowerPoint presentation," explained Yonker.

The company continues to increase outsourcing of its manufacturing. Flextronics assembled 85% of products by the end of 2002, and Funai is starting to produce more now. Engines are being sourced from Ricoh, Chinontech and Zeiss. InFocus also has an investment in Japanese lamp maker Phoenix Electric.

In distribution, it is working more closely with CDW, which Yonker says has now been separated from IngramMicro in order to lower margins. InFocus is sticking with Office Depot and Staples for now and will move the X1 projector into these stores. It will also start a new consignment program with these outlets that allows buyers to buy the projector on the spot. Today, an order needs to be placed before the projector is sent to the customer. "Today, the volumes are small in this channel, but by the end of 2003, we expect it to be the fastest-growing channel," said Yonker.

InFocus is very happy with its efforts in the home theater space too so far, with two products in the market that have sold well. In addition, the X1 is expected to be a crossover product that will wind up in homes too. All are sold at good margins. To help educate consumers about front-projection home entertainment, it has developed a kiosk that it will complete at the end of Q2 and roll out soon thereafter.

For RPTV, it is working with SVA and now, more importantly, supplying engines to Thomson for its line of DLP-RPTVs that launch this summer.

Financially, Yonker expects InFocus to come out of the red and reach break even in Q2'03. The company should return to profitability in the second half of 2003. Right now, about 40% of its sold projectors are HTPS models with the rest being DLP types. That should move to 50-50 in 2003. From a revenue perspective, however, about 60% comes from DLP products and 40% from HTPS.
"The key to returning to profitability will be managing ASP price declines," concluded Yonker. We agree, but tough to do.

Infocus, Mike Yonker, 503-685-8603, mike.yonker@infocus.com

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Insight Media, Annmarie Gabisch, 203-831-8464, Annmarie@insightmedia.info