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Sorry, Taiwan: US Company Nails Cheap Video

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The Japanese dominate video camera sales and for years the Taiwanese have sought to undercut Nippon’s brand game. But Pure Digital Technologies, an 80-employee company behind the popular Flip Video camcorder, somehow has managed to trump those Chinese rivals (and tick off the Japanese brands) by successfully branding a cheap digital video camera.

Nearly 1 million Flips sold in USA since the digital camcorder's May 2007, in a cutthroat market dominated by Sony), Flip starts pricing at $120 vs. an average $314. That’s one out of every 6 million camcorders shipped to American retailers in 2007-- in less than a year from launch!

Only 4 months after its first release (so in Sept. ’07), Flip began selling the smaller Flip Video Ultra in 20,000 stores, including Wal-Mart, Costco, and Best Buy ($150 for t30-minute version in basic white or black, and $180 for the 60-minute one in orange and pink). Some camera colors are exclusive to specific retailers as part of the retail partner deal.

CEO Jonathan Kaplan says revenues jumped 300% in 2007. Though he doesn't disclose sales figures as a private company, we can tell you Kaplan secured US $40 million in funding last year: investment bankers like his “sell-video-like-popcorn” strategy in a YouTube era. Pure Digital began in 2001 as a maker of throwaway digital cameras sold in drugstores that required users to have their images processed on the premises (or at a designated digital-photo lab).

CEO KaplanDesigners of Flip had to strip away all control buttons from a typical camcorder and stick with only essentials. No slots for extra memory cards just internal storage from a half hour to an hour, depending on the model. No multiple controls, just a simple series of buttons. No CDs, just built-in software (compatible with Macs) that loads instantly each time the device is plugged into a pc.
No chargers, just cheap AA batteries to power the Flip. No messy cables, just a flip-out USB key (concealed in the plastic case until you press a button, like BMW keys.)

Thanks to Pure Digital, you could now afford to video all those hundreds of Chinese suppliers gnashing their teeth instead of just having to listen to them lament their failure with their own video camera brands. 
Go Flip, Cheap & Sellable

Who’s Next? Eldorado Incriminated in Tax Evasion and Contraband

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Analyst and Consultant for Russian IT

ElDoradoSearch and confiscation of accounting documents in Eldorado’s Moscow headquarters by agents of the Russian Federal Tax Services sent shock waves throughout Russian retail business circles.

The main question on everyone’s mind is: Who will be next?

Eldorado sells through 1100 Eldorado stores in Russia. Eldorado also owns 6 superstores under ETO brand name, 450 salons of mobile communication and 40 stores in Kazakhstan under the brand Sulpak. The turnover of Eldorado brand in Russia is estimated around USD $2.5 billion, while consolidated turnover including franchising is around USD $6 billion.

But as of today is still unclear who is responsible and who could be charged for tax evasion and contraband? It is logical to assume it can be one of the company’s CEOs at the time when the company was alleged to be involved in “grey market” imports. According to FNS, Eldorado’s tax evasion took place in 2004-2005 fiscal years when Alexander Shifrin was General Director. FNS raised charges against him on April 1st, normally an April Fool’s day that encourages people to make practical jokes. But these charges might be not so funny for Shifrin as criminal charges could get him up to 5 years in prison.

YakovlevThe FNS alleges Shifrin defrauded the Russian tax authority by a scam of buying merchandise through a network of especially registered companies that existed for a few days and then disappeared without paying any taxes. According to FNS, the fraud is more than USD $300 million, but Igor Yakovlev, owner and main shareholder of Eldorado, insists the amount should be only half of that USD $300 million.

If that lower amount will not be confirmed and agreed by FNS, Yakovlev argues he will be forced to sell part of the business since the company already has financial obligations (accounts payable) for USD $1 billion.

Additionally Eldorado is already under investigation for another criminal case in the Central District of Moscow in connection with contraband import shipments in 2004, i.e., the custom terminal in Kursk region where imported computers were listed as “screw-drivers.” Ilya Novohatsky, Press-Secretary of Eldorado, says the company is discussing a pre-case settlement with FNS. He insists all the documents confiscated in the office are only identical to those Eldorado submitted earlier.

Since the use of “import companies” was very common at the time (and was practiced by many companies as their only solution to skip high taxes), probably Eldorado will not be the last big Russian retailer to be charged with tax evasion.

In 2005, DSG International bought an option to purchase 10% of Eldorado for USD $190 million until Jan. 2008 (so company value was estimated around USD $2 billion at that time). Now the value of Eldorado is estimated to be around USD $5 billion. In the beginning of this year DSG cancelled the deal, citing instances of “doubtful business practices” by Eldorado-- which probably meant the use of those small one-day companies used for tax evasion.

More Background on Eldorado

USB in 2008: Year of Higher Capacities, Lower Prices

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Now 4GB looks likely to displace 1GB as most popular USB capacity, as hopeful contender 2GB goes flat in market share.

Context recorded a “remarkable” increase in market share in 4GB and 8GB for USBs sold in Feb. ’08, says their research covering UK, France and Germany.

The share of 4GB went up to 27% in Feb. (compared to 17% in Jan., 12% last Nov.) narrowing the gap with 2GB (29% share in Feb. but stable the last five months).

8GB, with only 2% share last Nov., jumped to 8% in Feb. and 512MB plummeted from 6% in Nov. to only 0.3% in February.

Prices dropped by 29% from June 2007 (Euro 15.09 excl. tax) to February 2008 (Euro 10.70) (and by 30% if you look from Sept. 2007, at Euro 15.32.)

The ASP of 4GB USB memory dropped to Euro 13.84 in Feb. 2008, from Euro 21.50 (last Dec.) and Euro 30.45 (Sept. ’07). This trend (sinking prices) tracks in all major capacities, even 8GB, 16GB and 32GB.


USB Chart

Go Context on USB Trends

AMD CEO Promises Re-Structuring

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Frustrated once more by Intel, CEO Hector Ruiz is forced to study AMD’s exit from businesses outside AMD’s core: microprocessors and graphics chips.

It’s ironic the company may have to cut the very escape routes they desire the most to retreat from a deadly-competitive universe ruled by the blue giant star, Intel.

While Intel wooed Apple, AMD chose to woo Dell, once a famously-exclusive Intel shop. When AMD stumbled in its counterattack to Intel’s new chip line, AMD’s most-prized customer dumped them hard, hard enough so the loss of a single customer gets blame for much of the shortfall. Intel, on the other hand, went on to sell Apple 4 million units a year.

AMD was viewed as gutsy but never as a real rival to Intel until it grabbed an upper hand in 2003 with 64-bit Opteron. AMD now has to again build up enough tech success to generate the finances needed to fuel an escape from the black hole of direct competition with giant Intel.

Go AMD’s Q1

WH Smith Avoids Us, Expands into Denmark

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The confectionery, books and news retailer, reports sales up 1.8% to £734m. Group pre-tax profits rose by 8% as CEO Kate Swann’s strategy kicks in. She wants to avoid entertainment to focus on higher margin products such as confectionery, books and drinks.

In entertainment, like-for-like sales were down 15%. Gross margin was lower Y-to-Y due to a competitive market, price declines and lower-margin game consoles.

WH Smith is also due to open 5 units at Copenhagen airport in partnership with the outlets’ current operator SSP. But Swann says this move is not a precursor for more international expansion.

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