3-D Firm Shifts Focus From Movies

November 13, 2013 Leave a comment

3-D Firm Shifts Focus From Movies

ERICH SCHWARTZEL

Nov. 12, 2013 7:09 p.m. ET

RealD Inc. RLD 0.00% told investors it will bring to market 2-D and 3-D consumer electronics in 2014 as it tries to mitigate continued losses due to falling 3-D ticket sales and market saturation in North America. Speaking Tuesday on an earnings conference call, RealD executives withheld most details of the electronics, saying only that they would most likely be with mobile and tablet applications. Some of the electronics will be announced in 2014, while others are expected to come to market within the calendar year.RealD Chief Executive Officer Michael V. Lewis said the company was focusing on consumer-electronic products that offer revenue possibilities “beyond a 3-D cinema platform.” Investors shouldn’t expect a product announcement at the Consumer Electronics Show in January, he said.

The company’s accelerated efforts in consumer electronics come as the firm announced a second-quarter net loss of $4.7 million, or 9 cents a share, compared with the loss of $4.2 million and 8 cents seen one year ago.

Year-over-year revenue fell about 20% to $43.9 million.

Earlier this month, RealD announced it was laying off 20% of its staff, eliminating about 35 employees in its Beverly Hills, Calif. and Boulder, Colo. offices. Those workforce cuts, along with restructuring in the company’s research-and-development department, are expected to save the firm approximately $15 million per year.

In a sign of consumers’ growing disinterest with 3-D screenings, RealD said the estimated world-wide box office from RealD-enabled screens was down even as the number of 3-D films released went up.

During this year’s second quarter, RealD-enabled screens collected about $582 million with 11 releases in 3-D. Last year, the company collected $709 million with nine releases in the quarter.

The company’s second-quarter earnings included the bulk of summer releases. Many of the family films released in the format, including “Turbo” from DreamWorks Animation SKG Inc. DWA +1.02% and “Despicable Me 2” from Comcast Corp.’s CMCSA -0.78%Universal Pictures, saw fewer than 30% of opening weekend patrons choosing to see the movies in 3-D.

Next quarter’s report is expected to be healthier since it will include the performance of “Gravity,” the space drama from Time Warner Inc.’s Warner Bros. that has seen about 80% of ticket sales coming from 3-D screenings. RealD Chief Executive Officer Michael V. Lewis said 3-D added about $60 million to the box office gross of “Gravity,” which has so far collected about $232 million domestically.

Internationally, the situation was a bit brighter. The company announced new contract agreements for 250 new screens in China and Russia, two of the firm’s fastest-growing markets. The company has a backlog of about 4,000 screens, only about 1,000 of which are in North America.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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